Photo: Michigan Retailers Association
Is online a bigger threat to independent merchants than big boxes?
For years, the big box was derided as the major threat to the survival of the local independent store. More recently, however, the online giants have become an equal or more ominous menace.
While also targeting the national chains, Michigan Retailers Association’s “Buy Nearby” program aims at out-of-state online stores.
“We launched this campaign to get people to buy in their community rather than online,” Thomas Scott, the association’s SVP of communications and marketing, told MLive.
Like many “buy local” efforts, the program includes signage for stores to hang that details how supporting local stores increases local jobs and brings more money into local economies. The association organizes a “Buy Nearby” campaign on the first weekend of October as well as other events throughout the year. Social media outreach encourages shoppers to post stories and photos online of their favorite local shops and restaurants. The program even has a “Buy Nearby Guy” mascot symbolized by a blue, open hand.
The program was launched in early 2013 when the practice of showrooming started gaining attention. Consumers have since become even more accustomed to the generally lower prices and convenience offered by online shopping. Online sellers’ emphasis on same-day or two-day delivery has also undermined the instant gratification advantage promised by physical stores.
Heightened online competition has particularly affected merchants of premium brands and labels available at independent specialty shops. Executing e-commerce sites at the levels of the online giants has also been a challenge for many local merchants.
Local stores can try to be more competitive on price. But it sometimes comes down to educating customers around the importance of “buy local” and the value of knowledgeable associates and the in-store experience.
Discussion Questions
DISCUSSION QUESTIONS: Has online become a bigger threat to the prosperity of local independents than big box competition? How does the response to the online challenge need to differ from strategies to compete with big boxes?
Poll
BrainTrust
Dave Wendland
Vice President, Strategic RelationsHamacher Resource Group
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
All of the danger signs are still there … online sales continue to grow year over year. Much of this online sales growth has to be coming from other retailers since retail sales growth lags online growth by a wide margin. In short, if online sales are a threat to Walmart, they are an even bigger threat to local independents.
The 800 pound gorilla continues to demonstrate that online is more than selection and price. Amazon Prime is a holistic ecosystem that creates trust, convenience and personalization in ways that Amazon becomes the top-of-mind choice for many categories and during peak selling seasons.
Local independents can not win on breadth of selection or lowest price. They can win on special curated assortments that appeal to local customer needs. But the real competitive advantage local merchants have over online and big box is customer service before, during and especially after the sale. The future of local independents is not about a sale made today, but continuing to build that trust relationship which brings customers time and again to their store.
I concur with Chris and would add that local sellers need to focus on their strengths. Boutique experience of curated goods, exceptional customer experience and immediate gratification.
Independents can and should be viably competing on service and experience as Chris notes, but in both the online and offline world. The question here misses the point — online retailing is a tool that’s entirely accessible to independent retailers. There are literally dozens of solutions independent retailers can work with to bring their stores online to support click & collect, delivery, endless aisles, etc., with many different price points and business models.
This is drastically different than the big box supply chain optimization driven by volume. Volume and price is not an area independents can compete with at scale. eCommerce is a much more level playing field and enables even the smallest retailer to be able to reach their audience, target relevant offers (some of them at better price points than big box), drive a purchase and potentially even bring that customer into the store. The biggest danger independents face on this front is not taking action.
Online is a threat to all brick-and-mortar stores. The response from small merchants should be focused on customer experience, not price. They can’t win a price battle with online, but they can shine by making small stores fun places to shop, places that are well-stocked and are staffed by knowledgeable, friendly salespeople.
This is a rather difficult question to answer with a broad stroke. Online has definitely created a new dynamic that affects all of retail — not just the independents. And the impact varies by class of trade.
I envision a new type of retailer emerging (and there are some examples already) wherein the premise of the business may not be focused on the physical product that can indeed be delivered via an online site. Rather the emphasis is on the “service” piece of the puzzle … but we’ve heard that all before Dave. I’m not merely talking about customer service, I’m speaking of a bigger level of services such as: measurement and installation if it is a household appliance or furniture; tailoring and accessories for clothing; set-up and training of medical-related items.
I’m a huge proponent of thinking outside the box and it’s time for retailers — especially independents — to think beyond their traditional four walls.
You can’t get much sales life out of educating customers that they are wrong and shaming them into buying local. The real reason so many stores — big and small — are susceptible to online is simply that their customer experience is often rotten. To compete in 2016, you better value the fact that I had to leave my house in traffic, find a parking place and put my smartphone down while shopping in your store. Those who do are creating an exceptional experience and thriving; those who don’t will blame everyone but themselves.
As a business strategy, focus on service or locality will never pay as long as customers practice showrooming. Using service as a selling point, either with a “local” flavor or not, is a good idea only if the customer does not utilize the in-store service but buys from Amazon. We have seen this same old strategy failing for years now. To me it is a mystery why it is still used.
