NRF: Independents’ Renaissance Begins Online

Last Monday at NRF was “Independents Day.” One of this year’s speakers (again) was the owner of Dave’s Soda and Pet City, Dave Ratner. Mr. Ratner has demonstrated how aggressive utilization of online channels has made it possible for his business to not only survive, but flourish, even through the down times of the recession. The internet has enabled him to engage with both customers and employees in a variety of ways that motivate them to support the business. As a result, Dave has actually expanded his brick and mortar business into additional store locations.

This got me to thinking about the whole idea of independents in this “Online World.” Chain stores excel by exploiting the economies of scale. By leveraging the expertise of category managers who are able to research the detailed characteristics of a category and apply their findings across many locations, chains were able make better assortment decisions. By offering economies of scale to producers, chains could get preferential cost and promotional discounts. But the whole effort now — to localize with “neighborhood stores” where assortments are targeted to local demographics — kind of defeats some of these chain advantages.

When you start to think about the effort chains invest in aligning employee incentives with the goals of the business, you can see further advantage for the independents. Who is more devoted to the business than the employee who reports directly to the owner? What chain store manager has more incentive to correct an employee misfit than the business owner who is directly impacted? What chain employee is more concerned about preserving and expanding their customer base than the independent employee who clearly understands the customers in their store are the source of their paycheck?

All this got me to thinking about a renaissance for independent retailers. All the pundits say that for brick and mortar stores to survive they will have to differentiate themselves by other means besides price. Independent retailers have the motivation; now online channels give them the tools they need to differentiate themselves. Yes, price sensitive consumers will look for better prices online, but with targeted promotions I believe independents can reach even those consumers and pick up on the impulse buys.

daves soda and pet city

BrainTrust

Discussion Questions

Discussion Questions: Do you think independents can make better use of online affiliations and targeted promotions than their big box challengers? Are independents better at maintaining QoS (quality of service) than their chain competitors?

Poll

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Dan Berthiaume
Dan Berthiaume
12 years ago

I remember seeing the “Soda/Pet Food City” store in Hadley, MA when I went to college in neighboring Amherst and always thought it was a very funny product combination, but that is probably a large part of the appeal. Indies definitely can provide much better and more personalized customer service than large chains and should be taking advantage of online promotions, including social media, to stay competitive. Despite chains’ continuing dominance of the retail landscape, an indie with the right marketing hook and great customer service probably has a better chance of surviving in today’s segmented market than at any time since the late 1980s.

Mark Heckman
Mark Heckman
12 years ago

I think it intuitive to believe that independents have an inherent advantage over chains when it comes to all things personal and local. Certainly that includes localizing and personalizing online transactions. In my mind, the real key to success to anything that is propagated online is to be able to support it in-store with the same personalization and continuity that is demonstrated on a website or on Facebook posts. Independents should be in position to excel in that respect.

But two areas that most independents remain at a disadvantage to larger chains, are the access to brand content needed for a steady stream of offers and information, and in having the right people in place in the organization who understand and can devote themselves to web, mobile, and social media.

IF independents can “crack the code” on devoting meaningful content to their online initiatives and devote strategic talent to the effort, they can carve out a very nice niche for themselves for sometime to come!

Camille P. Schuster, Ph.D.
Camille P. Schuster, Ph.D.
12 years ago

The independents that have survived and thrived have been able to leverage the understanding of their consumers into product selection, service, and communication strategies on a local basis. This is the niches that the big chains find challenging and difficult to implement with a cost effective supply chain process. When independents compete on what they can do best (target local consumers), they are strong competitors.

Ryan Mathews
Ryan Mathews
12 years ago

This is a case where size does and doesn’t matter. The online race will be won by the most competent and — assuming equal competence — by the best resourced.

It’s great to intuitively believe independents are closer to their markets by digital success is based on more than empathy.

Historically big boxes have a poor track record when it comes to building innovative, creative and personalized digital presences but given their resources this seems more about the reality of their organization limitations than it is about their potential ability to marshal talent, invest in sites and social media and monitor each store as though it were a stand alone.

Will they ever get there? Who knows but, given the evidence to date, it’s not likely that they’ll lead the charge.

Bob Phibbs
Bob Phibbs
12 years ago

Great retail is having a unique proposition. I noticed Dave (again) and wonder how much a pet food store or a gift store or a shoe store that just opened a few years ago could take from their story.

If you don’t have a great story, which much of retail doesn’t, it seems the last place to start is trying to compete with the Amazons and PetSmarts of the world as I wrote here.

Dan Frechtling
Dan Frechtling
12 years ago

Being able to differentiate by means other than price varies by category. Pet stores can connect with their communities with the nature of the product and buying occasion. Restaurants and entertainment venues can create similar emotional bonds.

Other categories like home electronics, and music face an uphill battle due to the strength of online competition.

Dave’s Soda & Pet Food City not only picked a conducive category but also finds clever ways to engage its communities. Local animal shelters are given $5 Dave’s gift cards to refer new business. Local Dog Scouts groups choose Dave’s as a venue for training. Dave’s student-of-the-month program recognizes students who tried hard but didn’t quite get straight A’s.

It’s less an issue of marketing channel — online or offline — and more an issue of category and creativity.

