Are the cards stacked against small and medium sized retailers?

Photo: Getty Images/ablokhin
Nov 04, 2021

The general assumption is that the economy’s three-pronged challenge — supply chain disruptions, labor shortages and inflation — will wind up hurting smaller retailers and vendors significantly more than larger ones.

Smaller businesses often can be nimbler than their larger counterparts, but many of the current obstacles seem to favor organizations with greater leverage and strong balance sheets.

On recent quarterly calls, major vendors and retailers have called out the benefits of having strong relationships with their production and logistic partners as well as scale in managing the supply chain challenges expected to last through the first half of 2022.

Lowe’s CFO David Denton told analysts, “Our supply chain team continues to leverage our scale and carrier relationships to minimize the impact of these distribution costs experienced across the retail industry.”

Chip Bergh, Levi’s president and CEO, said on his company’s call, “Our globally diversified sourcing strategy, combined with our scale, are a source of competitive advantage.”

Costco, Walmart and Home Depot are not only able to charter their own ships to circumvent the sea logjam, but being well-capitalized helps the companies absorb escalating freight, warehousing and trucking costs. With a strong balance sheet, retailers can also fund air freight and stock-ups of extra inventory.

With plastic, paper and cardboard all in short supply, packaging materials required to support e-commerce’s momentum are also expected to first go to larger retailers. Andrew Hogenson, the global managing partner of consumer goods, retail and logistics at Infosys Consulting, told NBC News, “Someone like Amazon is obviously going to be at the front of the line to get their share of capacity, whereas these smaller businesses are at the back of the line.”

Larger retailers are also believed to have more financial flexibility to absorb higher costs and keep prices down for customers than smaller competitors.

Finally, having the financial wherewithal to continually lift wages and benefits to battle worker shortages is also expected to favor larger firms. Costco and Starbucks hiked wages again in recent weeks. Kevin Johnson, Starbucks’ president and CEO, said last week on his company’s quarterly call, “We believe this investment, combined with our industry-leading benefits program, will enable us to remain an employer of choice.”

DISCUSSION QUESTIONS: Do you agree that larger retailers and suppliers are significantly better positioned to deal with the current supply chain, labor and inflation challenges? What advantages do small and medium-sized retailers still have in the current retailing climate?

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22 Comments on "Are the cards stacked against small and medium sized retailers?"

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Mark Ryski

Clearly large retailers have resources that small/medium ones don’t and can brute force their way through some of the challenges. Money can solve some problems, and bigger chains have more of it. The greatest advantage small/medium retailers have is the frontline service that they can deliver. Forget about trying to match the capabilities of the big retailers or trying to take on too much – focus on what you do best.

Cathy Hotka

Exactly that. Big retailers’ efforts at customer service are pale imitations of what smaller retailers can achieve.

Ken Morris

I believe that larger retailers have a tremendous advantage. Smaller retailers are definitely at a disadvantage when inflation is involved. They can’t negotiate with suppliers and are usually last in line when the supply chain gets backed up. With labor, smaller retailers might actually have one interesting advantage. With hiring, they can be nimble and creative with wages, plus they have an actual human network for communicating openings and needs.

I am a board member of the Boston Main Streets Foundation and we are trying to level the playing field by giving mom and pop stores the same technology that the big players use. This initiative went a long way in the dark days of COVID-19 to allow for BOPIS, BOPAC, and delivery. Being innovative and having the right systems gives small players a tool to win.

Bob Phibbs

In a world dominated by oceanliner big retail, indie retailers are speedboats. The most creative, motivated, and engaged retailers by far. They don’t have the luxury of a bad thought or one bad hire. #StopCountingThemOut

Dick Seesel

It’s usually true that small and medium-sized retailers can offer more personalized service and other benefits vs. “the big guys.” But it’s even more true today that large retailers have far more leverage with their suppliers and with their logistics partners. In today’s climate, great customer service may be irrelevant if there are no goods to sell.

Lisa Goller

Yes, bigger players’ robust supply chains and deeper pockets give them an edge as retail risks make global headlines.

Yet smaller retailers have trusted relationships within the community and shorter supply chains if they source locally. These shops offer unique assortment variety with innovative products and attentive face-to-face service that builds connection.

Kevin Graff

Deep pockets almost always win. Yet the smaller retailers still have room to navigate their way to success. Great service (not lip service), community connections and the ability to create a great shopping experience are the way forward. That’s nothing new. It’s just that these smaller retailers are going to have to execute at a much higher level than they’ve done in the past. Some will. Some won’t.

David Naumann

As Mark Ryski stated, small and mid-sized retailers will need to find a way to differentiate their services to attract and retain customers. Personalizing the customer experience will be their key to success. Unfortunately there is not much small retailers can do to impact the supply chain issues as they do not have the same leverage and influence as the powerful big retailers. They need to focus on what they can control.

Chuck Ehredt

Well-run smaller retailers will be fine because they are more engaged with their customers and understand local preferences. The supply chain issues will be solved, but the labor issues will likely go on indefinitely – which means treating your colleagues well is key to long-term retention. Smaller retailers can also do more in the context of shop local campaigns to appeal to shoppers who care about their community.

Meaghan Brophy

Large retailers have the cash flow to win pricing bids on supplies and hike employee wages. Although I wonder how long they can sustain the increased spending.

Smaller retailers are definitely at a disadvantage – they simply don’t have the same leverage big corporations do when negotiating with suppliers. However small businesses are also able to pivot a lot faster, have community engagement, and have more loyal local fans. 

Small businesses can succeed by getting creative with product sourcing, staying on good terms with suppliers, being transparent with shoppers, and offering great service.

