How To: Survive Mega Competition

How small businesses can thrive up against big competitors.
April 23, 2013

It’s an old story: A thriving mom-and-pop hardware store doesn’t give a second thought to the newspaper announcements of a big-box retailer breaking ground on the edge of town. Then the mega-chain opens and tumbleweeds start rolling through downtown. The once-flourishing hammer-and-nail dealer, with its many longtime, loyal customers, shutters in the face of unbeatable competition.

By planning ahead, strategizing and remaining flexible, small businesses can hold their own, says Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University in Winston-Salem, N.C.

“You have to accept that as an independently owned business, you cannot compete on the same playing field as a major national retailer,” Beahm says. “These companies have enormous marketing teams and efficiencies of scale that can shut you down. You have to use a centuries-old strategy of finding their weak spot and attacking it.”

Consider these pressure points for besting competition from a corporate behemoth:

Personal Touch

The obvious spot of vulnerability is the cozy customer service and personal attention that only small, local businesses can provide, says Nora Simpson, CEO of small-business consultancy Simpson Strategic Solutions. “The No. 1 biological driver of human beings is our need for interaction with other human beings,” Simpson says.

Ask yourself:

• What kind of service, expertise or community can our business provide that the big boys cannot?

• Are employees enthusiastic ambassadors of our brand? Are we hiring the best people to interact with customers and vendors?

Do this:

• Create a customer database. Collect information based on every customer’s purchases, and tailor offers and promotions to the individual. “The point is to treat each customer as royalty,” Simpson says. “Each piece of marketing you create should be addressed to the customer by name. Offer clients products customized to their tastes and preferences.”

• Invest in hiring, training and retention practices to ensure that the best people work with you.

 

Be Flexible

Small businesses have the freedom to be nimble when necessary and take risks at will. “Every successful business takes little risks all the time, and small businesses have the luxury of being incredibly responsive to the marketplace,” Simpson says. “Corporations take much longer to make changes, and the risks are bigger.” In other words, take advantage of the fact that you do not have a stock price, compliance or layers of corporate management to wade through to make business decisions.

Ask yourself:

• What are some small risks we can take now, for which we can afford to lose both time and money?

• Do we need to reposition the benefits we offer?

• Do we need to take a big risk and find a new service or product?

Do this:

• Ask your customers what they want and need. Ask them what your big-box competitor is not providing. Fill the void.

• Respond quickly and personally to social media interactions. “Small-business owners can respond [to complaints] immediately,” Simpson says, “and then make changes that rectify the situation.”

 

Differentiate

In addition to a personal touch, unique merchandise can make a small business stand apart, Beahm says. “A small business can offer a selection customers can’t find elsewhere.”

Ask yourself:

• What product availability issues do customers complain about?

• What items or services are among our biggest sellers?

• What do we offer that no one else in the area is providing?

Do this:

• Zero in on what works. If customers are focusing on a certain product line, reposition the business around that.

Mitch Goldstone

President

Business: ScanMyPhotos.com, headquartered in Irvine, Calif.

Strategy: Reinvented a local business into a unique international corporation.

Results: Revenue has grown into the millions, and the market is no longer restricted by geography.

In 1990 I opened a photo development center, and we grew into a very successful local business. But it was very localized, with our customer base within a 3½-mile radius. In 2007 I read in the newspaper that Costco and Target would be opening within a year at a new strip mall literally across the street from my business. I knew they would kill us.

At the same time, smartphones and digital cameras were taking over—it was really a double-whammy.

Right away I started studying everything I could about digital photography and scanning, and began to reposition my business. I started ScanMyPhotos.com, which takes old albums and boxes of photographs and scans them into digital format. Before that took off, the giant retailers opened and all our longtime customers left, just because they could save a little bit of money at the big chains.

The years of loyalty, customer service and our family environment didn’t matter. Sales were down 75 percent. I don’t like to think back on it. I get emotional.

