Trends Affecting Small Independent Retailers

I finally had a chance to read a powerful white paper about trends among small retailers, called "Challenges of the Future: the Rebirth of Small Independent Retail in America." It is a very good roundup of the trends and pressures affecting small business retailers today.

Here is the background for how the white paper came to be written:

"This white paper originated from an observation and a supposition by Jim Baum, a highly active and successful Morris, Illinois small, independent retailer. His observation was that macro and micro trends affect the small independent entrepreneur differently than their large competitors. His supposition is if small independents could just step back, take a deep breath and think about what's really happening, what's changing and what's just over the horizon, they might act differently. They might change how they do things. They might experiment more to take advantage of new emerging opportunities. They might see solutions more clearly. They might find new ways to connect more closely to their marketplace."

The white paper identifies eight trends affecting small independent retailers today.

• Personalization - "Knowledge of customers' birthdays, favorite colors, time of day they like to shop, and other information is not just pleasantry any more. It can be an essential driver of sales. So while big companies employ slogans like 'reach out and touch someone,' it is more likely the small independent retailer who can actually shake their hand."



• Value equation - Customers are more becoming more demanding and expect more value. "And so, the traditional retail power structure has permanently shifted from sellers to buyers. Doing business as usual can mean doing no business at all. Buyers now hold the trump card."



• Increased Competition - Competition is growing in strength and numbers. "Because of the presence of the Internet and the increasing clout of large national chains, small independents must not compete on price. To do so is a death wish. It is not sustainable. It is not winnable. And it will likely lead to ruin.
  
  The real strengths of successful small independent retail revolve around specialization, differentiation and finding profitable, defendable and sustainable niches."



• Changing Demographics - Three demographic trends are bringing profound change and opening up new opportunities to serve these demographics: (1) the aging American population, (2) the growing Hispanic population, and (3) Generation Y -- born between 1981 and 1995 -- which is the largest American consumer group in history.



• Community Activism - "There is a growing national trend of community resistance to unrestrained retail development in order to protect local community personality, feel and values."



• Health Care Costs - "The most important domestic problem in the U.S. is the healthcare insurance crisis. While this affects everyone, it hits the small business especially hard due to the runaway costs of providing benefits to employees. It creates a real competitive disadvantage."
  
  
• Changing Consumer Attitudes and Behavior - "The traditional customer definitions and delineations have been blurred by the sheer volume of marketing activity across the entire socioeconomic spectrum. * * * Consumers want a transparent buying process devoid of hassles. A retail experience that fulfills these dual emotional needs will be highly valued."



• Urban Sprawl and Real Estate Development - "A recent trend in new retail development is to create community spaces of mixed-use that exhibit a strong sense of place. Many of these developments called 'the new urbanism,' incorporate features more in keeping with feelings of towns and neighborhoods vs. traditional large retail centers."

Download the entire white paper on retail trends here (PDF).


Tags: Business; small business; sales; retail; trends

Small Businesses Resisting Open Source?

Dana Blankenhorn at ZDNet wonders aloud why small businesses resist Linux.

"I do know that inertia keeps me from making more use of Linux than I do. Distribution channels for open source systems are thin, and the assumption is help will be hard to come by.

So I want to throw this open to our small business readers, especially those who continue to use Windows in their operations. Is it inertia, can that inertia be broken, or is there another reason we don't give Linux a chance?"

Well, I happen to agree with one of the comments to the above blog post, commenter number 76, Otto_Delete. He says "Most businesses can save a lot of time and money using Linux for their servers, but it isn't ready, IMO, for most desktops."

One thing I've learned from reader input here at Small Business Trends is that significant numbers of small businesses are using Linux at the server level -- and they may not even know it. Small businesses rely on their technical gurus to choose the right server technology. All that business executives care about in that situation is whether the servers work properly for a reasonable price.

On the desktop, however, it is a completely different matter. There the advantages of using a software platform in common with the rest of the business world win out. Small businesses don't want to have to train employees on new software. Most have neither the time nor the technical skill to install new desktop applications, figure out how to maintain them, train their employees how to use them, deal with all the extra integration to make multiple applications work together, and still run their businesses.

UPDATE JULY 13, 2005: A reader emails stating that FireFox is more-or-less taking over the world. Certainly many more people are using FireFox these days. But a browser is a limited application and doesn't need training to use it. It's not the same as Word, for instance, in a law firm, where it is crucial that employees be power users of Word in order to rapidly turn out lengthy legal documents, or Excel in an accounting or consulting firm, where the professionals create complex, multi-tab spreadsheets for clients.

Tags: Business; small business

Carnival of the Capitalists -- And Other Roundups

Carnival of the Capitalists, that online roundup of business blog posts, is being hosted this week at Multiple Mentality. One of my favorite posts in this week's Carnival is Sexy Advertising: Paris Hilton and the 3 tests over at the Retail Store Blog.

Be sure to check out the Blawg Review, a roundup of legal blog postings (get it? law + blog = "blawg") which is now being hosted at Legal Commentary. Don't miss My Shingle's post on law firm billing practices, describing profit markups by law firms that hire contract attorneys.

And finally, visit the Carnival of Personal Finance, being hosted this week at Smart Money Daily. Two must-read personal finance articles are Moving to Your Dream Job and How I Got my Dream Job, both of which are really stories about enterprising entrepreneurs.


