The sheer pulling power of large retailers and nearby mega malls can leave small independent retailers gasping for customers – In today’s store wars, knowing how to deal with competition can make or break your business. Specialty retail expert, Stephen Spring, investigates solutions.
Many ‘mum and dad’ operators and small retailers seem to be facing a bleak future thanks to a two-pronged assault from industry giants. First, small operators are unable to compete on price and range as national chains and big box retailers stomp them out of business. Second, shopping centre pulling power concentrates customer flow and strangleholds retail spend, leaving small stores that are outside centres out of the action. And specialities inside centres are burdened with rising rents and close proximity competition from fellow tenants.
The pressure from large corporates is across the board, from the local butcher to fast food. By targeting weak independents with predatory pricing, some chains now command entire categories, narrowing their focus to achieve vast economies of scale in manufacturing, distribution, and customer reach, making independents look like endangered species.
Despite the difficulties, independents can counter-attack and regain ground. Believe it or not, many see the challenge of change as presenting a unique opportunity. Despite intense competition, many independents prove that the battles are winnable and larger competitors’ defences are not impenetrable. They focus on capturing their customers’ hearts, minds, and money, and leave competitors gnashing their teeth. How do they do it? Successful retailers have common key traits which are easy to follow. You should:
• be the best at the basics
• be different, and be known for something the chains cannot do
• know your strengths, seek professional advice on your weaknesses
• know your competition better than they know themselves
• turn plans into action with a sense of urgency
• never compete on price or markdowns
• precisely and ruthlessly edit your stock
• be a professional expert and ensure staff are too; and
• communicate to your customers.
Russell Cox runs Heatherbrae’s Pies, north of Newcastle in NSW. He developed his booming pie business by choosing an affordable location and cooking with the best and freshest ingredients. His menu doesn’t compete with the fast food giants that surround him; he simply sells a unique product to the area, in a clean, modern fast food environment equal to overseas name brands, and tries to make customers feel valued, not just a number or head count.
The service is consistently quick but not rushed, friendly not robotic; and you can tell staff enjoy working there. It’s only a pie shop, but drop by morning and afternoon and it’s likely to be packed with customers who have driven past the chains to Heatherbrae’s parking lot. No big budget advertising, no flash gimmicks, just a mighty good pie at a fair dinkum price.
Alina Duncan owns Swap Books and Music, Bondi Junction, NSW. Her 80-square-metre bookstore is opposite the ultra chic Westfield and directly across from Borders Books, the massive US bookseller with its superb location and vast resources. With about 12 traditional and nine secondhand bookstores in high traffic locations also in her trade area, there’s plenty of competition. How can a minnow like Swap possibly survive that onslaught?
Compared to most other secondhand bookshops, Swap is spotless and family friendly. Browse Duncan’s shelves and you’ll find virtually all top books at a fraction of the price of those across the road, plus DVDs and vinyl masterpieces. Ask her about books and you’ll find she’s probably forgotten more than most assistants will ever know. But here’s the best part: return to Swap and Alina will trade your last purchase for a small fee and credit you more on your next visit—again and again. There’s no big budget retailing, just a gap in the market being filled with proactive enthusiasm and sound economics. Duncan is a canny buyer and ruthless with her sell-through. She rejects the high rents her competitors carry. She offers value and her customers love it.
These are examples of well-executed retail in very different markets. They are the antithesis of a me-too mentality, abhorring the ‘brandwashed’ approach adopted by many retailers. While some consumer sectors feel a deep need for brand identity (tween-agers for instance), most of us just desire quality and value. We don’t want to be let down, cheated, or treated as just another number, and when we are we resent giving retailers our money.
Chantal B is a tiny fashion and accessories shop in a backstreet of Sydney’s Paddington, owned and managed by Chantal Blanchet, who trained with the best Parisian haute couture houses in the heyday of classic French fashion. Her wares are not general purpose. You will never find a brandwashed garment, nor a piece of quality jewellery without style enough to gloss the best social pages, and her customers return from everywhere, despite her limited range, Paddington’s poor parking and the new shopping centre in the adjacent suburb.
Blanchet gives customers her full attention. In fact, she’d be insulted if you didn’t let her serve you and she would hate you to leave feeling anything but truly special. Blanchet doesn’t need advertising to tell you what she’s all about. Her secret is building long-term relationships with customers so she can market directly to them and weather retail’s ups and downs. Although she has been tempted to make a move to the mall over the years, with extra browsers comes unprecedented rental pressure and she’ll probably tell you, “Il n’a pas besoin?”—who needs it?
Mountain Equipment is an adventure gear shop in Sydney. Established in the early 1960s, it has seen an explosion of competitors and some tough times. Chain and department stores have encroached upon its market and popularised mass-produced outdoor wear. A ring of regional shopping centres has circled Sydney’s CBD, and owner Geoff Chapman has refocused and re-positioned the shop to be the ‘expert’s expert’ in walking, climbing, and mountain equipment—not just apparel. He’s gone back to his roots and re-found his niche. He supplies the best products available and a few brands unique to Mountain Equipment, along with footwear, ropes, carabineers, survival gear and accessories. And the staff are knowledgeable because they test the gear themselves.
But Chapman’s secret goes much deeper, way beyond its shopfront. He sponsors local climbing talent, he combines post-adventure and equipment exhibition nights and involves customers through clubs and loyalty schemes. With point-of-sale and database technology now a fraction of the price it was a few years ago, purchase automation gives Geoff more than just stock control and accounting information. He captures detailed customer information. Even small retailers can database market, communicating with customers like never before.
Specialised stores such as cycling, running, and autosports can compete with super volume sports stores if they offer expertise and personal service the chains can’t offer. So can lifestyle shops. Hairdressers and restaurants are obvious examples of high personal and customer loyalty, but what about dedicated hi-fi shops, organic meats and collectable shops? They, too, can generate a tremendous following.
Chain store management is often centralised, far from the coalface and concerned with business issues not always customer related. Chain staff are often employed not for their product or service expertise but for labour costs per hour, and their service can be impersonal. Merchandise is bought in volume to keep prices keen, but can suffer from easy ‘comparison shopping’ across many chains. Look at the quality and service aspects of your business, rather than price point, and focus on giving customers a personal touch they can&rsq
uo;t get from larger competitors.
Times can be tough if a retailer badly positions the business, fails to invest in expert advice or becomes ‘storeblind’. Business will be arduous if location and property economics are ignored. It will be tougher for retailers who take a head-in-the-sand approach to social change and shifting consumer habits, or forget that closeness to customers brings a healthy bank balance.
Next time you go shopping, will you be chained to the chains or will it be your independents day?
*Stephen Spring is a consultant for Australian Retail Lease Management, and retail policy adviser for both the Retail Traders and Shopkeepers Association of NSW and the Franchise Council of Australia. He can be contacted on (02) 9518 4744 or www.retaillease.com.au