I invested hundreds of thousands of dollars in high-speed scanning equipment and marketing my new services. Then The New York Times reviewed our company, and soon there were 30,000 people on our website at once. Now we get orders from all over the world. Today we’ve scanned 100 million photos and just relocated from a 1,200-square-foot store to a 6,000-square-foot space. We’re also part of a reality TV program that will elaborate on the stories behind the photos we scan.

None of this success would have been possible if I had tried to compete with the big retailers simply on price or customer service. I was forced to find something they couldn’t touch. At first it looked bleak, but it really turned into an incredible opportunity.

Jon Abt

Co-President

Business: Abt Electronics, Glenview, Ill. Strategy: Offer competitive prices, customer service and a unique, family atmosphere.

Results: Double-digit annual growth has continued; the company, founded in Chicago in 1936, is now located on 37 suburban acres.

We are the largest independent electronics retailer in the United States. The secret is good old-fashioned customer service and everyday low prices.

We’ve been offering low-price guarantees for 30 years—before anyone knew what that term meant. We have signs all over the store saying, “Our answer is ‘Yes’ to any reasonable request.”

Our sales staff is empowered to make deals and offers without getting a manager’s approval. We allow them to make decisions to make customers happy. We take care of our people in other ways, through good benefits and an on-site gym, and we’ve been named “Best Place to Work” by The Chicago Tribune. If our employees are treated right, they will treat customers right.

We are also authorized service providers for nearly everything we offer and employ 250 repair people on-site. Everyone else outsources repairs, but customers like knowing that you will fix any problem they have with the product they bought from you.

We grow according to what the customer wants. When we opened 77 years ago, we sold radios, but slowly grew to offer other appliances, electronics, luggage and watches. Recently customers started asking whether we sold mattresses, so we opened a new section selling mattresses and furniture. We always keep an eye on our competitors, their policies and pricing. But we offer a family atmosphere that just can’t be found anywhere else. On weekends we provide coffee and freshly baked cookies, and families love coming in to experience our 7,500-gallon saltwater aquarium—the largest privately owned aquarium in the state—an interactive shadow attraction, butterfly exhibit and a bubble machine.

Of course we get nervous when customers come in with circulars from our competitors, but at the end of the day our philosophy allows us to adapt and evolve to stay competitive.

Mitchell Kaplan

Owner

Business: Books & Books, multiple locations in South Florida and Grand Cayman

Strategy: Create a customer community through events, unique environment and merchandise, and hire the right people.

Results: In its 30-year history, the store has expanded from one location in Miami Beach to three wholly owned stores, a “newsstand” concept and four affiliate locations. The business has spawned Books & Books Press, a custom book publisher, and The Mazur/Kaplan Co., a production company that options books for film and TV.

We don’t see only big-box bookstores as competition—we see everything as competition: the Internet, online movie streaming and other forms of entertainment. Our philosophy, which is at the very core of who we are, is to differentiate ourselves by being indispensable to the community and making our customers feel they have ownership in the space.

Everything comes back to our passion for books and desire to support writers, in the same spirit as many great independent bookstores in history. City Lights in San Francisco and Shakespeare & Co. in New York are great examples.

We do this by creating unusual ambiance—all of our stores look very different than other retail spaces in our area, with floor-to-ceiling books, cozy rooms and unique food offerings. Some have wine and beer licenses. We also hire highly educated, nice and knowledgeable staff members who love and know about books.

Our product is unique in that we offer one of the largest selections of art, design and photography books in the country. These are items that people do not tend to buy online or in e-book form.

One of the biggest things setting us apart is our calendar of author events. We average 60 events each month, and these tend to be big names. We communicate these events, announcements about new books available, reviews and bios of authors through a daily email to 20,000 people. It’s educational, not hard-selling.

None of this was conceptualized strategically. Everything emerged organically out of our passion for books and authors.

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