Small business strategies for competing against big box retailers

¶ … Small Business Needs to Do to Compete Against Big Box Stores Such as Wal-Mart

Big box retail stores such as Wal-Mart and K-Mart have overtaken the United States and have put the Mom and Pop stores of Main Street America out of business because the "...large discount chains draw customers from greater distances and can offer the consumers services traditionally not offered by smaller outlets, such as one-stop shopping, extended hours, free parking and lower prices." (Center for Applied Economic Research, 2000) it is stated in the Center for Applied Economic Research report entitled: "The Impact of Big Box Retail Chains on Small Businesses" that the advantages "...of the 'big box' discount retailers is clear: lower prices, aggressive pricing practices, large advertising budgets, expanded lines of products to choose from, constant renovation and remodeling stores with the appeal of seeming 'new' all the time, free parking, hours of operation (many are open twenty-four hours), one stop shopping (including groceries, dining, apparel, filling prescriptions and much more) and a lack of back ordering." (Center for Applied Economic Research, 2000) Bannock (2003) states that "the vulnerability of small firms arises virtually by definition from the small scale of their human and financial resources." Bannock states that the Committee of Inquiry on Small Firms, chaired by the late John Bolton identified three characteristics in it economic definition of small firm" as follows: (1) a small market share, that is not large enough to influence national prices or quantities; (2) 2. Managed in a personalized way; and (3) Independence or the exercise of ultimate management responsibility. (Bannock, 2003) Bannock states that these three characteristics "are to be founding the vast majority of all businesses, but the economic definition is of no use for statistical purposes since business statistics are not classified in terms of market share, owner-management and employment dimension, a threshold that seems appropriate to define a 'small firm' in one activity may not be appropriate for another." (Bannock, 2003)

I. Management, MARKETING & SERVICE

Management will do well to pay attention to the advice of the work entitled: "Customer Service Take Your Fear of the Competition Turn it Around to Generate Incredible Results" which states that while many retailers spend their time in fear of the economic affect of the 'Big Box' stores, there are other small business owners who have "leveraged the advertising dollars of their competitors to create a consistent flow of traffic to their 'Small Box' stores. This incredible and effective customer service and marketing strategy provides increased customer satisfaction and saves thousands of dollars in advertising costs." (Hoagland-Smith, 2008) These five strategies are stated to be those as follows: (1) the location of the business "needs to be near the Big Box stores and on a well traveled route with noticeable signage." (2) the small business needs to "purchase, read, and study the local newspapers, especially with the advertising inserts. (3) Check in the inventory in the small business and ensure that at least one of the products that are being advertised is in stock "so that your potential customer can compare apples with apples." (4) When the customers, who are "your soon to be customers come in with your 'competitors' flyers in hand, you can show them the same thing and then offer them a possible upgrade along with the additional value that you bring as a small business owner." (Hoagland-Smith, 2008)

There are reportedly seven primary mistakes that small business owners are known to make and these are reviewed and stated to include the following: (1) the small business owners should work 'on' and not 'in' the business; (2) Asses the business both internally and externally: The business owner should never "presume" that they know what is going on and should set aside the time to make an assessment of the business both inside and out. The small business owner should use "an organizational assessment based upon proven criteria such as Baldridge" in enabling them to "focus on the directionally correct actions"; (3) Develop a strategic plan: failure to make a plan results in whatever plan is in action is a plan belonging to someone else. The purpose of the strategic plan is to set out what responsibilities belong to which employee and when these duties are to be accomplished; (4) Work on the plan mistake: the mistake is to spend time and money on a plan and then to place it on a shelf or leave it lying around to gather dust. The plan has a purpose which is action-based therefore, failure to utilize the plan results in the plan being rendered useless; (5) Invest in the employees:."..spending money on technology instead of people because people make the business. People create loyalty in customers; (6) Pay yourself first: when the small business owners attempt to wear all the hats and simultaneously does not pay themselves based on their true worth. Paying themselves first will allow the business owner to focus on what they are really good at doing and enable them to delegate out the duties that can be accomplished by other employees and at a lower rate; (7) Keep balance between personal and professional lives.

