I thought you might be interested in the thoughts of Tony Gao, Ph.D., a marketing professor and retail expert at Northeastern University’s business school, on ways independent retailers can better compete against big box retailers in the current economy (you can find Prof. Gao’s bio here: http://cba.neu.edu/faculty/directory_detail.cfm?e=240):
“Generally speaking, in competing with larger national chains, independent stores suffer from a lack of economy of scale (larger size -> bigger buying power against suppliers -> better price and delivery terms) and a lack of economy of scope (merchandise scope, geographic scope, and multichannel presence). Therefore, they should avoid competing directly on price but should take advantage of their relationships with customers, unique merchandise, and unique services as key competitive weapons.
“In today's economic environment, though, even small stores which pride themselves on selling at full prices should be prepared to given incentives to shoppers. If not in the form of price discounts as commonly seen in national chains, these incentives could come as surprises or delights that add to the purchase order and sweeten the purchases to shoppers. They could also start or make more intensives uses of their loyalty programs to channel the best incentives and deals to their best customers.
“Smaller and independent retailers, by their family-owned nature, may enjoy a unique advantage over their larger counterparts, especially public ones. They can perhaps better withstand the economic storm than their larger foes because they don't have to face the same pressure from outside investors on profitability and sales performance fronts. Work and life balance is another major goal for indies in running an independent store and they can sacrifice some income and profit for these additional benefits.
“In slow business times, owners of small stores can take the time to reflect on their business experiences and seek ways to come out of the crisis as a stronger and more relevant player in the local retail market.”
“Generally speaking, in competing with larger national chains, independent stores suffer from a lack of economy of scale (larger size -> bigger buying power against suppliers -> better price and delivery terms) and a lack of economy of scope (merchandise scope, geographic scope, and multichannel presence). Therefore, they should avoid competing directly on price but should take advantage of their relationships with customers, unique merchandise, and unique services as key competitive weapons.
“In today's economic environment, though, even small stores which pride themselves on selling at full prices should be prepared to given incentives to shoppers. If not in the form of price discounts as commonly seen in national chains, these incentives could come as surprises or delights that add to the purchase order and sweeten the purchases to shoppers. They could also start or make more intensives uses of their loyalty programs to channel the best incentives and deals to their best customers.
“Smaller and independent retailers, by their family-owned nature, may enjoy a unique advantage over their larger counterparts, especially public ones. They can perhaps better withstand the economic storm than their larger foes because they don't have to face the same pressure from outside investors on profitability and sales performance fronts. Work and life balance is another major goal for indies in running an independent store and they can sacrifice some income and profit for these additional benefits.
“In slow business times, owners of small stores can take the time to reflect on their business experiences and seek ways to come out of the crisis as a stronger and more relevant player in the local retail market.”
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