Is the sole proprietor toast?

Discussion
Photo: Judi's of Nevada City
Mar 08, 2017

Brian Kilcourse

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

On a recent weekend shopping trip, the proprietor of Judi’s of Nevada City, a women’s wear store in North California, seemed a little down. She expressed her concern that her business efforts “might all be for nothing.”

The sentiments weren’t surprising with the news lately heralding doom-and-gloom for “the store.” A speaker at a small business conference she just attended also basically told her, “You’re toast!”

Judi said, “We do everything here. We work with vendors directly. I pick out the buttons and the fabrics, and we try to work with companies with local ties, not some big manufacturer that we’ve never met. I just have to believe that people see the value in that. You won’t see these fashions in a Macy’s or a Target and you can’t buy them on Amazon. Why wouldn’t people want that?”

My answer was simple: “They do.”

Not only do I feel that way, I think it’s the natural outcome of all the big retail trends occurring. The more products commoditize, the more people will enjoy an antidote to all the sameness. Think of the popularity of some antidotes to commoditization: heirloom tomatoes instead of the perfectly red, round, and tasteless ones you can get at the supermarket; a good microbrew IPA instead of a Bud; that perfect-fitting sports coat from “the Hong Kong tailor” instead of the off-the-rack one that actually costs more.

This all goes back to something my old boss said to me years ago, that “retail is entertainment.” Given the opportunity to pamper yourself, most of us will indulge from time to time — it’s fun! And I can’t think of a better way for someone to pamper themselves than by finding that unique “something” to wear that makes them look good. But more than that, Judi works with her customers, finding the right sizes, the complimentary pieces and accessories and helps put together the whole ensemble.

For “the store” to thrive in this digital era, everyone in the store needs to think — and act — like sole proprietors. As a consumer, I’d love to see it.

DISCUSSION QUESTIONS: Are mom and pops more susceptible or less to the digital threats that large brick and mortar chains face? Do you see more opportunities or challenges for smaller proprietors given the shifts to online selling?

Braintrust
"I am tired of the endless parade of pundits who seem to get glee out of giving this message. America runs on small business. Period."
"...let’s consider some notable exceptions — smaller proprietors emerging in categories that are otherwise ripe for sightings of “the walking dead.”"
"...small retailers can easily “punch above their weight” with effective e-commerce presences."

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30 Comments on "Is the sole proprietor toast?"

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Bob Phibbs
BrainTrust

Thanks for this Brian. That anyone would ever speak to a small business group and give that message — even if it is not said exactly — is bulls***. I’ve done literally thousands of presentations to associations, chambers and dealer networks — it is the last message anyone needs to hear: hopeless.

I am tired of the endless parade of pundits who seem to get glee out of giving this message. America runs on small business. Period.

When the small brick-and-mortar businesses go, so does your downtown shopping, so does the chance of being able to get out and meet others. While we seem to be moving to a stay-at-home economy there is still a huge amount of brands dependent on the eyes and ears of the smaller businesses that make up the web of community. Entrepreneurs don’t aspire to be the next Starbucks or Staples or Lululemon, they just want to dominate their market. I think that is far from hopeless.

Ian Percy
BrainTrust

This is you at your best Bob!

Mark Ryski
BrainTrust

Running a mom-and-pop retail operation has always been challenging, but in some ways I think these stores are less susceptible to digital threats than larger retailers. Consumers have very different expectations of mom-and-pop stores. Shoppers don’t expect them to necessarily have an app or a really slick e-commerce site. To the shoppers who frequent mom-and-pop stores it’s the uniqueness, quaintness or location that makes them interesting. While the retail industry media is naturally dominated by the big chains and their goings-on, I do think mom-and-pops and small independent retailers add color and flavor to the industry and I’m confident that they will continue to not only survive, but thrive.

Ken Lonyai
BrainTrust

Mark: I totally disagree with “shoppers don’t expect them to necessarily have … a really slick e-commerce site.” I’m not sure what “slick” means to you, but discovery is of massive importance to small businesses (everyone really), so when a potential customer visits a website, they rightfully expect it to be responsive, functional, current and with adequate content to answer the majority of their needs. To me that’s not being slick, it’s an expected level of UX/CX. The majority of small businesses (unsurprisingly) are lacking such a site and causing their own demise by not understanding the importance of it in a digital/mobile world, far removed from the glory days of mom-and-pop retail in the 20th century.

