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Small Retailers vs. Big Boxes

Jul 1, 2007
by Christopher Heine

How do independent retailers compete with the, "big boxes?" Let us face it: It is hard to beat the economies of scale that the big boys enjoy in the retail market. They use technology, distribution networks, targeted advertising and tremendous buying power to ensure low prices, a wide selection and convenience.

However, there are many things they cannot offer, and it is those elements that provide independent retailers with opportunities to not only survive but even thrive in the same communities as those retail giants. For starters, successful independents diligently scope the marketplace every single day in order to find quality products at the best prices. After that, they provide top notch customer service.

And without question, there are many other factors to consider as well. The best independents use every sales channel available to them and have a healthy focus on the web. Perhaps most importantly, they differentiate their product lines from the competition.

Hats Drive Helmer's Success
For instance, there is John Helmer Haberdasher, a downtown Portland, OR, menswear shop that has been selling fine clothing since 1921. However, a few years ago retail giant, Men's Wearhouse, moved in just two blocks away. Instead of letting the national competition bring the local retailer down, it has reacted by further differentiating its product line, increasing its specialty in stylish hats and caps.

"The key to our success has been specializing in headwear and sticking with it," said John Helmer III, third generation president of the family owned company. "Our line of headwear, as well as our higher end clothing and accessories, has helped set us apart from more bargain based competitors like Men's Wearhouse. We use the quality of our products to our advantage, rather than allowing them to become a disadvantage. And it is important to take risks, as long as you know why you are taking them."

Indeed, as his competition grew, Helmer increasingly embraced the idea of calculated risk. Most notably, he took his lines of unique hat styles and started marketing them on the web with a strong magazine advertising push. He bought placements directing readers to his URL, www.johnhelmer.com, in national periodicals targeting middle class demographics, such as The New Yorker, Atlantic Monthly, Utne Reader, National Review, Mother Jones and Yankee Magazine.

To track response, Helmer key codes the ads so he can see an accurate return on investment for each one. And there is little doubt that the tactic has allowed his lines of $10 European berets and Greek fisherman's caps ($26) to go flying out the door.

"The most expensive magazine ad is around $1,400 with The New Yorker, so you can do the math on the number of $10 berets we got to move to get the return on investment we are getting," Helmer added. "Our online business has grown to 20 percent of our sales. We are fortunate that it has allowed us to keep growing and growing. It has helped us compete with the so called big boys."

Al's Sports Plays Big Time Ball
Like Helmer's hats, quality customer service never goes out of style. But sometimes, offering a deep array of niche product can mean everything to the consumer. After all, who likes to drive from one store to the next on their Saturday afternoons, looking for products that should be available in one place? For that matter, who wants to spend their entire lunch hour going back and forth between websites to take care of all their product needs? In short, product selection can be a form of customer service, in and of itself.

"We are a sporting goods store like the sporting good stores used to be," said Kris Larsen, president of Al's Sports. "Most sporting goods stores today do not carry things for hunting, fishing, baseball, softball, basketball, camping, etc. They are more specialized than that. We, on the other hand, do carry everything. And it allows us to separate ourselves a bit locally. I think our reputation is really our greatest asset."

Larsen runs an independent, warehouse styled (40,000 square feet) storefront in Logan, UT, that competes with national players like The Sports Authority and regional chains like Sportsman's Warehouse. He credits his company's ability to work with top distribution partners, allowing it to be stocked with the best possible items at competitive prices. He launched the firm two decades ago before going online (www.alssports.com) in 1998. The website was due for a major facelift and relaunch by the middle of June.

"We have had good, top of mind awareness to the brick consumer, as opposed to the click consumer," Larsen explained. "The click complements the brick in our case, rather than the other way around. By the same measure, our website business has really been growing. Our website raises the water in the whole lake, you could say. We get orders from all over the country. We plan on doing a lot more with the new website, which will allow us to grow the business and become even more competitive. We already have one of the nicest operations you will see. We are proud that the store is so aesthetically pleasing."

Stone Creek Brews Local Sales
As Larsen suggested, one way that independent retailers can compete against the cookie cutter big boxes is to distinguish themselves by utilizing a strong sense of style within their store walls. In one example, Stone Creek Coffee is a three outlet chain in the Milwaukee, WI, area that believes that the bigger the Starbucks of the world get, the better. It only makes Stone Creek's look and feel that much more attractive in the local market.

"In a way, their saturation of the marketplace does help us," said Steve Hawthorne, president of the firm. "People end up wanting to find a quality coffee shop in their neighborhood or town that does not look and feel like dozens of other ones they have been in before. We tried to design our shops so they are more comfortable, friendlier and not so boxy. We make an effort to appeal to people who might find Starbucks to be a little sterile. People like local alternatives if the product is strong, and they want to support local businesses."

