Nothing — and I mean nothing — frightens a small-business owner more than hearing that one of the big-box retail chains — Walmart, Costco, Lowe’s, Home Depot and the like — is moving into town (well, maybe that Amazon is moving into its line of business).
It has never been easy for a small retailer to compete with the big chains for two reasons:
1. Big chain stores buy 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 available anywhere.
2. 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 a single roof.
When you are up against a big-box retailer (or any other enemy), you can’t win by playing against its strengths. A big-box retailer’s biggest strength is price, so if you are planning to compete on that, fuhgeddaboudit. You will lose.
So, what are the weaknesses of the big-box retailers? I can think of three:
1. They don’t offer service of any kind — their staff (usually) doesn’t know the merchandise and won’t spend time helping you or answering questions.
2. They don’t spend money on decor or customer experience — they are giant warehouses with ugly industrial-type lighting and few displays.
3. 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 service and giving the customer a great experience? Many small-business experts think you can.
But I disagree.
Small businesses almost always offer better service to their customers and a better overall customer experience than big-box retailers. The problem is that customers don’t want to pay extra for them. They want the service — 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 exactly where the best deal is anywhere at a given time. The cards are stacked against small businesses here. Thus, the phenomenon of showrooming, where customers spend lots of time in a small retail shop asking millions of questions, trying everything on three times, making a decision and then going home to buy the darn thing on Amazon for 40 percent off plus free shipping.
That leaves us with convenience as a way of competing against big-box retailers. Here we’re on more solid ground.
Big-box retailers are notoriously difficult to navigate. It’s hard to find what you want, lines are long and it often takes hours between the time you walk in and the time 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. Customers often have to travel 30 minutes or more to get to their nearest big-box retailers.
If you are looking to spend hundreds of dollars buying a month’s worth of groceries in one shot, you will probably put up with the inconvenience of shopping at a big box. But not if you are buying just one filet mignon to impress a date this coming Saturday night.
And therein lies one of the keys to competing with a big box.
In the town where I live, there’s a (really) small hardware store that has competed successfully with Home Depot for over 20 years. It’s located at the heart of town, at a key intersection next to a popular brew-and-burger restaurant that guarantees it lots of ambient traffic. Wherever you live in town, it takes only five to 10 minutes to get to this hardware store. Getting to Home Depot will take you 20 to 30 minutes, longer on a busy Saturday.
But that’s not the main reason for this store’s success.
This store does not try to stock everything a hardware customer might need. It stocks only the most common or most requested items: lightbulbs, garden tools, fertilizer, shovels, rakes, insect repellents, kitchen cleaners — only 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.
People don’t leave this store with overflowing shopping carts. Most leave with just a small bag or two. 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 (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series “Money Hunt.”
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