Mark Ryski
BrainTrust

Fair points Ken. “Slick” is vague. I completely agree with you that discovery is critical and that mom-and-pops still need to have a competent site.

Richard Layman
Guest
1 month 19 days ago

You have to split out “e-commerce” from a social media presence. You can have the latter and don’t require the former, depending on the retail category. Social media helps to make for constant buzz and top-of-mind awareness and provides triggers to stop by and shop.

Charles Dimov
BrainTrust

Mom-and-pop shops tug at everyone’s heartstrings. We want the small retailer to survive and thrive. Most of all we all love the personal service, caring attitude, great service experience and entertainment value.

The winning ticket is to be present on digital, encourage customers to talk about the experience and share and spread the message. That way our little gems can survive and do well in the phygital realm.

Dave Nixon
BrainTrust

+1 Charles!

Shep Hyken
BrainTrust

The sole proprietor in retail has some disadvantages which are obvious. Buying power is one of them. A huge advertising budget may be another. But the advantages can outweigh the disadvantages if the small retailer focuses on their customers and not the competition. For example, how do the independently owned Ace Hardware stores compete against the big box stores and online retailers? They out-service them. They have knowledgeable people who don’t just give great service, but help their customers (as in “Ace Is the Helpful Hardware Place”). The key to the small mom-and-pop or independent retailer being successful is to build up a fan base. They must focus on delivering value in the form of service, convenience, personalized attention and emotional connection. Sure, they should run sales and discount promotions, but if price becomes main strategy it puts them head-to-head with the chains, boxes and online retailers.

Cathy Hotka
BrainTrust

Small retailers have everything that chains lack — customer intimacy, geographical insight, personal loyalty and pinpoint inventory accuracy. While it remains easy to go online and check superstore prices, smaller competitors are much more nimble and closer to customers. I’ll bet on the smaller ones every time.

Ken Lonyai
BrainTrust

Small retail has always been tough, but unique experiences/merchandise and customer-centricity are not enough. Now it takes seeking your market, not waiting for it to find you.

When we discuss these issues the conversation always includes selling unique (non-commodity) goods, providing customer service that big retailers/digital-only merchants can’t and creating “experiences” (a term with many interpretations). That is all true, but it’s no longer enough. Amazon commands 55 percent of initial product searches — search engines only 28 percent. So small merchants not only battle the Internet, but they are battling stacked odds. Then there are all of the big stores and other mom-and-pops scrambling for the same dollar. So having a couple ads in the local free paper and having a web presence no longer cuts it.

Merchants that expect to survive must go to their market and create an active, meaningful presence in every channel that they can support. It will likely include social media like Facebook, a website that truly adds value and stays current, a mailing list, local events, sponsorships and more. Otherwise, as good as products and selection may be and as service-oriented as they may be, small merchants will get lost in the ever-increasing noise.

Dave Nixon
BrainTrust

No, no, no. We are headed for retail transformation by getting back to more one-to-one retailing. See the transformation of “big box” stores. The challenge is being able to build the ecosystem needed to compete, on a budget, and with flexibility. But how?

Enabling and innovative technologies like Cloud, PaaS, IaaS and IoT (many are pay-as-you-go or pay for what you use) will redefine the pricing model and the ability for smaller retailers to play with the larger ones. Digital can now extend the reach outside of your local footprint.

The rules of engagement are the same … the customer experience is the most critical piece and everyone has to do that with excellence to win. You just have to find creative and innovative ways to do it if you are smaller — but it IS possible!

Ken Lonyai
BrainTrust

“innovative technologies like Cloud, PaaS, IaaS and IoT … ” That’s Latin to 98 percent (or more) of mom-and-pops. As noted above, most have yet to offer a true value added website. As useful as those technologies are, only very savvy and often young entrepreneurs have the ability, resources and bandwidth to look in those directions.

Dave Nixon
BrainTrust

I agree with you, Ken, but being a mom and pop should not mean “head in the sand” or they WILL fail. Learning how to compete in the new economy is only a few clicks away on Google. But it is up to us to educate those retailers on how they CAN compete.