I think that appealing to local allegiance is somewhat similar to earlier appeals to national allegiance (“Buy American Made Goods!”) The difference is that people may not feel the same sympathy to local retailers as they did with local factories.
The “Buy Nearby” initiative is a prime example of drinking the Kool-Aid (and the result will be suicide). This problem is not exclusive to the retail segment. The same blindness can be found in almost every category of product and service when they are faced with great change.
It is the result of a desire to see things as WE WANT rather than what IS.
Why is online feasting on brick-and-mortar? The answer is breadth of products and ease of use. NOTHING is more nearby than your computer of mobile device. Nothing.
Good luck Michigan. Enjoy your nap.
The advantage that online retailing offers is the tearing down of the barrier of location. EVERY retailer needs to have a robust online marketplace (and this is just to keep up with the market let alone have a competitive advantage). The secret to future retailing success is investments in SEO, a redefinition of your raison d’être, the easiest shopping interface in your segment and an embrace of niche markets.
Throw out the old definition of your business and start looking at the market from the outside in.
The answer simply is yes, and this trend will be difficult to change as independent stores are at a disadvantage versus online. Consumers demand low prices no matter who is selling the product, and local merchants are having a difficult time keeping up with the online explosion of goods and services. I talk to different retailers who are struggling for survival and it hits small towns and Main Street very hard. You can buy anything online with the click of the button, and unless independents can give them a compelling reason to shop there, failure is inevitable.
Outside of high-income areas that have beautiful main streets and are bustling with coffee shops and local foodie restaurants, consumers are staying away. Yes there are exceptions to be found everywhere. All my years in business have helped me realize that standing pat is a guarantee for failure. Taking the initiative to create a great social media platform did not happen overnight, but we are now fully engaged with our customers and keeping it fresh daily. We make sure we respond to online questions on orders. It is critical. If we don’t, it simply will not work. I wish I could give some of my fellow retailers a magic pill that makes them instantly aware of how they can make their businesses better, but it is up to them to find the initiative to change for the newer generation of shoppers who want to use online services. I’m grateful we are doing this, because doing nothing is not the way of the future.
I love the small retailers, but I have to say that what Amazon and Apple have enabled (free delivery from the store in your pocket) is just too convenient to pass up for most shoppers. Including me. Buy Nearby is a good concept and I applaud the effort but it’s not gonna stop the train.
Online is about convenience. Another way of defining that is, “I can order from my desk, phone or anytime. I don’t have to go to the store.” That applies to the local retailer as well as any retailer. The difference is that the big box guys have the resources to play the online game at the highest, most technically-sophisticated levels. The local retailers do not.
There will continue to be value for shoppers to have a personal connection with local physical stores. The convenience and human contact is difficult to completely replace by online stores. Of course, online stores often level the playing field for large and small retailers, as most any size retailer can have the same reach online.
Of course. Believe it or not a good deal of America is still free of big boxes — some inner cities and rural America for example — but connectivity is almost everywhere.
Also, for an increasing number of shoppers, big boxes just aren’t that attractive and even the biggest box can’t contain all the options online shopping offers.
I live in Michigan and the buy local campaigns are effective, but the halo doesn’t always last that long.
The secret of competitive success for independents is what it always has been — be much better than the other guys.
Independent retailers have had to carve a niche to compete with big box retailers. All retailers are facing the challenge of incorporating online sales with in-store sales. That challenge also applies to independent retailers. If small, independent retailers really have developed a niche with their products, an online presence may give them a larger consumer base.
Absolutely. Research on all consumers, lead by Millennials, indicates a disruptive shift to online shopping. Like their differential advantage responses to big box retailers, the same strategy is applicable today. Online does not have brick-and-mortar options that can act as romanced, customized, exciting shopping experiences. In addition to using their storefront capabilities, at some point (sooner rather than later) these retailers need to adopt an omnichannel perspective.
“Cannibalize yourself before somebody does it for you.” It is the adage of innovation … and of retail. Many retailers invest in the development of their brands for years, only to see this challenged by different formats and approaches to commerce and eroded in the accelerating swipes of consumer credit cards somewhere else.
Inertia is the enemy and change management continues to be the most important capability in business.
Online, big box or others of a dozen major threats and many more deliver “death by a thousand cuts” — those that are masters of their intentions will always succeed.