Tags: Business; small business; Capitalists; carnival.

PowerBlog Review: Joseph's Marketing Blog

Editor's note: We are pleased to bring you the seventy-third in our regular weekly series of PowerBlog Reviews of business weblogs. This week's review is being guest-blogged by Martin Lindeskog. Martin Lindeskog has a Bachelor of Science degree in Business Administration from Southern New Hampshire University (2000). He graduated in May as an International Project Coordinator. Martin Lindeskog is seeking international job opportunities and is planning to start his own small business. He is a deputy member of the Swedish National Association of Purchasing and Logistics (Silf, Western Region).

By Martin Lindeskog

Joseph's Marketing Blog's tagline says "Rants of Marketing, Business, and Daily Life." Joseph DePalma started his blog in February by saying: "I'm probably going to turn this into somewhat of a business-experience blog." For being in his twenties, he has lots of business experience. I got curious about his different companies, so I sent him an e-mail and asked for an description of his ventures.

Here's some other information I can tell you: Vertora, Inc. is my main focus that everything sort of "falls back" to. It's a brand consultancy focusing on building amazing brand experiences (focusing on customer interaction, more so than graphic design and the like.)

AerialText, Inc. is a text message advertising firm that I'm currently selling. It's opt-in text message advertising. Currently there is no site for it because of this sale and how things are moving over.

Digital Charisma, is a web development firm I've had for years. it provides top notch web design and user experience - bottom line.

My favorite project, outside of brand experience consulting (which I absolutely love) is coming up. It's called OpenBeat - it's an internet radio center for independent music. Musicians will be able to sign up for a small annual fee, and we will promote their music on our 10 radio stations, give them a personalized artist website which we will also promote, and handle all payment processing for any CDs they wish to sell. It's a very exciting project, and we ran into some big delays with it, but it'll be going live in the next 2 months or so. Anyone will be able to go to the site and listen for free, and buy artist CDs right through our site. I can't wait till it's live. (E-mail, 07/09/05.)

From the About page: "In his spare time, Joseph writes this blog as a way to share his experience and knowledge." Joseph DePalma seems to be very good at managing his time, running all these different companies and at the same time being an active trader on the stock market. I bet he has read something by "productivity guru" David Allen. Joseph told me that he likes to read books. His favorite book is Good to Great by Jim Collins. I read Jim Collins's book, Built to Last: Successful Habits of Visionary Companies, in my Organizational Leadership course. Talking about leadership of an organization, I have to recommend the book, The Blackwell Handbook of Principles of Organizational Behavior, edited by Edwin A. Locke. I think that chapter 10 (Motivate Performance through Empowerment, pages 144-145) by Jay A. Conger, could be of special interest to Joseph DePalma and his readers. The author is listing Richard Branson of the Virgin Group, and Jack Welch of General Electric, as two positive examples on how empowerment works. See Joseph's reading list for books by Jack Welch and Richard Branson, and read his post, The Power of Empowerment.

The power of Joseph's Marketing Blog is the focus on how to build a better brand through customer experiences. I want to end this review with an excerpt from Joseph's post, Marketing is Life.

Marketing is not an afterthought. It should be integrated into the entire product or service right from the beginning. So many businesses focus on rushing to create a product or service, but never really think about the marketing behind it. (JosephDePalma.typepad.com, 05/16/05.)

When and Why Most SMBs Will Do Business in China

A McKinsey Quarterly article suggests that small and midsize manufacturing companies in Europe and North America are passing up opportunities in China:

"For many small and midsize enterprises in Europe and North America, the prospect of doing business in China can be daunting. In fact, as a result of their reluctance, such companies seem increasingly vulnerable on several fronts: they are not only forfeiting opportunities to sell goods and services in China and to source low-cost products in its factories and workshops but also face new Chinese competition at home.

But rather than wait passively for the day when these competitors show up on their doorstep, they can pursue strategies that could help them overcome the barriers to entering China's domestic and export markets. To be sure, those barriers are considerable. Many small and midsize companies are hardly eager to deploy scarce management resources to identify qualified Chinese vendors or to research and understand the tastes of the country's consumers. Nor do they have the time and resources to recruit staff and manage operations there."

So what is the right way for SMBs to go about capturing the China opportunity? The article notes that some businesses attempt partnerships with local Chinese companies, but these rarely work out. Rather, the author suggests that small businesses band together and/or pool resources, possibly through trade associations, to take advantage of opportunities to reach China as a market and/or to source manufacturing there.

I found this an interesting article, but the part about pursuing market opportunities (i.e., finding customers) in China strikes me as unrealistic. Precious few small businesses would be in a position to chase customers in China, even by pooling resources. Most small businesses have a tough enough time increasing their footprint in their own local markets. To attempt to go after markets half way around the world, with deep cultural and language differences, is a challenge most small businesses simply cannot overcome.

Sourcing of manufacturing, however, is a different matter. Small manufacturing companies in the West today are faced with compelling circumstances that make it imperative they have competitive cost structures. These days, competitive cost structures are hard to achieve with high-paid Western labor. Outsourcing of manufacturing in China can make sense.


Tags: Business; small business; globalization; outsourcing