I agree there are knowledge and resource gaps, but the new wave of small independent agencies and consulting firms can help get them there. There are plenty of resources out here to help those smaller shops. (And they DO need to start with a better web presence.)

Ken Lonyai
BrainTrust

You’re implying that I support a “head in the sand” mentality. Although I work with very advanced technologies, AI, etc., there is a reality as to who the majority of mom and pops are, their resources, and willingness to embrace new thinking, regardless of what you want them to believe. When I consult, my role is to serve clients best interests — technology or not, given who they are and their comfort level, not to force technology for technology’s sake on them. Not sure what the new wave of agencies is supposed to mean, but pushing an agenda that suits their agenda only, “WILL fail.”

Manmit Shrimali
BrainTrust

If small business owners want to remain small with lackluster growth they will not see the impact of digital, provided they are able to serve the niche market. But if they are hoping for growth and scalability (the primary drivers of big retailers), then for sure they will.

In the long run they will benefit greatly from digitization and automation because at some point in time there will be just too much digital noise and technology that will make consumers want to go somewhere else for a more human experience. Our study shows that implementing technology (like Watson) that can replace humans as part of the in-store experience actually would do much bigger damage to brands in the long run.

Phil Rubin
BrainTrust
1 month 19 days ago

“Reports of my death have been greatly exaggerated.” — Samuel L. Clemens aka Mark Twain.

As we read each day of chains filing for bankruptcy, some not for the first time (e.g., RadioShack), let’s consider some notable exceptions — smaller proprietors emerging in categories that are otherwise ripe for sightings of “the walking dead.” Take menswear and Sid Mashburn. What started as a sole proprietorship in Atlanta has now expanded to five markets stretching from east to west across the U.S. It’s still a sole proprietorship and it has also been ranked and mentioned by the likes of GQ and Esquire as a top menswear merchant in the U.S.

Smaller operators may have (some) disadvantages in terms of purchasing power but they can crush large chains when it comes to merchandising, concepts and a superior branded experience.

Bob Amster
BrainTrust

The mom-and-pop shop has and will have a place in the market. There may be fewer of them going forward but their raison d’être is differentiation. I shop an apparel store in Lenox, MA. They have the most exquisite collection of men’s and women’s apparel (not cheap). The owner is the buyer and attends to the customers personally. The store is charming and always well-stocked with interesting assortments. As far as I can tell, he has a loyal following and makes money. You don’t see that confluence of attributes too often. Those that can achieve it will make it and stay around, just like any other retailer.

Camille P. Schuster, PhD.
BrainTrust

Finding an affordable partner to do online activities can be a challenge. However, in terms of a local market, small shops have an advantage IF they know their customers well. Then they can offer custom products that other stores serving a national market cannot. Offering only the same thing as national chains is not competitive.

Ken Morris
BrainTrust

I don’t believe for a second that mom-and-pops are more threatened by digital than large brick-and-mortar retailers … unless they try to compete with the same-old, same-old. Retail stores are not dead but many are just boring. Retail is theater as expressed above and the theater has never been stronger. Digital presence and not newspaper advertising is how to jazz Generation Z and Millennials but the big guys are still investing in inserts. If mom-and-pops sell to my children and not my parents, understand digital’s influence, provide unified commerce options and have a unique product then they will thrive.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Franchisees are sole proprietors as well. Beyond shops, boutiques and cafes, these too can bring community involvement and benefit from word-of-mouth and social media promotion that reduces their marketing costs and builds their business. Nimble operations can provide small B2C firms with a great advantage, in particular when they apply some of the best practices used by competitors.

Ian Percy
BrainTrust

Phibbs is right. Some of these speakers and pundits say the dumbest things. I’ve been on the speaker circuit for over 40 years and I’ve seen it all. A lot of BS comes from “experts” standing on podiums. Fortunately there is not enough space here to list the dumb things I’ve said.

Nevada City Judi (and the millions of others like her) needs to stop fighting the retail bullies, trying to beat them at their own game. That does lead to toast. Instead, Judi, find the weakness in their strongest advantage, namely mass production and purchasing. You already know what your strengths and competitive advantages are — you’ve listed them right in this article. There’s only ONE Judi’s on the entire planet.

