How To Succeed Against Tough Competitors
For independent retailers and small chains the competition is tough, especially wherever big-box retailing is firmly entrenched. US correspondent Bob Vereen reports on survival strategies that can be employed to increase sales and net profits…
Too often, the experts say, smaller retailers worry about expense control and their pricing image, but they can’t rely on those alone. More attention must be given to increasing revenue, something which can be achieved by increasing the satisfaction of present customers or by devising ways to attract new ones. Obviously this is easier said than done, but there are decisions that can be made to improve your performance.
Typically, there are four core competencies that retailers can develop:
- Product breadth and/or depth
- “Signature” departments
- Service excellence and distinction
- Pricing leadershipIn view of the buying power of big-box stores, pricing leadership is difficult if not impossible for smaller chains or independents. This leaves the others.
According to Brad Farnsworth, president of The Farnsworth Group, Indianapolis, IN., you can demonstrably become “the absolute leader” in a category or department. Doing so would enable you to expand your store’s reach or market share beyond its normal trading area.
Research in the U. S. indicates that consumers typically make 9.4 trips annually to a hardware store, home centre or consumer-oriented lumberyard. Adding a new department or new service, such as rental, provides an opportunity to increase the number of store visits in your trading area. Other services can also be offered, such as shipping, screen and window repair, even fax and copy services if these are convenient for local customers.
Increasing your average sale is another option, something which can be accomplished by better merchandising (end caps, for example) and advertising. This is in addition to providing superior customer service and the previously mentioned new categories.
You should ask yourself a few simple questions: what is my message to the marketplace? In other words, what does the customer think of me? Am I the store of first choice – be it for convenience, selection or service?
Research conducted by Farnsworth’s consulting firm showed that in some cases, only 62% of consumers found the items they were looking for when they visited hardware stores or home centres, and only 8% bought items on impulse. Both percentages can – and need to – be improved, he said. The three main reasons why customers don’t walk out with what they came for are:
- Couldn’t find it
- Didn’t know what to purchase
- Not sure if it met their needsSadly, it is quite possible that the reasons behind (1) are that the store stocked the item, but the customer couldn’t find it or it was out of stock at the time. Then again, it could also be that the item simply wasn’t stocked at all. In-store signing, improved inventory management and better customer service will boost the number of customers finding what they came to buy, and in-store merchandising and suggestive selling both provide a great opportunity for increasing sales.
However, all three reasons for not buying can be eliminated in many cases by training employees to help customers buy. In some major retail chains (like Meijer) employees MUST escort customers to a product’s location when customers inquire if the store stocks it. If this is not the case then perhaps there is a substitute that the employee can suggest? Retail management also needs to focus on helping consumers navigate their stores to locate what they require, help them determine what they need for the job, and then educate them on how to use the product or complete the planned project. One of the simplest ways to create unplanned purchases is to use messages such as reminder signs or, even better, pass-out lists of related items needed for jobs, i.e. – sandpaper, brush cleaner, brushes and/or rollers, etc. These can be given to anyone buying paint. ‘Don’t forget’ signs can also be effective in many departments. Cross-merchandising, such as stocking batteries near electronics (as well as in their primary location), is another basic and highly effective technique. Too often, such reminders are not regularly utilized.
According to Farnsworth, it is far easier – and more profitable – to make minor improvements in customer transactions (in order to increase sales and net profits) than it is to focus entirely on expense control. By increasing the “closure rate” on customer transactions or increasing the transaction size by up-selling and/or adding related-item or impulse items, you can substantially improve sales and net profits from existing customers. By becoming a destination store for a signature department, you increases store traffic.
Combined strategies like these are bringing success to thousands of small chains and independent retailers across the U. S. This is happening even as major chains like Home Depot and Lowes continue to open hundreds of big-boxes around the country every year.