The 10 main rules for small retailers to out-compete the biggest retail chains

Posted by AFN Staff Writers on 27th May 2015

Allen Roberts is a guest contributor to Australian Food News and writes another of his regular articles here.

Chain stores dominate our grocery shopping environment.
Chain stores dominate our grocery shopping environment.

Chain stores dominate our grocery shopping environment. They have developed all the advantages of scale, and use them to the advantage of their shareholders, by delivering returns and to customers by delivering low prices to their customers.

The model works. In Australia 75% of the grocery shopping dollar goes to one of two retailers and many small retailers have been decimated.

However, small retailers are making a comeback. The ones who are left, good enough to deliver value to their customers in different ways to the chains, and they are making a good money.

The successful small retailer uses a variety of strategies, elements of which make up the following 10 rules:

  1. Make the store look warm, friendly, inviting, and, importantly, current. The last Valentines Day, a client put in huge volumes of roses in which he put some very cheap prices compared to the highway robbery employed elsewhere.  He also had a collaborative promotion of chocolates and a voucher for collaborative promotion with the grog shop two doors down. He did sell a lot of roses, a pile of chocolate, and got a slice from the bubbles the grog shop sold.
  2. Collaborative retailing is a really effective way of building sales and relationships with customers. The example above worked really well, as have others that group retailers of differing women’s apparel, dresses, shoes, hairdressing services, etc, together
  3.  Experiment with everything under your control. It is a long list limited only by imagination and energy, such as store layout, range, price, stock weight and position, proximity of complementary products, promotional activity, it is a long list limited only by imagination and energy. Experimenting is not the only game, you need to track results, now made easy via the electronic tills, and if nothing else, Excel pivot tables. Understand what works, and improve it for next time, eliminating the things that prove not to work. It is a simple formula, challenging to implement consistently, but in principle, simple. Learn as you go, and as the you experiment more, you will also find your depth of tactical knowledge also increases. A small business can put in place an experiment, have the outcomes and a resulting tactical outlook while their bigger competitors are still trying to get a meeting together to decide if it may be a good idea.
  4. Use technology widely not just in the tracking of sales but in the management of your operations and most, importantly, in the engagement of your consumers. Make your website the co-ordination centre of your marketing efforts. Make informed choices as mobile, email, social media platforms, blog posts, all potentially have a place but generally you cannot do them all so make informed choices. You need to recognise that digital is not free, there are both operating and opportunity costs attached and for most SME’s, a capability gap. Outsource all you can, which is getting easier by the day and importantly, track the results of everything you are doing online.
  5.  Make sure you have a website that does you justice. A mate sent me this link to Victor Churchill, a butcher in Sydney’s eastern suburbs, and now I just want to go there.
  6.  Personalise, personalise, personalise. The chain retailers have a “mass market” business model, so they cannot easily personalise their offer to the customer base. They may have the edge with technology because they have the resources, but how often does the casual filling the shelves greet a customer by name? How often do they enquire after their kids, and ask how the fruit basket you supplied last week for the centerpiece of their dinner party worked out?
  7.  Specialise in what you do best. Deliver “depth” to consumers where the mass retailers can only deliver “breadth” to a mass market.
  8.  Be the expert in your category. If you are a produce retailer, know where the best strawberries come from and when they will be available; similarly a fashion retailer needs to be current with the trendsetters, to know what is coming, what will accessorise easily, and how the fashion can be tailored to the market they are serving. Most people want to deal with and seek the affirmation of experts. If you are the expert, and they will keep on coming back.
  9.  Apply the disciplines of Category Management to your inventory and space management. In its simplest form, Category Management is a mindset that seeks to allocate finite and valuable shelf space on the basis of maximising the customer experience, while delivering optimised profitability and long term commercial sustainability. This can get as complicated as you like, but for an SME, building an excel database leveraging the capability of pivot tables, tools virtually every business has sitting on their PC already, is sufficient to get started.
  10. Watch the cash. This one always gets a run. Retailers greatest cost  and biggest risk is usually inventory, and inventory is a raging consumer of cash. On the other hand, the oldest adage in retailing is “stock sells stock”, so there is a tightrope to be walked. Perhaps the most valuable and in SME’s underused, performance measure in retailing is stock turn. Use it aggressively to fine tune your range and inventory.

None of these “rules” is of great value separately, but together, they offer a potent competitive tool set for small retailers.

Allen Roberts is a guest contributor to Australian Food News and writes another of his regular articles here. He is the Director of Strategy Audit and has worked in the food sector for more than 35 years. To read his full biography click HERE.