Small retailers can triumph over ‘big box’ chains, author says

Whenever a big box store announces plans to open a store in a new community, one common reaction to the news is that it will prove to be the kiss of death for the area’s small retailers.

That doesn’t have to be true, Marc Joseph says. In fact, he believes small retailers can compete and win against the mega stores, and he outlines how they can do just that in his new book,The Secrets of Retailing, or How to Beat Wal-Mart.

Joseph, who lives in Scottsdale, isn’t just an author and retail expert. He also is president of DollarDays International, an Internet-based product wholesaler to small businesses and local distributors. His book is based on his own experiences in competing against, and being a supplier to, the big box store referenced in the title.

Joseph’s basic message: “No one can compete against a small retailer’s creativity, solid business acumen, and determination to thrive in the shadow of Wal-Mart or any other chain store.”

The secret is that the little guys must offer unique merchandise, personalized customer service and, yes, competitive pricing, Joseph said.

“The retailers who have been driven out by big box retailers were capitalizing on their local monopoly by selling ordinary merchandise at exalted prices. When Wal-Mart came in, these small retailers were undersold,” he added.

“But while giant retailers can buy in large closeout quantities, they can’t buy in small quantities, which give independents the huge advantage of selling opportunistic products showing great value. And because of a limited supply of unique and different items, the chains can’t buy them in sufficient quantity, giving the independent a chance to really be different.”

Know your customers
Because many online “closeout” wholesalers order a huge variety of merchandise (DollarDays alone boasts more than 250,000 products) in large quantities, they pay lower prices. That fact, Joseph said, is reflected in the price the wholesaler charges to retailers — and in the price retailers charge their customers.

The edge this gives small retailers is that “the major chains don’t buy closeouts because they can’t put them in all their stores and they can’t advertise them,” he said. “So that gives the independent retailer a chance to buy all kinds of products at a price that will undercut all the chain stores.”

Small retailers also have the advantage of being able to operate with lower overhead costs and more personalized and knowledgeable service, Joseph said.

“Personal attention is what really separates the independents from the chain stores. If you can get to know your customers — know what they need, know what they want, and really understand who they are — then you can really run circles around these chain stores.”

A winning strategy
“Of course, none of this is to say that the discounters do not offer serious competition, because they do,” Joseph said. “But contrary to the complaints you hear from retailers driven out by Wal-Mart, even the largest, most aggressive discounter is nowhere near strong enough to stop a small retailer who knows what he’s doing.”

To support that observation, Joseph recently conducted a survey on the DollarDays International’s Web site (www.dollardays.com) and in the company’s newsletter, both of which are seen by many thousands of small retailers in all 50 states.

According to the survey results, 99 percent of the small business owners who responded have big box retailers located near their stores. Seventy-two percent opened their stores after the chain stores arrived in town, while 26 percent were already in business.

Of those already in business, 52 percent said they implemented new strategies to compete, including cutting prices (25 percent), increasing inventory (23 percent) and increasing marketing and advertising (22 percent).

The survey also showed that implementing these strategies allowed 42 percent of the small retailers to maintain their market share, while 35 percent reported an increase in business.

Less then 1 percent said their business decreased after incorporating these strategies.

“The reason I wrote this book was not to bash Wal-Mart,” Joseph said. “I just wanted to empower the independent business person to compete against Wal-Mart. It can be done, and anyone can do it if they’re determined and knowledgeable enough.”

The Secrets of Retailing, or How to Beat Wal-Mart can be ordered online at www.secretsofretailing.com.