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Beating_the_Big_Box_Retailers
| Beating the Big Box Retailers
A question that faces many small business owners is how to
compete with the big box retailers. Wal-Mart is a common target.
To their credit, they've established a highly efficient
distribution system and a really simple business model. They'll
win on price due to distribution efficiency and economies of
scale. So, this isn't meant to be a shot at Wal-Mart or any
other big box player. However, I for one can't help but to hope
that there always will be a spot for the smaller players. They
may not be able to win on price, but they can provide
outstanding service and bring profits back to their respective
local community.
So, the question becomes, how do you win? Business 2.0 published
a pretty good article in their May 2005 issue titled "How to
Beat Wal-Mart?" What's particularly interesting is that some
folks have been successful even competing on price. Save-a-Lot
competes by providing the convenience of a smaller store in
local neighborhoods that aren't name brand. To me, that seems to
take away the direct brand competition, which is a good thing.
The Dollar Tree also attracts those looking for low price in a
small store with simple pricing. In fact, their operating
margins are higher than Wal-Mart's. Finally, Costco succeeds via
providing higher-end products to those who want good items at
lower prices. Small business is a primary market, one that Sam's
Club is now going after.
With all that said, fighting on price is a battle you'll likely
lose. Especially if you are offering identical items. Wal-Mart
will almost always beat you on price, although there are big box
players who are less focused on price. So it might be a little
more feasible against one of them. Still, I'd differentiate
along other lines. Service is the obvious one. Going after a
more upscale segment is another feasible route, although it is
dependent on your local community's demographics. With all that
said, it is still helpful to remove inefficiencies in your
business. This will make you more competitive on price, and you
can let other factors put you over the top.
Here in Rochester, we're lucky enough to be home to Wegmans.
Wegmans is generally perceived as an upscale grocer. They offer
an amazing wealth of services. When Wal-Mart came into town,
they changed their pricing model to become more competitive.
They continue to improve their extraordinary logistics system.
They've followed the model of competing on price, although not
beating them on it, while using their other attributes to put
them over the top. Trust me, there is no comparison between
shopping at a high-end Wegmans versus a Super Wal-Mart. That's
why they've held their own.
So, there you have it. Try to reduce costs where possible, offer
something unique, and potentially go after a different segment.
If you are in the grocery business, you'll likely take a hit.
However, see if you can expand into unique areas that will
differentiate your business. Worldly foods, organic foods, and
so on. The same can applied to other businesses. Of course, it
is easier said than done, especially if you are in an area with
limited population. However, maintain hope and consistently
adapt your business model, others have dodged the big box
threat. You can too, just continue evolving.
About the author:
Brett Daly is a Marketing Specialist for a small software
company. He has a MBA and a B.S. in marketing with a minor in
political science from the Rochester Institute of Technology.
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