How can I compete with big discount stores?

Q: Whenever I turn around, another big discount store is popping up. As a small business owner located on the square of a small town, what can I do to stop people from buying in the big city or at the nearest discount store and shop locally?

You’ve taken the first big step by asking, What can I do? No one else but you can save your business from the increased competition supplied by the superstores. Only you have the power to change this trend. I attended a workshop this fall with Rita Hogsett Friberg from Pueblo Community College, who shared nine successful survival strategies for small business retailers that want to stay competitive in today’s market.

  1. Focus on serving the customer.
    People shop where they perceive value. Value does not always mean the lowest price; many people will pay for knowledgeable, efficient service and a pleasant shopping experience. What can your store provide that the superstores cannot? Personalized services such as free gift-wrapping or mailing service, better selection in specific product lines, or even hot cider on a cold day are a few examples. Focus on your present customers and make sure you go that extra mile to take care of their needs and keep them coming back.
  2. Create whatever-it-takes customer service.
    Hire good employees and train them well by keeping them informed. Customer service is everyone’s job. Be reliable, keep promises, apologize when a mistake is made and do everything you can to fix it. Give your employees the authority to solve problems. Remember it costs five times more to gain a new customer than it does to keep an existing one. For every customer who complains, 26 will not and the average unhappy customer will tell eight to 16 other people. As the late Sam Walton so aptly stated, “There is only one boss: the customer. He can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.”
  3. Pay attention to first impressions.
    Look at your store with fresh eyes. What does a new customer see, smell, hear, taste and feel in your store? Are things clean, easy to find, welcoming both inside and out? Remember that people are looking for a pleasant experience when they shop, so aesthetics are important. Change your windows frequently, move products around so it looks like you have new merchandise, play soothing music and make sure customers are personally welcomed when they walk into your store.
  4. Hire the right employees.
    Hire naturally enthusiastic, smiling employees who genuinely like people. Train them to do what it takes to run the business. Don’t forget telephone training. Get more information on hiring and training the right employees.
  5. Identify the target market. Find out the five W’s:
    Who are your customers?
    What do they want?
    When do they like to shop?
    Where else do they buy goods and services and
    why do they buy them?
    Then try to give customers what they want. Work with other retailers that have the same clientele and swap each other’s client lists. Cross market your product in their store for inexpensive advertising.
  6. Analyze the competition.
    The business owner must know the strengths and weaknesses of the competition, including the major discount retailers. Visit the competition and look at their shoppers. Visit the sections of the store that will compete with your business. Do you have the same brands? How do their prices compare to yours? You may want to match the competition’s price on some products.
  7. Position the business uniquely. 
    Make sure your business is different and memorable. Select a niche that matches customer needs. Consider specialty product lines that are not available in the local area. Rita told the story of a general hardware store that was worried when a new superstore came to town. After analyzing their competition, they realized that the superstore did not have much in the way of lumber. So they filled this marketing niche, getting rid of other products and expanding their lumber selection. They matched the price of the superstore on standard lumber but more than made up for the discount by up selling to higher quality pieces that carried a higher profit margin. They are making more money now than before the superstore came to town.
  8. Eliminate waste.
    Every dollar saved in operating costs goes directly to profit. Justify every expense, every day, every month, every year. If the expense is nonessential, get rid of it. Control your inventory and check your accounts receivable to make sure you are collecting payments on time.
  9. Prepare to make changes.
    Embrace change with a positive attitude and strive to make one small change each day. What is new is what sells.

As Charles Darwin said, “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” Resolve to take the offensive and respond to the change in the marketplace for a more profitable year.

For personalized help exploring business ideas, marketing, finance, management, technology, international trade, growth or other business issues, contact a business specialist at a center near you. Or visit the full list of training courses to find an upcoming training seminar.