Nothing — and I mean nothing — frightens a small business owner more than hearing that one of the big-box retail chains, such as Wal-Mart, Costco, Lowes and Home Depot, is moving into town.
There are two reasons it has never been easy for a small retailer to compete with the big chains:
—Big chain stores buy merchandise in massive quantities and negotiate tough terms with their vendors, passing these volume discounts on to their customers so they can offer the lowest prices anywhere.
—Big chain stores have almost unlimited floor space and can stock a wide, if not comprehensive variety of inventory, enabling their customers to shop for everything they need under one roof.
When you are up against a big-box retailer (or any other enemy), you can't win by playing against their strengths. The big-box retailers' biggest strength is price. If you are planning to compete with them on price, fuhgeddaboudit. You will lose.
So what are the weaknesses of the big-box retailers? I can think of three.
—They don't offer a service of any kind. Their staff usually doesn't know the merchandise and won't spend time helping you or answering questions. —They don't spend money on decor or customer experience. These places are giant warehouses with ugly, industrial-type lighting and few displays.
—They are hell to navigate. Sometimes it takes forever to find what you're looking for, and then you stand in a long line behind a bunch of contractors with pallets of lumber waiting to pay for your six-pack of dental floss.
Can you compete with big-box retailers by offering better services and giving customers a great experience? Many small-business experts think you can.
But I disagree.
Small businesses almost always offer better services and a better overall customer experience than big-box retailers. The problem is that customers don't want to pay extra for the services. They want them, you betcha. But they also want the substantial discounts that big-box retailers offer. Small businesses, because of their high overhead and limited floor space, can rarely afford to discount the way big-box retailers can. And today's digital world makes it easy for customers to find out where the best deal is at any given time.
Thus, the phenomenon of "showrooming was created," where customers spend lots of time in a small retail shop asking millions of questions, trying everything on three times and making a decision, only to then go home and buy the darn thing on Amazon for 40 percent off plus free shipping. The cards are stacked against small businesses in this regard.
That leaves us with convenience as a way of competing against big-box retailers.
Big-box retailers are notoriously difficult to navigate. It's hard to find what you want; lines are long; and hours often pass before you walk out with your merchandise. Also, because big-box retailers look for low real estate costs, they tend to be located on the wrong side of the tracks, far away from where their customers reside, sometimes 30 minutes or more.
If you are looking to spend hundreds of dollars to buy a month's worth of groceries in one shot, you will probably put up with the inconvenience of shopping at a big-box retailer. But you probably won't if you are buying one filet mignon to impress a date this coming Saturday night.
And therein lies another one of the keys to competing with a big-box retailer.
In my town, there's a really small hardware store that has competed successfully with Home Depot for over 20 years. It's located in a key intersection in the heart of town, next to a popular brew-and-burger restaurant that guarantees lots of ambient traffic. No matter where you live, it only takes five to 10 minutes to get to this hardware store. Getting to Home Depot will take 20 to 30 minutes (or longer on a busy Saturday). But these aren't the main reasons for this store's success.
It does not try to stock everything a customer might need; it stocks only the most common or most requested items, such as lightbulbs, garden tools, fertilizer, shovels, rakes, insect repellents and kitchen cleaners. And it only carries one or two brands, not 20. The sales staff (generally only one or two people) can help you find anything in the store in less than five minutes.
Most people leave the store with a small bag or two, not overflowing shopping carts. But every customer leaves with a bag.
The key to this store's success is not service; it is convenience and time management. You will not go to Home Depot to buy one or two lightbulbs, and you surely won't care that the local store charges a few pennies more for them.
More next week...
Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our webpage at www.creators.com.