Educating consumers on buy-local is going to have a very limited effect, unless it is part of a broader set of lifestyle guidelines and consumers can afford it. The fundamental threat of e-commerce to independent merchants is convenience, not price. A trip to the store consumes gas, yes, but more than anything else it consumes time. As shipping costs go down and logistics networks get more sophisticated it will become harder and harder for people to justify a trip to the store for an item they already know and want — we see the beginnings of this with the Amazon Dash button. With Amazon Dash buttons shoppers can one-tap reorder common goods that they are not interested in comparison shopping. That’s the real danger to independents and big box stores alike — that consumers with shrinking budgets and growing time commitments are forced to prioritize shopping by utility.
Still, independent stores (and physical stores in general) have one convenient advantage. While it takes longer to shop, you get the goods today — and people will always find themselves in need of things today (I’m deliberately not including the same-day/hour delivery services available in dense urban areas, lets see how that develops first). Independents who focus on making shopping more convenient, like Walmart with their recent focus on saving time, will make the most of the physical store’s advantages.
On the contrary, online should be a huge help to independents and a method for potentially selling to an audience on a national and even global scale. Of course it helps to have something fantastic to sell. But that’s nothing new. In any case, if you have great service and a unique product, pulling off the old “Amazon Can’t Do That” is much easier to achieve than it would be for someone like Walmart.
This past spring, Amazon was doing almost 60% of all online retail sales with giants like Walmart and Target and Best Buy coming in under 10%. THEY have a huge problem in that the sales Amazon is creating for itself comes directly from the Big Box coffers. To put all that effort into e-com and still have AMZ kick you butt has got to be disheartening, and scary.
It’s a much better world now for independents. It used to be that a Walmart could come into your neighborhood and destroy you. Now, Walmart might not even see your neighborhood and visa versa. Good time to be indie, IMO.
The cold hard truth of retailing is that consumers have little desire to shop at independent retailers. Online merchants have created an ecosystem whereby consumers can find anything and everything at lower costs and have the products delivered in as little as a few hours.
Buy local and other programs generate a sense of pride but little in the way of actual sales. Yes, independent retailers can certainly offer personalized service but since the majority of online merchants offer product return service, as well as replacing products that don’t meet the need of a customer with no questions asked, one can make an argument that online merchants have crossed the bridge to personalizing the retail experience.
Local independent retailers who succeed these days do so by embracing online marketing channels and creating a compelling virtual presence to complement their physical one. Adaption to digital continues to grow in all demographics and shoppers do use their smartphone to engage in physical shopping, through activities such as webbrooming and comparing local stores. Maximize these channels, Indies!
I don’t see how one can really generalize. To niche players or sellers of unique items in small towns, their business model may become less borderline, because their market may grow — assuming they begin selling online (hey, it works both ways); but for the local hobby shop or hardware store or other seller of basically commoditized goods, it’s just more damaging competition … for many, fatally so.
I think online is often a bigger threat to local independents. The key is in marketing theory. The online beauty is a nearly infinite selection both in product type and brand which has to be traded off against shipping and delivery time.
A big box has incredible product type selection and the advantage of immediate pick up, as well as a shopping experience to go with it. Local independents struggle to maintain broad selection of either product type or brand. And that makes it far harder to compete against online.
That said, I’ve been reading “Behind the Green Vest,” a history of the McGuckins local hardware stores in Boulder, Colorado. They succeeded by developing unique local stock that fit the local market and building a network to quickly supply emergency goods to fit weather events. And using this, were able to survive the establishment of Home Depot only blocks away.
To respond to the online threat, local stores need to do similarly: find ways to build a uniqueness tied to their locality that is powerful enough to overcome online infinite selection.
Online is a threat to big box stores and to local independents. That being said, local independents still have access to online selling (whether it be their own webstores and/or online marketplaces). Competing on price will be tough, but finding ways to add value (service, unique products, etc.) both in person and online (if they choose to enter that channel) can be a differentiating factor.
The in-store experience offered by many big-box-stores is indeed lacking, but small retailers are also to blame for much of the movement towards online shopping. Let’s talk for a moment about the mistakes being made:
Small retailers, I’m rooting for you, but give me a positive experience to hang my hat on. Don’t chase your customer away.
I am not sure that the positioning of “local” will have a meaningful impact on a large segment of customers. Customers are drawn to physical stores for a number of reasons, based on their segments — convenience, variety, service, support, etc. Online is a grater threat to larger retailers because those retailers have more generic product and poor/average service. As a result, they can only compete on price.
You’re either predator or prey. Big boxes and online stores are predators. That leaves locals retailers as prey.
Most local retailers are oblivious. The future is bleak for them because they’re still stuck in the past. Most launched their firm to secure their independence, but missed the tipping point when they became isolated. Now they talk to each other to assure themselves that it’ll get better.
Every local retailer should be exploring opportunities to expand their brand presence online and execute omni-channel strategies, create alliances and focus their merchandising to sell more unique brands and products at higher margins.
They can’t win the war. But they can change the battle.