Bob Amster

Medium and small retailers can circumvent some supply chain issues because they can and do source more domestic product. They can also circumvent some of the scarce labor issues because they are more adept in developing closer relationships with their employees and, maybe, make a conscious decision to pay their employees a little more than their large competitors. Relative to inflation, medium and smaller retailers may be at a disadvantage. They may not have the deep pockets to underwrite some of the cost increases that all retailers are experiencing.

Georganne Bender

Large retailers have always had the advantage over small retailers, that’s nothing new. Suppliers ship new goods to larger retailers first and generally take care of large accounts before the smaller ones. Of course, the shipping issues we are having right now have made it tougher for smaller retailers to get certain goods. But not all.

Independent retailers are nimble. Our indie clients have had contingency plans in place since the pandemic began. They are able to curate items that are right for their stores and right for their customers. Not every category of product is hard to get and they are making the best of it. Local and American made suppliers and makers are helping these retailers supply their customers with unique product this holiday season. If the pandemic has taught them anything, it’s to pivot fast and often.

Gary Sankary

Retail giants definitely have an advantage, especially in the area of supply chain. They can be much more creative or, as Mark Ryski said, can “brute force” their way through this by creating their own dedicated channels. That said all is not lost for the smaller players. Some things I’ve seen working:

  • Play up the customer service aspect of their business. They can build really genuine relationships with their customers in ways that are far more difficult for the big guys.
  • Source locally. The shorter the supply chain, we’ve seen, the more reliable it’s going to be. Food coops are a great example. They’ve been able lean on local producers for key products and at least in my experience have been more reliable from an inventory standpoint.
  • Reward employees by making them feel valued and offering them competitive pay and benefits. Again I’ve seen some of our local small business not experiencing anywhere near the turnover that the big box stores are experiencing.
Jeff Weidauer

Larger retailers have the same advantages they’ve always had: size, scale, and money. But this is a new challenge that may not be best handled using those tools. In a world of diminished supply and increased demand, smaller players can act more quickly to take advantage of smaller quantities that the behemoths overlook. It’s a matter of capitalizing on your strengths; size doesn’t always win.

Rick Watson

The biggest difference with the large retailers now is that Walmart and Target are the new malls for many brands. So many brands have “de-malled” hundreds of stores and instead tied up with Target or Walmart. Smaller retailers need to be more focused and curated. The answer is to niche down.

Phil Chang

If you’re a small or medium sized business and you’ve made your success as a follower, you’re out of luck. The current retail climate will box you out.

If you’re focused on a unique selling position and you know your consumer, the world is for the taking. We’ve never had more avenues for small and medium sized businesses to interact with the consumer, and I think there are more boutique brands and makers out there now than ever before.

It’s not the time to be a follower. There’s not enough stock for mini-mes.

Richard Hernandez

I don’t think you can count out those small and medium retailers that have fought for a piece of the pie during the pandemic. They have delivered with product and great customer service and people remember that with repeat business. Those that waited and did nothing to improve on what they had are not in a good spot to survive.

Shep Hyken

I’m a fan of buying local – and from small and medium sized businesses. Do they have the buying power of a huge brand? Of course not! But they do have the ability to play “local” better than a national or international brand. That’s their secret sauce; playing the local card. That said, supply chain, labor and inflation challenges make doing business more difficult for the smaller retailer. They must get clarity on their business model and strategy. They must be nimble and flexible. They must offer guarantees that packages will show up when promised. The customer must have trust in confidence with whoever they do business. Smaller businesses have to be better at creating those guarantees and building trust. Couple that with the idea they are a local business, and that could give them a competitive advantage they need to compete against the big brands.

Mel Kleiman

As I have read every one of the posts before mine, I find they are all saying the same thing about the advantages and disadvantages the small retailer has in surviving and thriving in today’s rapidly changing world. I will only add a straightforward piece of advice. Whatever your segment is in the market, don’t focus on the competition — you will win by focusing on your customers.

Craig Sundstrom

Significantly better? No. At least not unless we are talking about a handful of mega-retailers that can actually own their own ships. Indeed, one of the main stories to emerge from the current problems is that we’re all in the same boat … literally! But size usually confers advantages, so I agree they’re somewhat better positioned; and often even this (seemingly small) difference can be the difference between success and failure … so perhaps “significant” as to the ends more than the means.

9 months 6 days ago
Are the cards stacked against small(er) retailers? It’s more like the walls are caving in on them. Meanwhile I not only work part-time in what can be classified as a one-off specialty retail operation, I have always been a devoted customer of said businesses. But over the course of my lifetime, even I have shopped where it’s more convenient and economical more times than I care to admit. However, in most of those instances I can be forgiven because those buys were out of pure necessity? Conversely, shopping on a more intimate scale has, mostly, to do with reasons of either curiosity or wanting to help cultivate and maintain the vibrancy and strength of the community/neighborhood where these shops exist. But even I know that if these places do not satisfy whatever (often inexplicable and indefinable) urges I may have, I will leave and go elsewhere — if an option exists. Couple that with sometimes wanting a basic at one of these places and not finding it with another customer whose wants are so particular,… Read more »
Ananda Chakravarty

Two different market groups. I loved Bob’s metaphor of speedboats. That’s exactly how small business copes. I can see them rummaging through old boxes in their basement to find packaging for their next shipment. They’ll be canvassing their local community college to find new hires. Inflation — well that’s a wash no matter what your size. These speedboat retailers have learned to hustle and they’ll be out in front of the game even without buying power.

"In a world dominated by oceanliner big retail, indie retailers are speedboats."

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