The work of Paul Miser (2007) entitled: "Think Mayberry, Not Wall Street! 7 Steps to Beat Your Top Competition! states that for years the business viewed as being 'ideal' was "to get as many customers as possible and retire a multi-zillionaire. But as a small business owner we can't afford the time and resources to do so and many of like to perform in the smaller scale." This is great for the most part but has a potential to become problematic." (Miser, 2007) the small business has a focus and income that is smaller and therefore renders the small business unable to compete because prices of the small business cannot be set low enough for competition with the 'big boxes' if the small business is to survive. Miser states that the first step the small business owner or manager must take is to 'gather information' because "knowledge is power!" (Miser, 2007) if the small business owner or manager is to compete with the larger stores then it is necessary to "...fully understand your business, customer, industry and competition." (2007) Secondly Miser states that it is necessary for the small business to 'tweak' its' image and this can be done by "utilizing your information" in order to "know what your market is looking for in a product or service." (2007) Third, Miser states that the business must "create a culture of this image" which must be implemented "in every aspect of your company from operations to customer service." (2007) Fourth stated by Miser is that the small business should never "skimp on operations" and "whether your produce widgets or provide eye exams, you need to provide your customer with a top-notch, five-star product or service." (2007) Miser relates a guarantee that "the big box store will fall short in this arena." (2007)

Fifth, it is critical, according to Miser to increase customer service and states that "little things matter here. The courtesy calls, thanking them for their business, gong above and beyond the call of duty, offering value-added information for free, building a relationship, etc." (2007) Miser states that when this is done correctly that this investment is very well worth the time expended. It is also important to "remind your customers of your added value" and Miser states that the small business owner or manager should blow their own horn and spread the word of what a great company the small business is and how much better customer service is than that provided by the big box store. It is likely that the most important point made by Miser is the seventh point stated which is "think Mayberry." (2007) Miser states: "Sit down and watch a few episodes of the Andy Griffith Show. Watch for how people are treated, what the reaction is, what the lifestyle is. How can you implement these values into your business? Doing it will provide something that the Big Box will never e able to meet; Personable, Appreciated relationships." (2007)

Leanne Hoagland-Smith writes in the work entitled: "Business Marketing Strategy that Doubles Results Through 5 Simple Questions" that small businesses are generally defined "as companies with under 500 employees" and that these businesses tend to fail in marketing their company with the consequences of losing market share. "The inability to increase sales revenue goes beyond the expertise of your sales staff and is directly tied into your marketing plans." (2008) the first required ingredient in a good marketing plan is the 'marketing message' according to Hoagland. Secondly, Hoagland asks "does your marketing message interrupt your prospect or suspect?" Hoagland also asks if the marketing message is one that "engages your prospect or suspect? And if so, "now that your have your prospect's attention, how do you keep it?" (2008) Finally, Hoagland asks the question of whether the marketing message "educate[s] your intended audience? Hoagland states that in order to solidify the marketing message that it is helpful to cite "proven, documented data or statistics." (2008) Hoagland asks the final question of whether the marketing message "...provide[s] an immediate offer? (2008) Hoagland states that the marketing plan, if it is to be effective must contain: (1) a marketing message that has the element that (2) interrupts; (3) engages; (4) educates; and (5) offers.

The work entitled: "Beating Goliath" published in the Smart Business Magazine relates the story of Mike Abt and his success in keeping his electronics business ahead of the big-box competition. The report states that Mike Abt "as the president of Abt Electronics, the largest single-store electronics and appliance dealer in the United States, besting the competition is his passion. From beating the big-box retailers on price to having an exceptional Web presence and creating an engaging in-store experience, Abt has used traditional and not-so-traditional techniques to draw customers in and keep them coming back." (Wurzinger, 2006) Wurzinger states that it is a well-known fact that in the retail business, the easiest way to attract customers away from your competition is by offering the best practice." (2006) the way to achieve this is by making purchases in bulk, which is generally quite a challenge to the smaller business operations. The Abt Electronics store, while being only a single store has a showroom covering "350,000 square feet, making it large enough to move inventory en masse and allowing it to buy in build and negotiate deals with vendors." (Wurzinger, 2006)