Where the single proprietor needs help is in how to build and use an innovative social media marketing strategy. That needn’t cost much — just requires some equally original and creative thinking.

Ralph Jacobson
BrainTrust

Along with the well-known advantages of independent retailers (e.g., shoppers who want to support local businesses, etc.) in all formats (e.g., grocery, apparel, etc.) there is at least one inherent advantage in the digital commerce world. Shoppers who look online have no idea how large or small a retailers is unless that retailer has a marquee brand. So small retailers can easily “punch above their weight” with effective e-commerce presences. Another aspect we need to acknowledge is that there are some huge independent retailers that have maintained their small-business culture. Those innovators are successful with these shoppers in spite of their large revenues.

Patricia Vekich Waldron
BrainTrust

Some of my favorite (and most frequently patronized) retailers are mom-and-pops. They have unique merchandise and great service. I can’t imagine the retail industry without these shops and people.

Richard Layman
Guest
1 month 19 days ago
As someone who worked in “Main Street commercial district revitalization planning” for many years, I’d say that answering this question is very complicated and nuanced. One of the problems for independents, at least in cities, is that the traditional commercial leasing/real estate development business isn’t set up to give very good terms to or be accommodating of independents. As the big retail sectors consolidate there is some change. But only a little. Except for restaurants. And even for restaurants they are moving from sole proprietorships to groups of allied concepts. With the new rise of independent bookstores (partly because of the failure of Borders and the shrinkage of Barnes & Noble, plus the demise of Dalton’s and Waldenbooks) they are positioning more in terms of the experience. It’s not a way for a proprietor to get rich, but they can make a living. To survive as an independent, it will be key to be located in the right place. Just because space is available, if a district isn’t “regionally serving,” it will be hard to get the right level of business/foot traffic necessary to succeed. Communities/the industry need to focus on capacity building, financial support, rent issues, etc., to build… Read more »
Tom Redd
BrainTrust

These are the stores that are the foundation of shopping. Some basic web work can expand the awareness of the store, but most key is the service and the assortment. Keeping both of these elements tuned around the focus of the big retailer is the trick for the small retailer. Having the right amount of inventory on hand at the right time is also key. If the small retailer can keep focused on the basics, center on the service, and expand the personal relations with shoppers, they will be fine.

Craig Sundstrom
Guest

Perhaps paraphrasing what David (Livingston) often says: I think for competent people with good ideas, it’s never been easier to start — and succeed — with a small business. And for those with the opposite skills, or really lack of any, it’s never been easier to fail.

Min-Jee Hwang
BrainTrust

Sure, smaller mom and pop stores are going to have to adjust to the digital threats that large brick and mortar chains face, but I feel that they are less susceptible because of their unique position. Large chains typically sell a wide variety of goods, but the same selection of goods throughout. Smaller stores on the other hand have a smaller more unique selection. It may be easier to buy the same things online vs going in person for a big chain store, but with smaller retailers, consumers are going for the products as well as the shopping experience. Shifting to online selling doesn’t offer the same experience and changes the whole dynamic. Offering their goods online should be an option, but their focus shouldn’t be on that at all.

Joan Treistman
BrainTrust

To a great extent, it’s related to product category. Not all mom and pop retailers can effectively compete when their product category doesn’t allow for customer service to wow the shopper. Think of specialized shoes and boots. We can shop online and find great prices, but we can’t always get the fit we want or need. If the retailer offers the service to insure satisfaction with the purchase, then that retailer has a good chance of building a base and expanding it. But it’s not viable for every category, e.g. books.

Ricardo Belmar
BrainTrust

People crave uniqueness and great experiences that are memorable. Mom and pops are especially positioned to deliver this to shoppers in ways big chains themselves crave. Why else do those chains seek personalization and ways to make their in-store experience special? They are trying to be more like the mom and pop shops!

wpDiscuz
Braintrust
"I am tired of the endless parade of pundits who seem to get glee out of giving this message. America runs on small business. Period."
"...let’s consider some notable exceptions — smaller proprietors emerging in categories that are otherwise ripe for sightings of “the walking dead.”"
"...small retailers can easily “punch above their weight” with effective e-commerce presences."

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