Small businesses dominate the retail business. While big companies such as Wal-Mart, Nordstrom’s, Best Buy, Bloomingdale’s, and others fill the business headlines; about ninety-five percent of retailers in the United States only have one-store outlets.
The face of retailing is changing, and no one is more affected by these changes than the small independent retailers. Small retailers face several industry trends, some of which may benefit them while others may prove to be their disadvantage. In order to survive, they must be aware of these trends and plan accordingly how it can affect them or turn these trends to their advantage.
These trends affecting the small independent retailers are as follows:
The buzzword in retail is “personalizing the customer experience.” With advancements in technology, customers now expect retailers to give them a more personal service. Gone are the days of mass customization, where the mantra is one size fits all. Customers want to be pampered, and to be given the quality of service that they think they deserve.
It is in this arena where small retailers are more likely to give the big boys a run for their money. Small businesses are more flexible and tend to know their customers individually. They are more apt to provide personal interaction with their customers — from knowing the actual names, personal details like birthdays, to knowing a customer’s preferences.
2. Value Equation
Customers are increasingly demanding more for less money. They want better products, better prices, better selection, and better service — but without making a dent on their wallets. They want it cheap, they want it fast, and they want it now.
This is one trend where big businesses have the edge over small retailers. The Wal-Marts of this world will continue to under price other retailers, whether big or small. Big retailers enjoy economies of scale that small businesses do not have, allowing them to cut prices in order to give more value to their customers without sacrificing their bottom line.
3. Increased Competition
The retail market has grown more and more competitive in the last few years. One of the toughest parts of being a small retailer is competing against a big retailer. Owners of small businesses often find it hard to fight against these big retail boxes whose goal is to dominate their product category or customer segment. The big boys often tend to squash their competition, big or small.
The only recourse of small businesses is to find a gap in their product or service offering and fill it. Let’s face it: small businesses cannot compete with the giant retailers on their terms. The key is to become a true specialist. The real strengths of successful small independent retail revolve around specialization, differentiation and finding profitable and sustainable niches.
4. Changing Demographics
America is in the midst of changing demographic trends, which is profoundly impacting the face of retailing. The aging of the population, the growth of the Hispanic population, the increasing dominance of the Generation Y consumers provide specific target niche opportunities for small retailers.
5. Community Activism
As big retailers like Wal-Mart move to new geographic markets to spread their dominance, they are finding that communities are up in arms to protect the “local community personality, feel and values.” Knowing the impact of bringing in the retail giants on small retailers, many local development committees often make it hard, if not outright resist, the encroaching of the big retailers in their area.
However, this type of protectionism beneficial to small retailers. For one, consumers seek out shops — whether big or small — that cater to their needs and provide them with the value and service that they demand. Also, the whole effort of fighting off the coming of the big boys simply distract small businesses from the more important task, which is improving their businesses and preparing for increased competition.
6. Health Care Costs
The rising cost of healthcare insurance is adversely affecting many small retailers. Many small retailers are forced to choose between spending money on their fledgling businesses or paying for health insurance. In fact, according to the International Profit Associates Small Business Research Board, healthcare represents the fastest growing small business cost. Instead of investing in inventory, marketing and supplies, small retail employers are finding their resources directed to paying for health care insurance instead.
7. Changing Consumer Attitudes and Behavior
Consumers are now faced with an avalanche of choices. They can choose to shop in the mall, in a smaller boutique setting, in a catalog, or on the Web. They also shop for luxury items today and opt to buy a discount item the next. Economic segmentation of customers is now a fuzzy line: it is increasingly hard to pigeonhole or classify a customer.
Buying behaviors of consumers are also shaped by their need to maximize time. People nowadays complain of lack of time, and as such, reward retailers (big or small) who value their time and provide service characterized by speed and convenience with their patronage.
8. Urban Sprawl and Real Estate Development
People are shopping closer to their homes. Hence, real estate developers are responding by creating mixed-use development that combines urban features with Main Street sensibilities. Instead of large retail centers, smaller shopping areas designed to fuse together leisure time and social interaction are sprouting in the suburbia. This type of retail development fits the small independent retailer.
9. The Power of Social
Social networking has become a significant driving force in retail. Small retailers should learn how to harness social networking sites such as Facebook to build relationships, engage in conversations and help people out — in order to bring in more sales and customers. Creating a presence in these social networks has become a must for small retailers to stand out above the competition and attract attention of customers. There are also opportunities to integrate social media into e-commerce, particularly on sites such as Pinterest that small retailers can do.
10. Increase in Mobile Usage
The use of mobile phones and tablets have skyrocketed in recent years. Smart big corporations have learned to leveraged the integration of mobile into ecommerce, creating apps that allow mobile users to find products and purchase them from their mobile devices. There are also apps that allow the consumer to compare prices among retailers in a specific location. Mobile integration may be a significant cost investment for the small retailers, but it is a trend that cannot be ignored.
REFERENCE: Challenges of the Future: The Rebirth of Small Independent Retail in America prepared by George H. Baum Community Charitable Trust, the Illinois Retail Merchants Association and NRF Foundation
Recommended Books on Small Business Retailing:
- Retail in Detail : How to Start and Manage a Small Retail Business
- The Retail Doctor’s Guide to Growing Your Business: A Step-by-Step Approach to Quickly Diagnose, Treat, and Cure
- The Specialty Shop: How to Create Your Own Unique and Profitable Retail Business
- The Complete Idiot’s Guide to Starting and Running a Retail Store
- The Everything Guide to Starting and Running a Retail Store: All you need to get started and succeed in your own retail adventure (Everything (Business & Personal Finance))
- Selling a Sense of Urgency in Retail
- How to Recession-Proof Your Retail Business
- Passion and the Independent Retail Owner
- Recession Lessons for Small Independent Retailers
- Your Competitive Edge: YOU!