According to Mike Abt the method he uses to keep prices low are through savings in "operating and marketing costs." (Wurzinger, 2006) Abt states that compared to his competitors he has "very little overhead...We spend under 1% advertising and the average person in our industry is spending 7% advertising." (Wurzinger, 2006) Abt states that advertising through the method of "having good word of mouth" is how Abt Electronics realizes the largest savings. Furthermore, the efficiency realized by having only one location saves a great deal in expenses and Abt states: "people drive to us, we don't build stores where they are." (Wurzinger, 2006) Furthermore, there is the company's attitude regarding maintenance and upkeep because Abt Electronics does not "outsource the care and maintenance of its delivery trucks, repair services on the products it sells or its own building maintenance. By doing it all on its own the company saves money and passes those savings on to the customers." (Wurzinger, 2006) Also stated as a factor is that with the company's single store format the company is enabled to a greater level of flexibility and "by remaining small, it is able to adapt to the industry changes more quickly than its competitors can, and its' also willing to take risks." (Wurzinger, 2006) Abt states that the business owner or manager has to be aware in that it is necessary to know what is going on the industry in relation to products and services. It is this "openness to change" that resulted in Abt Electronics presence on the Internet Abt states that his company is "really into information and sharing, and we knew that in the old days, appliance people would go to books and look up specs. We did it first just to get information to the salesman so they could give it out to the customer. Then outside people came to it. We were one of the few appliance guides." (Wurzinger, 2006)

Wurzinger states: "Recognizing the sites draw, in 1997 the company expanded from an online product information guide to a complete online appliances and electronics store." (2006) in order to overcome the fact that on many consumers sites concerning shipping charges resulting in cancelled orders, Abt Electronics has the practice of charging one flat shipping rate to anywhere in the continental United States. Abt Electronics has realized success due to the strategies related in addition to being able to reach consumers throughout the United States. This has enabled the store in external growth through business expansion to other states without having to open a second store. Additionally, the company can sell more inventory that it has room to store. The report states that Abt relates that customers who visit online prior to their visit to the store is approximately 80% of the total customer-base of Abt Electronics. Online shopping at Abt Electronics provides a streamlined manner of shopping for customer as well. Abt Electronics motto is: "The answer is yes to any reasonable request" meaning "that if the customer wants something reasonable...the company does it, no questions asked." (Wurzinger, 2006) Proper delegation of authority is key for Abt Electronics as the employees are empowered to satisfy their customers honoring all reasonable requests without having to obtain supervision's agreement. Customer service is a key ingredient as well in the strategy and plan of Abt Electronics as providing the customer a positive memorable experience is what it takes to have customers returning again and again to the store.

In June 2007, United Hemispheres magazine published a report entitled: "Small Business, Big Impact" which states: "A variety of trends are converging to debunk the 'bigger is better' myth. One of the most powerful is the backlash against big-box chain stores and impersonal corporations. Recent statistics certainly make a compelling economic case for locally owned and operated businesses. Civic Economics, a Chicago-based consulting firm specializing in sustainable economic development, performed a series of "Livable City" studies in Austin, Texas; Toledo, Ohio; and Maine's midcoast region. They found that local merchants routinely generated three times as much local economic activity, adjusted for revenue, as chain stores." (Fredman, 2007) Additionally stated is: "For every $100 consumers spent with a local firm, $68 remained in the community, compared with $43 from a chain firm. For every square foot occupied by a local firm, the local economic impact is $179, compared with $105 for every square foot held by a chain firm." (Fredman, 2007)

Capitalizing on these types of statistics when advertising is important for informing consumers and bringing consumer support to small businesses throughout the United States. As of 2005, the U.S. Small Business Administration states that the United States has "reached a new high of roughly 26 million..." small businesses in existence. It is necessary to consider the perceptions of consumers as related to small business owners as it is stated that "the perception of these small business owners as 'hippie throwbacks' who just want to get out of the mainstream is off the mark..." (Fredman, 2007) in fact, the report states that in reality "Many are sophisticated entrepreneurs who are balancing financial and lifestyle concerns and who are beating the big guys on their own turf." (Fredman, 2007) it is reported by one business owner in this study that half of his time is spent on "nonprofit work" and the report states that "many local owners similarly devote their extra hours to community organizations, and they find that in their efforts to live a more meaningful life, they get back as much as they give." (Fredman, 2007) the author of the work entitled "The Small Revolution: How Local Businesses are Beating the Global Competition" that it is possible for small businesses to leverage the knowledge of local individuals in order to "provide personalized goods and services. The results is customer relationships built on trust that can last longer than those dependent on deeper discounts." (Fredman, 2007)