4 Ways SMBs Compete with Big Retailers Opening Smaller Stores

Are small stores the next big thing in retail? It would appear so.

Over the last few years, big name retailers have made the move towards smaller format stores. Target, for one, already has a handful of small stores in various urban areas. They plan to open 30 more by the end of the year.

There’s also IKEA, which now has 44 small format stores across the UK, Canada, Norway, Italy, Japan and China. And let’s not forget Nordstrom, which opened a 3,000 sq. ft. store called “Nordstrom Local” in West Hollywood late last year.

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There are a number of reasons behind this trend.

There’s the fact that retail today has gotten a lot more convenient and accessible. Thanks to ecommerce, free shipping, and fast delivery, consumers no longer need to drive to a big box store and meander its aisles to find what they need.

As a result, big retailers who want to keep up are establishing shops closer to where their customers are.

It’s also important to note that in certain locations (i.e. dense, urban markets), it makes more sense to have small stores that stock people’s immediate needs versus having a 100,000 square foot superstore that shoppers have to travel to.

Yes, big retailers “going small” is a trend that’s clearly gaining steam. The question is, should SMBs be worried?

Here’s the answer: retailers that offer great products, unparalleled customer service, and interesting experiences will still be able to compete with large retailers setting up shop in their neighborhoods.

Here are a few ideas on how to do just that.

1. Localize your assortment

Staying competitive in retail today isn’t about having more products. Instead, it’s about having the right ones. Your assortment will be a key driver of traffic and sales. So invest the time and resources to get it right.

See to it that your inventory adequately reflects the needs of the communities you serve. Pay attention to shopper demographics, local trends, stock movement, even weather patterns in each area, and then work with your suppliers to stock up accordingly.

Retailers that invested in localization are seeing results. Take Zumiez, for example. According to Retail Info Systems, in 2017, “the retailer grew its comp sales by 7.9% nearly doubling the low-end of its guidance prediction of 4% to 6% year-over-year growth.”

That success can be attributed, in part, to its localized assortments. As RIS puts it, “A key tenant of Zumiez’s integrated model is providing its customer base a unique, on trend, localized assortment, with a focus on emerging brands.

Kohl’s is another retailer that’s using localization to influence their inventory. According to the retailer:

“Gone are the days when racks were stocked based on broad market clusters that were largely based on the climate of the region. Instead, Kohl’s is using analytics to study customer behavior in individual stores to edit and tailor our assortment to the brands and categories they want to see and buy. Kohl’s is putting customers first by making our store more relevant to them.”

And it looks like that practice is paying off. RIS reports that in 2016, Kohl’s locations with localized assortments experienced “around 70 basis points lift in comp, with a 40 basis point reduction in inventory.”

2. Strive for convenience

When it comes to modern retail, convenience is the name of the game. You should ensure that your customers can get their hands on the items they need in the quickest, most efficient way possible.

Doing that could mean:

Allow shoppers to buy online, pick up in-store (BOPIS)

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BOPIS has become table stakes in the retail world, so if your shop doesn’t offer in-store pickup, it’s high time that you look into the service.

As of 2017, more than half of shoppers have used BOPIS at some point, and you can expect that number to increase as ecommerce adoption continues to grow.

The key to making BOPIS work is to seamlessly connect your in-store and eCommerce catalogs. Ideally, your retail management system should allow you to manage your products and customers using a single platform, but if this isn’t the case, then you need to find a way to integrate your POS with your online shopping cart.

You also need to think about logistics. How will you ensure that items are ready for pickup in a timely manner? Do you have the resources (i.e. space and staffing) to process online order pickups on site? If so, great. But if this isn’t possible in your location, you can choose to partner with third parties to help you implement BOPIS.

For instance, there’s Apex AnyWhere, a provider of automated, self-service lockers for click-and-collect orders. There’s also Penguin Pick-Up, which offers a free pickup location for consumers.

Explore your BOPIS options to see what works best for your business and customers.

Improving your store’s layout and design

You’ve worked hard to get people into your store. The last thing you want is for them to walk out because they can’t find what they need.

Take a good look at your store’s layout and design then ask yourself: are you making it easy for shoppers to navigate your store? Can they find what they need quickly and easily?

Stop leaving money on the table with poorly executed merchandising

If not, then make some adjustments. Perhaps you need to re-arrange your shelves and fixtures. Or maybe it’s a matter introducing clear signage. Whatever the case, see to it that the look and feel of your stores are optimized for easy browsing and buying experiences.

Once you have your merchandise and fixtures up and running, conduct checks and audits to verify that they’re executed correctly.

Offering local delivery services

Same-day delivery is another service gaining traction among modern consumers. People’s need for instant gratification is stronger than ever, so if your store can meet that need, you’ll be in a great position to compete.

See if same-day delivery makes sense for your business. Look into solutions such as Postmates or Deliv and consider using them to fulfill the immediate delivery needs of your customers.

3. Deliver the best customer service

Enabling customers to shop quickly and get “in and out” of the store is great, but let’s not forget that for some consumers, “convenience” means having a helpful associate answer their questions or point them in the right direction.

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Unfortunately, too many retailers fail to meet this expectation. The majority of merchants (particularly big box stores) employ dispassionate associates who aren’t always keen to go above and beyond for their customers.

As an SMB, customer service is an area where you can truly shine. Differentiate yourself by investing in retail employees who not only know your products and industry, but who have a natural inclination to help people. Train them to help and not just sell, and teach them to connect with your local customers and regulars.

Case in point: I always opt to buy wine at my local liquor store because it has the best people. The store’s employees know who I am, they’re familiar with my preferences, and they’re experts in their products so their recommendations are always spot-on.

For these reasons, I choose to buy from them instead of the dozens of other places in my neighborhood that sell wine.

Strive to achieve that same level of customer service in your store. Invest in your employees and make them a key differentiator to help you compete with similar stores in your area.

4. Beef up your foot traffic efforts

Driving foot traffic is always important, but it becomes an even bigger priority if you’re dealing with competition from big box retailers setting up shop in your neighborhood. Take the following steps to ensure you always have a steady stream of customers walking through your doors:

Image credit: Francesca Nicasio

Create remarkable window displays

Keep your window displays fresh and updated by sprucing up your products and fixtures every couple of weeks. For best results, tell a story with your windows or go beyond clichéd displays and do something shoppers won’t find elsewhere.

Here’s a great example from Kate Spade, which created a unique (and moving) contraption to demonstrate how customers can personalize their purses.

Don’t forget the curbside

Utilize your store’s curbside and see if there’s anything you can do to stop people in their tracks. Many retailers are using boards or signage outside their shops to tell pedestrians about any in-store specials.

Stay in touch with your customers

Do you collect customer contact details such as their email address or phone number? Put that information to good use by communicating with them regularly. Doing so keeps you on their radar and helps drive traffic to your location.

Increase your online visibility – The internet is a huge driver of foot traffic, so don’t neglect your digital marketing efforts. Keep your Google and Yelp listings updated and invest in SEO to ensure that your business shows up in search results.  

Your turn…

How do you feel about big retailers opening small-format stores? Let us know in the comments.

About the author:

Francesca Nicasio is a freelance writer and content strategist who’s dedicated to writing about retail trends and tips that help merchants increase sales, improve customer service, and be better retailers overall. Her work has been featured in top retail industry publications including Retail TouchPoints, Street Fight, Retail Customer Experience, VEND, and more. She’s also a featured thought leader on LinkedIn, and is followed by over 300,000 professionals on the site.

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