Unleash Your Inner Beast: How Small Shops Can Compete with Global Giants

If you own a small business, particularly a shop or other retail business, you may have found yourself faced with the challenge of a bigger, well known competitor moving into your neighborhood. Large retailers and franchises are constantly expanding, so if you haven't felt their presence yet, you may in the near future.

There have been numerous stories and documentaries about small mom and pop type operations closing after a giant such as Wal-mart enters their community. The good news is that your business doesn't have to be one of the ones that suffer. There are plenty of small shops that not only survive when one of these global giants pop up in their backyards, but they flourish.

The key here is to make sure that you fully understand what you're up against. A little proactive research can both help you and set your mind at easy. In particular, there are three things you need to look for and you can use the acronym P.D.A. to remember them.

P stands for Poor Performance. You want to find the areas where your competitors perform poorly and turn them into your strengths. When going up against bigger companies that are able to offer goods for a lower cost than you, this is extremely important. One large retailer started a new campaign where everyone at the store wore a button that says "I can help you in any department." What caused this to happen? Customers complained that when they were finally able to track down an associate, the response they received was "I can't help you, I don't work in this department." Many hardware stores are able to attract business as their employees will help you find what you're looking for and if they can't answer your question, will find you someone that can. Customer service is often what's sacrificed by these big retailers in order to provide low prices.

D stands for Different Demographics. Again, the biggest advantage that big companies have is price. They have more buying power and can negotiate better deals. The good news for the small business is that these companies go after the least desirable demographic, which I like to call high maintenance/low return. These are the customers that supermarkets can't stand: they buy only the items that are considered loss leaders, and return anything that doesn't live up to their satisfaction. I once had a conversation with someone that worked at the service desk at a Wal-mart. I was told horror stories about product returns: a woman returned clothing because she got it dirty, a man started screaming and swearing because he couldn't return an opened CD and a woman tried to return a vacuum that she grabbed off the shelf earlier that day, but never purchased. The Wall Street Journal ran an article a 2004 about Best Buy trying to get these types of people to go to their competition because they cost more than they bring in.

Keep in mind that this demographic is tough to serve because they are most impacted by outside factors such as the economy and fuel prices. More affluent consumers are rarely affected by economic downturns, and when they are, the items they forgo are often luxury items that they really don't need.

A stands for Additional Advantages. Look for advantages that you can provide to your customers that the big guys can't. The big three are time, cost savings, and additional products/services. For time, imagine that a client is undergoing some sort of home improvement project and needs a hammer. Does it make sense for him to drive all the way to the nearest home center, deal with a crowded parking lot, and then wait in line for 10 minutes to save $2? Of course not, you just need to communicate that to them. Let's say it's mid-December and someone needs to pick up the latest best seller for their best friend's Christmas present? Does it make sense to drive all the way to the nearest national bookseller, which is probably located in a busy mall or shopping center just to save $5?

Cost savings may sound difficult to compete on, but many small business partner with others - sometimes, similar businesses in different geographical markets, to create buying groups to get lower prices. Other ways you can provide your customer with savings is to pair up with a complementary business. We see this with Barnes & Noble and Starbucks but who's saying you can't do it? If you own a small bookstore, why not offer a free cup of coffee from the coffee shop two doors down from you with any purchase. If you own a bowling alley, why not give away a voucher for a small pizza from the pizza place across town to anyone that bowls a strike. The point is that you win by giving your customers added value and the other business wins by getting potential customers to come to them. Sure, there will always be those people that go in, take the free item, and not buy anything else. But most people feel the need to reciprocate so they'll pick up a soda with their pizza, or a muffin with their coffee. Many businesses use this same tactic with direct mailings, but this costs a lot less and will produce better results.

Sometimes, you can offer additional products and services that it doesn't make sense for your competitors to offer, but you can. Bridal shops do this by providing alterations which aren't profitable enough for Filene's or Macy's. You can really succeed in this area by working with complementary businesses. Home Depot does this with their "At home services." Instead of having installers on staff, they hire local contactors and tack on a fee for pure profit. If you own a hardware store, you could refer plumbers, electricians, or other contractors and even get a small commission on the sale. If you're in real estate, you could partner with a loan officer from a local bank to help your customers get financing. If you're a lawyer, partner with a financial advisor so you can offer wills, trusts, and financial services together. Add in a CPA and you have tax-advice and preparation.

So there are a lot of ways that you can use your creativity and ingenuity to compete effectively with the juggernauts. Remember that it's important to take a good look at your business to make sure you're servicing your customers well. Use the P.D.A. acronym to help you focus on the areas where your competitors perform poorly, the different demographics that give you maximum return and additional advantages you can offer your customers. And always remember that no one can stand in the way of your success unless you decide to let them.