10 rules for small retailers to out-compete chains

Strategyaudit.com.au

Chain stores dominate our grocery shopping environment, they have developed all the advantages of scale, and use them to the advantage of their shareholders, by delivering returns, and to customers by delivering low prices.

The model works, in Australia 75% of the grocery shopping dollar goes to one of two retailers, and small retailers have been decimated.

However, small retailers are making a comeback, the ones left are good, good enough to deliver value to their customers in different ways to the chains, and they are making a good  bob.

They compete with a variety of strategies, all of which have elements of the following 10 rules.

1. Make the store look warm, friendly, inviting, and, importantly, current. The last Valentines day, a client put in huge volumes of roses on which he put some very cheap prices compared to the highway robbery employed elsewhere, but he also had a promotion of Chocolates and a voucher for collaborative promotion with the grog shop two doors down, on sale. He did sell a lot of roses, a pile of chocolate, and got a slice from the bubbles the grog shop sold.
2.  Collaborative retailing is a really effective way of building sales and relationship s with customers. The example above worked really well, as have others that group retailers of differing women’s apparel, dresses, shoes, hairdressing services, et al together.
3. Experiment, with everything under your control. Store layout, range, price, stock weight and position, proximity of complementary products, promotional activity, it is a long list limited only by imagination and energy. However, experimenting is not the only game, you need to track results, now easy via the electronic tills, and if nothing else, Excel pivot tables.  Understand what works, and improve it for next time, eliminating the things that prove not to work. It is a simple formula, challenging to implement consistently, but in principal, simple. Learn as you go, and as the you experiment more, you will also find your depth of tacit knowledge also increases.  A small business can put in place an experiment, have the outcomes and a resulting tactical outlook while their bigger competitors are still trying to get a meeting together to decide if it may be a good idea.
4. Use technology widely, not just in the tracking of sales, but in the management of your operations, and most importantly, the engagement of your consumers. Make your website the co-ordination centre of your marketing efforts. Mobile, email, social media platforms, blog posts, all potentially have  a place, but mostly you cannot do them all, so make informed choices. However, you need to recognise that digital is not free, there are both operating and opportunity costs attached, and for most SME’s, a capability gap. Outsource all you can, which is getting easier by the day, and importantly, track the results of everything you are doing on line
5. Make sure you have a website that does you justice.  A mate sent this to me this link to Victor Churchill, a butcher in Sydney’s eastern suburbs,  and now I just want to go there.
6. Personalise, personalise, personalise. The chain retailers have “mass market”  business model, they cannot easily personalise their offer to the customer base. They may have a technology edge because they have the resources,  but how often does the casual filling the shelves greet a customer by name? Enquire after their kids, and ask how the fruit basket you supplied last week for the centre-piece of your dinner party work out?.
7. Specialise in what you do best, deliver “depth” to consumers where the mass retailers can only deliver “breadth” to a mass market.
8. Be the expert in your category. If you are a produce retailer, know where the best strawberries come from, and when they will be available , similarly, a fashion retailer needs to be current with the trendsetters, to know what is coming, what will accessorise easily, and how the fashion can be tailored to the market they are serving. Most people want to deal with, and seek the affirmation of experts, be the expert, and they will keep on coming back.
9. Apply the disciplines of Category Management to your inventory and space management. In its simplest form, Category Management is a mindset that seeks to allocate finite and valuable  shelf space  on the basis of maximising the customer experience, while delivering optimised profitability and long term commercial sustainability. This can get as complicated as you like, but for an SME, building an excel database leveraging the capability of pivot tables, tools virtually every business has sitting on their PC already, is sufficient to get started.
10. Watch the cash. This one always gets a run. Retailers greatest cost, and biggest risk is usually inventory, and inventory is a raging consumer of cash. On the other hand, the oldest adage in retailing  is “stock sells stock”, so there is a tightrope to be walked. Perhaps the most valuable, and in SME’s underused, performance measure in retailing is stock turn. Use it aggressively to fine tune your range, and inventory.

None of these “rules” are of great value separately, but together, they offer a potent competitive tool set for small retailers.

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5 ways small retailers avoid failure 3 essential pieces of the supermarket business model 5 ideas for SME’s to compete using data. How retailers can read the consumers mind.