Hawthorne also keeps his cups of coffee and espressos, "within a few pennies," of Starbucks' prices, underscoring that you can never forget about cash value when it comes to retailing. In addition, he added a blog to www.stonecreekcoffee.com two years ago, and his staff has put up their thoughts daily in order to engage the local base.

At the site, consumers and other retailers (Stone Creek has a wholesale division) can order coffee beans, cups and accessories. Repeat customers can schedule regular deliveries without having to go back to the site. They will automatically receive their usual orders every week, every two weeks, once a month or up to once every three months, depending on what timetable they select.

Another interesting site feature is the suggestion box, which gives some of the shier customers another channel to express their opinions and feel like they have a voice at their favorite store. Customers can also signup to receive coupon offers via email.

"The website is designed to give a glimpse into our stores and who we are," Hawthorne explained. "We actually have a good audience of local people who go online and place orders. And we also have people who are from Milwaukee originally, moved somewhere else and cannot make it to our stores; we get a nice share of orders from them around the country. They can still hang onto their favorite coffee."

New Kids Clothes Separate from the Pack
Time and time again, the most successful small retailers are finding inventive ways of standing out with how they do business. While Stone Creek leverages its cozy shops and Al's Sports showed how offering an end to end product line can make a world of difference, New Kids Clothes takes the approach of focusing on single products.

For example, it has cultivated a niche in finding manufacturers with matching, uniquely styled clothes for twins that consist of a boy and a girl. The prices for the kids' outfits run around $30 at www.newkidsclothes.com.

"My goal is to offer items that the big box retailers and other competition cannot find," said Peggy Prine, owner of New Kids Clothes in Billings, MT. "You might be able to locate matching sisters or brothers outfits, but to find the set for one of each is very hard to do. Nautical outfits for both boys and girls have been really popular recently. I sell everything I can get my hands on. I think the popularity of the nautical items is because of the war in Iraq, where people want to get their kids photographed in sailor outfits for their parents stationed overseas."

Interestingly, Prine has added the digital, "speaking," customer relationship management tool called, Site Pal, to help separate from the pack. Using the image of a woman in her late 20s, the feature welcomes viewers and introduces the basics of the product line with four sentences of copy. Prine programs the tool to offer more specific messages at times like Mother's Day, and will do the same for the upcoming holidays. It also provides a voice for her Frequently Asked Questions page. "It is designed to give a personal touch," Prine explained. "It is nice to have an audio element at the site to add to the experience."

A Winner at Powells.com
When it comes to the web, sometimes innovative tactics are steeped in old marketing traditions from other channels. For instance, Dave Weich, Director Content & Marketing at book retailer, Powells.com, had an idea four years ago to take the concept of daytime radio listener contests and apply it to email. His creation, The Daily Dose, debuted shortly thereafter, offering subscribers the chance to win a $20 store/online credit every day for those who submit a paragraph or two on any book in stock at Powell's.

The literature retailer receives hundreds of daily submissions. It has grown steadily to 14,000 subscribers who not only frequent the ecommerce site, but also their six retail locations in metropolitan Portland, OR. Here is how The Daily Dose works: the email gets sent out right after midnight and allows the winner 24 hours to click through and collect their prize. If they miss the chance, the prize accumulates another $20 each day.

"We have rarely seen the prize go above $60, so that tells you that people are paying attention to the daily email," Weich said. "I think customers are curious about what other customers think. We have seen that in our other online marketing efforts. I definitely think the program is helping loyalty. And when you are competing against the Amazons and the Barnes and Nobles of the world, everything helps. We have been successful because we have been able to differentiate ourselves. This is another example of that."

Contact the following businesses for more information:

John Helmer Haberdasher, Inc.
969 SW Broadway
Portland, OR 97205
Tel.: 503-223-4976
Toll Free: 866-855-4976
Fax: 503-223-8451
Website: www.johnhelmer.com

Al's Sports
1617 N. Main Street
North Logan, UT 84341
Tel.: 435-752-5151
Fax: 435-752-5170
Website: www.alssports.com

Stone Creek Coffee
422 North 5th Street
Milwaukee, WI 53203
Tel.: 414-270-1008
Fax: 414-273-1251
Website: www.stonecreekcoffee.com

New Kids Clothes
PegMark Enterprises
1175 Toole Ct
Billings, MT 59105
Tel.: 406-698-1907
Website: www.newkidsclothes.com

Powell's Books
Portland, OR
Tel.: 800-878-7323
Website: www.powells.com

Topic: Business Strategies

Related Articles: retailers 

Article ID: 264

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