Friday, June 15, 2007
How Small Retailers Should React When "Big Box" Stores Invade
Recently I read a story in the Montana Forum (hey, I get around!) about how family hardware stores are dealing with competition from Big Boxes like Lowes and the Home Depot.
The story featured the saga of the family-run Power Townsend hardware store in Helena that decided to "take the Home Depot head on."
Instead of scaling back, as some experts recommend when Big Box stores move in, or folding altogether, as at least one other local hardware store did before the Home Depot arrived in Helena, Power Townsend hardware decided to expand.
They doubled their floor space and began working on a new 5-acre lumber yard just as the Home Depot began building.
Power Townsend hardware owner Mike Wall's strategy is, "You’ve got to be as big as Home Depot to compete against them."
WRONG!
How do I know this?
I was a marketing advisor to the now-defunct Payless Cashways chain of building materials stores from 1990 to 1997.
When the Home Depot started challenging Payless Cashways, their reaction, like that of Power Townsend's Mr. Wall, was to take the Home Depot head on.
I advised AGAINST this, because I knew they could NOT compete against the Home Depot on the Home Depot's terms.
Instead, I advised Payless Cashways to think SMALL, instead of big.
By that I meant, instead of competing against the Big Boxes on price and SKUs (number of items sold), they should compete with them in areas that the Big Boxes are WEAK on, like customer service.
Payless Cashways built their business by being a hometown lumberyard that had a large following of contractors and handymen.
I recommended that Payless Cashways FOCUS on that market by providing added-value services and genuine personal interaction that the Big Boxes don't provide.
For example, I suggested that Payless Cashways hold clinics for contractors and handymen that offered business training, as well as skills training.
I suggested that they set up a network of suppiers of non-competing products and services that contractors and handymen need—like health and liability insurance, equipment leasing and receivables factoring, payroll services, etc. I told them to negotiate deals with those suppliers for the contractors and handymen that were better than street prices. I suggested creating some kind of club or association that tied those deals to continued purchasing at Payless Cashways.
I suggested that Payless Cashways INCREASE the number of sales floor people and to INCREASE the level of training of those people.
I suggested that they do everything possible to position themselves against the Home Depot and Lowes as a "customer-friendly" place to shop, as opposed to the apathetic, uninformed and often nowhere-to-be-found sales floor and commercial sales personnel at the Big Boxes.
But alas, they wouldn't listen. May they rest in peace.
My advice to any business that is being assaulted by a larger, better-capitalized competitor is NOT to compete on their level. Hit 'em below the belt and compete in areas they CAN'T easily compete in. Create and develop a unique difference that you can integrate throughout your entire business and make it stick. They'll never know what hit them.
Are you worried about your competition? Nick Nichols helps you position your business so that your customers won't even THINK about going anywhere else. Call 702-227-5877 NOW, before it's too late!
"NOT hiring Nick Nichols will cost you a LOT more than hiring him!"
(0) comments
The story featured the saga of the family-run Power Townsend hardware store in Helena that decided to "take the Home Depot head on."
Instead of scaling back, as some experts recommend when Big Box stores move in, or folding altogether, as at least one other local hardware store did before the Home Depot arrived in Helena, Power Townsend hardware decided to expand.
They doubled their floor space and began working on a new 5-acre lumber yard just as the Home Depot began building.
Power Townsend hardware owner Mike Wall's strategy is, "You’ve got to be as big as Home Depot to compete against them."
WRONG!
How do I know this?
I was a marketing advisor to the now-defunct Payless Cashways chain of building materials stores from 1990 to 1997.
When the Home Depot started challenging Payless Cashways, their reaction, like that of Power Townsend's Mr. Wall, was to take the Home Depot head on.
I advised AGAINST this, because I knew they could NOT compete against the Home Depot on the Home Depot's terms.
Instead, I advised Payless Cashways to think SMALL, instead of big.
By that I meant, instead of competing against the Big Boxes on price and SKUs (number of items sold), they should compete with them in areas that the Big Boxes are WEAK on, like customer service.
Payless Cashways built their business by being a hometown lumberyard that had a large following of contractors and handymen.
I recommended that Payless Cashways FOCUS on that market by providing added-value services and genuine personal interaction that the Big Boxes don't provide.
For example, I suggested that Payless Cashways hold clinics for contractors and handymen that offered business training, as well as skills training.
I suggested that they set up a network of suppiers of non-competing products and services that contractors and handymen need—like health and liability insurance, equipment leasing and receivables factoring, payroll services, etc. I told them to negotiate deals with those suppliers for the contractors and handymen that were better than street prices. I suggested creating some kind of club or association that tied those deals to continued purchasing at Payless Cashways.
I suggested that Payless Cashways INCREASE the number of sales floor people and to INCREASE the level of training of those people.
I suggested that they do everything possible to position themselves against the Home Depot and Lowes as a "customer-friendly" place to shop, as opposed to the apathetic, uninformed and often nowhere-to-be-found sales floor and commercial sales personnel at the Big Boxes.
But alas, they wouldn't listen. May they rest in peace.
My advice to any business that is being assaulted by a larger, better-capitalized competitor is NOT to compete on their level. Hit 'em below the belt and compete in areas they CAN'T easily compete in. Create and develop a unique difference that you can integrate throughout your entire business and make it stick. They'll never know what hit them.
Are you worried about your competition? Nick Nichols helps you position your business so that your customers won't even THINK about going anywhere else. Call 702-227-5877 NOW, before it's too late!
"NOT hiring Nick Nichols will cost you a LOT more than hiring him!"
(0) comments