James Tenser
James Tenser
12 years ago

There will always be a few independent retailers who excel at leveraging the latest online, digital, localized, personalized and/or charismatic marketing to great effect. For me the key question is, “will it scale?”

Chains will be hard-pressed to match the kinds of successes that a company like Dave’s Soda & Pet has achieved because they cannot extract and replicate the kind of personal drive and intuition that Mr. Ratner possesses. Instead they must substitute a master system that introduces uniformity — or at best, programmed variation — that permits local stores to reflect the variation in their local shoppers.

Therein lies one of the core paradoxes of chain retail: As any chain grows bigger and more powerful, the distance between its stores and its headquarters grows too. Economies of scale and clout are offset by the dis-economies of complexity.

Ralph Jacobson
Ralph Jacobson
12 years ago

I believe that new marketing and selling channels have leveled the field for large and small retailers. Retailers of any size can leverage multi-channel retailing from a selection and therefore local assortment perspective. There are many examples of small chains taking advantage of and driving a loyal culture around their employees. However, I see large companies driving the same loyalty, whether their game is specialty food, apparel or electronics.

So, I think this discussion is less around whether large or independent companies have the advantage, and more around how well any size retailer leverage the new “tools” available to them.

Ted Hurlbut
Ted Hurlbut
12 years ago

I’d like to take a slightly different tack on this. Mr. Ratner attributes much of his recent success to his “aggressive utilization of online channels.” I have no doubt that’s true.

By definition, independent retailers have finite resources. The most obvious of those resources is financial, but it’s not the most significant, in my mind. In my mind, the most significant resource is the entrepreneur, their vision and passion. The constraint on that resource is time, energy and executive attention span. Simply put, independent retailers cannot seize every opportunity that might present itself. They have to set priorities, make choices. Since the recession, many have struggled to keep their stores cash flow positive. They’ve expended a lot of energy re-inventing their stores, sharpening their skills and execution, and focusing on rebuilding sales.

For those independent retailers, that’s been a full plate. For them, focusing on building their online presence would have been to spread themselves too thin. Choices had to be made. Every independent retailer needs to be aware of the online opportunities that might be there for them. But it’s critical that the things they choose to focus on they do exceptionally well, as opposed to taking on too much and doing little of it very well at all.

Tony Orlando
Tony Orlando
12 years ago

I think the online presence needs to be thought out quite well before jumping in with some half-baked attempt to “just be online.” I am slowly working on more online stuff. It takes someone to monitor the daily activities (added labor), and it must be uniquely driven to your customer base. No doubt it is something we should be involved in and it can add great value, if done correctly.

Gordon Arnold
Gordon Arnold
12 years ago

Medium and small business is on the ropes. One of the many aspects of service gone, but not forgotten in these market reports is after-sale support. The consumer is forced to do business with the Big Box simply because they will most likely be there if needed for vendor support.

Mark Price
Mark Price
12 years ago

Independent stores clearly have an opportunity to differentiate themselves from larger chains through two key strategies: personalization and customer experience.

Since independent stores deal with dramatically fewer customers than larger chain organizations, they have the potential to deliver personalized information and offers to individual customers based on their purchase history and expressed preferences. The scale becomes so much smaller that the personalization can lead to true 1:1 marketing, which is different enough from the chain experience to drive incremental visits and share of wallet.

In terms of customer experience, the large chains often suffer from an excess of “policy,” which tends to treat all employees exactly the same. The need to fit all employees into a single mold often leads those employees to become disinterested in the company mission and performance, which translates into poor customer service. By personalizing the employee experience, individual stores can differentiate on customer experience as well.

Ronnie Perchik
Ronnie Perchik
12 years ago

There is no doubt that small businesses have gained a new opportunity with the advent of digital. Online offers a nearly 100% free medium to be listed through search, connect with local consumers through social, and provide people with promotions that the owners themselves can control through daily deals sites, for instance.

Of course, as we know, big brands can benefit from digital too. It’s about determining which pieces of an online campaign meet your goals, selecting the proper websites to engage with, and then integration so everything works in tandem.

It’s not as easy as it may sound, so hiring a partner to assist is key. In the case of independents, they may look to small agencies or digital consultants to help manage.

Mike Spindler
Mike Spindler
12 years ago

There are two specific areas in which Independents can build success, and another area where they have at least a temporary advantage.

1. Chains have a plan to deliver shoppers to shelf but do not have an effective plan for making sure the shelf delivers the plan to the shopper. Our work over the last 2.5 years proves that the big guys have a really tough time having their shelves match the plan…at all. Independents have more control over this, but only if they measure and correct.
2. Chains rely a great deal on vendors and suppliers for their digital product content. Again, we have proven that less than 50% of the products actually on the shelf either have any image-data at all or have the wrong image. That makes the chain digital path to purchase much less effective than it could be. Making sure the products on the shelf carry their weight when it comes to online means measurement and correction, but this is doable in an independent world.
3. Finally most chains need to tune their gross advertising tools (circular and TV) to the lowest common denominator, the stores where they do not offer their full arsenal of online tools. Independents can push hard to convert people to their online and So-Lo-Mo tools in all forms of advertising.