Ask SCORE: Rapid changes make retail even more challenging for business owners

COURTESY TO THE BELLINGHAM HERALDAugust 6, 2012 

Question: The retail business I run is facing some challenges. I don't own it, but I'm suddenly the manager and I want it - and me - to succeed. I'm pretty naïve about this. Can you give me some insight to help me understand retailing?

Answer: Yes, SCORE is delighted to help you as the manager of a small business; we do it all the time. Remember that your meeting with a SCORE counselor (see below) is free and confidential. To say that you're "facing some challenges" is a nice way to put it. Retailing at every scale and level has never been more challenging. The key word is: adapt. Let's talk about this.

Things are changing rapidly right now. Pretty much everybody in retail business needs to be at their top of their game. To start with the obvious threat: online competition, which has a fraction of the overhead of your physical bricks-and-mortar store. To make matters more difficult, your relatively small store competes with many Internet sellers with high sales volumes. They probably buy in quantities you can't get near, and thus they get big-lot pricing you can't even dream about.

And ... it gets worse. What's happening now is that consumers are going to their local retail stores to look at products in the flesh, but then actually buying the goods online. Retailers call this "being a showroom for Amazon" and they hate it. Not only does it tie up unproductive inventory dollars, it uses your displays and sales staff time, with no return. For retail stores offering many small, easy-to-ship and high-value items like digital cameras and personal electronics, this is a big problem and a likely game-changer.

Also it's becoming common to see a shopper in a store using a mobile device to read an item's bar code. This app gives the user instant access to info on the best pricing near you, using their phone's GPS.

Here's some background. For most of the 1900s, we Americans "patronized" our local retail stores, which back then were mostly all in our downtowns. This included not just routine shopping for groceries and the bulk of our daily needs, but even the purchase of a car, furniture, or other major items. In smaller towns this continued into the 1970s or 1980s. But by then most cities had attracted developers who built shopping malls. These drew away the major anchor retailers, and then many others, into their shiny new spaces. Bellingham's regional mall opened in August 1988. The predictable "retail flight" left downtown Bellingham with several storefronts which are vacant to this day.

Many experts think retailing needs to discard an anachronism which has run its course. This is the $X.99 pricing tradition. Is $19.99 really that much cheaper than $20? (It's one-twentieth of 1 percent less.) There's even a retailing term for this: it's called "left-digit bias." Wal-Mart has done an excellent job of taking the art of pricing to another level. They commonly set their shelf prices at, for example, $6.87 or $14.73. This suggests that they have shaved even a few more cents off the price.

One retailing concept that is being revived is "clustering." The old thinking was fear of having a competitor right across the street. Then some brave retailers (auto dealerships) began formal clustering, intentionally grouping competing businesses in the same general area: "auto row." It worked. Informal clustering occurs when similar businesses locate in a concentrated area. Example: the Fairhaven district promotes "Local ownership, with art and crafts from local folks."

If your online presence is nil or weak, here are some ways to ramp this up. Etsy, eBay and Amazon all offer e-commerce solutions, where you provide the product and they market it for a fee. A second step would be to use Amazon fulfillment. With this arrangement they ship the product from their locations. Customers gain some free-shipping options, which are very powerful buying motivators. Of course your end goal is to have an excellent website, as soon as you can. Google "website setup bellingham" or ask others in business for a recommendation. Don't try this yourself unless it's your field.

And last, a challenge and huge opportunity for retailers: look down the pike. Here's what's coming: the Millennials. Born between 1982 and 2000, this generation was raised on high-speed Internet, smart phones, digital music devices and instant messaging. They're massive multi-taskers who simultaneously use Web-based search, social networking and gaming sites, texting, wikis and personal blogs.

Wow. Retailing is becoming a whole new ball game. Make sure your team is in the stadium and ready to play.

ABOUT SCORE

To learn more about managing cash flow, and other small business matters, contact SCORE, "Counselors to America's Small Business." SCORE is a nonprofit nationwide organization with more than 13,000 volunteer business counselors who provide free, confidential business counseling and low-cost training workshops to small business owners. Call the local SCORE chapter at 360-685-4259 to schedule an appointment. For details about the organization,visit SCORE.org.

Ask SCORE is prepared for The Bellingham Herald by Bob Dahms, a business counselor with the Bellingham chapter of SCORE. Submit questions for this column to newsroom@bellinghamherald.com.

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