Small Retail is Taking On Big-Box (and Winning)
For decades big-box stores dominated the retail world. They anchored the large malls and dominated suburban shopping centers… often at the expense of smaller retail stores.
But as consumers shift more of their purchasing online, large retailers are struggling. Macy’s, Sports Authority, Finish Line, and many more have either sold, closed stores, or shut down entirely. Suddenly, all the key factors that enabled their success – many locations, large footprints, lots of inventory – are now restricting their flexibility and ability to change to the new demands of fickle consumers.
eCommerce players like Amazon and Zappos are contributing to this shift by enabling customers to easily get almost any product delivered to their doorstep within days, at the same or better prices. They are also unburdened by the anchor of a physical store, and utilize the full benefits of scale and technology.
However, smaller retailers and mom-and-pop stores that provide unique experiences, curated products, and personalized service have taken a large share of big-box sales. PWC found that the consumer now craves personalization, and that “niche products, experiences, and services uniquely suited to individual tastes, interests, and aspirations have become ‘the new consumer indulgence.’” Large stores simply cannot provide these experiences.
Deloitte discovered that this fragmentation within the retail marketplace has lead to over $200 billion of sales stolen from big retailers by small and mid-level players since 2010. These smaller stores specialize in single segments, allowing them to provide a greater depth of offerings than the larger stores, which cover a broader cross-section of the industry. The smaller stores are also more nimble, allowing them to respond to changing consumer tastes, which can surprise larger stores.
Deloitte found four separate selling strategies that are leading the disruption:
1. Small Retailers Compete on Value and Convenience
They focus on reducing operating costs in order to provide better value, such as location and logistics to reduce travel and shipping times.
2. Focus on Experience
Others create a highly differentiated experience but sell products that are commonly available. These retailers provide enjoyable interactions with staff, education, entertainment, and personalized content.
3. Product Differentiation
Third, a group of retailers is competing using differentiated products that cannot be found elsewhere. Using private and exclusive brands, vertical integration, or a limited supply of products, they create a sense of urgency to motivate immediate product purchases.
4. Combine Product & Experience
Last, a small number of retailers have combined differentiated products and experiences. These players integrate experiences into the unique products and are typically a luxury play, surpassing the customer’s needs or expectations. Deloitte believes that this disruption is still in its early stages and expects it to continue to advance at an increasing rate.
What Does This Mean for Brands?
With small retailers selling more and moving quicker, you must adapt your brand’s selling capabilities to match their needs or you will risk losing out on a significant revenue stream. Buyers will require a faster and more flexible ordering process, readily available inventory, sales consultation, and efficient shipping.
Examine your current ordering process and see where it can be made more accessible. Can your buyers place orders via email or through your website? Do they have your most up-to-date catalogs? How long does it take you to process orders? Consider taking orders electronically and processing them within 24 hours. Also, put your catalogs on a website that can be easily updated to keep your buyers informed of your latest products.
It may also be time to examine the risk of carrying more inventory. This will quicken your processing and shipping speeds, but can tie up money. Talk with your shipping and fulfillment partners. See if you can negotiate faster shipping and processing times.
This is also the time to take a more personal approach to your selling. Get to know your buyer’s business, their goals, and their target customers. Learn what items work for them and what doesn’t. Use this knowledge to develop a selection of products just for them.
One way to significantly improve your processes is to to implement a B2B eCommerce platform. This will provide your brand with a ordering process similar to that of a traditional business to consumer site, allowing your buyers to browse products and place orders 24/7. Also, when integrated with your ERP or accounting applications, they can automatically enter orders, process payments, and maintain inventory count.
To learn what NuORDER can do for your business, request a demo.