OffpriceNetwork.com Article Center

Specialty Store Focus

By Mercedes Gonzalez

Recently, I attended a town meeting in Lincoln, Nebraska where the community members previewed the new anti-Wal-Mart movie, “The High Cost of Low Prices,” and discussed their concerns about a proposed new Wal-Mart. Not surprisingly, many attendees felt that a new Wal-Mart was unnecessary given the fact that there were already two Wal-Marts just outside of Lincoln. Like many communities around the country, residents worried that a new Wal-Mart would drive traffic and revenue away from their own small businesses.

As I looked around the room, I noticed that many attendees were wearing, ironically, clothes that they had purchased from Wal-Mart. When I asked several people why they shopped at Wal-Mart, they responded that although they felt that a new Wal-Mart was unnecessary, they shopped at the established Wal-Marts because merchandise was more affordable.

Every story I read and every program I watch on Wal-Mart says the same thing: Wal-Mart is out to destroy America. In fact there is a book out with a similar title: How Wal-Mart Is Destroying America: And What You Can Do About It. But the reality of the situation is simple—Wal-Mart has become an international retailing giant because people shop there and independent retailers do not effectively excel in the areas where Wal-Mart falls short.  In other words, many retailers take a defeatist attitude toward Wal-Mart. For example, the hardware store owner featured in “The High Cost of Low Prices” took a “let’s wait and see” approach after learning that Wal-Mart was moving into his community. The movie chronicles his final year in business.  The movie also talks about the Maine storeowners who lost $7.8 million dollars in business in the first year of Wal-Mart’s operations in their state. 

While it’s true that small independent businesses are unable to compete with the buying power and price points of mega discount stores such as Wal-Mart, the reasons for the failure of so many small businesses is more complicated than that. Often the reason small businesses fail to bankruptcy is they have not done their homework and found ways to compete effectively with mega stores.

 It is essential that independent retailers study and understand Wal-Mart’s weak areas and put themselves in a position to capitalize on them. Instead of becoming obsessively concerned with price points, an area where smaller retailers will always find it difficult if not impossible to compete, retailers need to rethink their merchandising techniques, customer service, and selection of goods. For example, an independent retailer many wish to join a buying group or an association in order to negotiate deeper discounts and better delivery schedules. Also, many smaller retailers attend trade shows such as the Off-Price Specialist Show where they find quality goods at below wholesale prices.

One client told me that he went head to head with Wal-Mart on the cost of garden supplies, eventually giving the merchandise away at cost, and still business was poor. Then he changed his strategy by focusing on customer service, running ads such as “We might be 50 cents more expensive than Wal-Mart on our bags of dirt, but Jim will load it in your car for you.” After some success with the first ad, he took it up another level with an ad reading, “Don’t know the difference between top feeders and root breeders? Come and ask one of our four plant experts to help you pick out the right plants for your garden.” Store traffic increased 30% with the second ad.

To further capitalize on this success, the storeowner started a gardening club where members can exchange ideas and sent out a gardening newsletter with monthly tips. In other words, this retailer took a proactive roll by fulfilling customers’ needs in areas where superstores have difficulty competing. Today he is enjoying an increase in traffic and higher sales.

Specialty boutiques can take advantage of their ability to create more thoughtful and attractive merchandise displays and packaging options for customers. Let’s face it, a gift purchased from a mega discount store doesn’t say “I love you.” Rather, it screams, “I purchased this item when I was getting my groceries. And it was cheap!”  

Product differentiation is key strength of smaller retailers. Look for the unique item or variations on products that can be found only in your store. Yes, Wal-Mart is known for in-stock inventory and low prices, but this can work to the independent retailer’s advantage. When a consumer is looking for a special occasion outfit, she doesn’t want to see dozens of the same dress on the rack. Consumers don’t want cheap items only; they also look for better quality goods, regardless of price point.

 By emphasizing and building on their innate strengths, specialty stores are able to create a business base that mega stores cannot penetrate. The greatest advantage that small retailers have over a superstore such as Wal-Mart is their ability to create an environment within the store that uniquely addresses their customers’ needs and desires.  Carefully selected and well-trained employees generate immediate sales and create a personalized relationship between the customer and store. With educated, helpful staff in place, customer service will shine. An educated employee understands retailing in both broad and specific terms. Help employees understand the art and science of buying and pricing.  Empower them to solve problems on the sales floor; your customers will appreciate not having to deal with the bureaucracy found in superstores.

In the final analysis, survival requires every small business owner to find unique ways to remain competitive with the mega chains that inevitably will arise in their community. Wal-Mart has had a positive effect on the retail landscape in many ways and it is incumbent upon the small retailer to learn how and why Wal-Mart is so successful. There is more to Wal-Mart than low prices; the company has pioneered innovations in production, inventory and supply chain operations. What can you do to make your store’s operations more efficient? This is a question that every independent retailer needs to be asking.

In the end, while the prices and generic items found at the mega stores may generate mega traffic, individualized customer service and product selection makes a lasting impression that will never go out of style and will always bring your customer back for more.

Mercedes Gonzalez is founder and Director of Global Purchasing Companies. A buyer in the garment industry since 1988, Mercedes has worked with some of the most important buying offices in the country and has helped open or restructure hundreds of stores in the United States and abroad. Mercedes regularly teaches workshops on successful retailing at industry trade shows such as MAGIC, Industry 212, Intima, and the Off-Price Specialist Show. She sits on the board of the Fashion Merchandising Department at the University of Arkansas and is adjunct professor at the NYU School of Continuing Education.