Consumers Find Reasons Not to Shop Local Stores
Many consumers would really
like to support local merchants instead of chains from somewhere else
but having a business in the same town is just not enough reason to
support a retailer when they fail on so many other levels.
A column by Kim Crow, style
editor for the Cleveland Plain Dealer, points
out a number of reasons that locals prefer chains to local mom & pop
establishments.
On Ms. Crow’s list are:
- Store hours – Most locally
owned businesses don’t have the staff to open as early or close as
late as big chains. - Returns – Chains are better
at taking items back than smaller stores. While chains often take
returns and refund purchases for 30 days or more, independents may
only accept returns during a much shorter window and then only offer
a store credit in return. - Guilt – Some shoppers
actually like not being known by store workers. That way they don’t
feel guilty walking out of a shop without buying anything.
Among the obvious concerns among
shoppers not explored in the Plain Dealer column
are product selection, price (especially these days), cross-channel shopping
options and parking. Many Main Street establishments are simply not convenient
to get in and out of.
Discussion Questions:
What are the biggest reasons that you think consumers don’t patronize local
businesses more? What can small retailers do to overcome “objections” that
local consumers have to buying in their stores?
“Guilt at knowing someone working there?” You’re joking right? The main reason I believe people don’t “shop local” is the experience provided; from what I call “Bitter Betty” behind the counter, to lack of product, to shoddy environment.
“Shop Local” has for many become the rallying cry for some shop owners who try to guilt people into shopping with them–like taking your cousin to the dance instead of the one you really wanted. “Shop Local” should be because it is an exceptional experience. Period.
This is a great topic and Kim Krow was on target with Store Hours, Return policy and Guilt. Other challenges that Kim did not mention include product selection and sourcing. When a local mom & pop store carries the same cheap, not well made product from China it is tough to justify paying more when a national chain has it for less and you can return it when it breaks in 3 months.
This is a huge opportunity for local stores to start carrying a stronger assortment of well made (preferably made in the USA) products. Retail is all about differentiating yourself and it is hard to think you can beat Walmart on price, hours, parking and return policies. They carry the cheapest made products at the cheapest price. Local stores need to compete on things that they can win with: customer service, product knowledge, uniqueness, higher quality products that are sourced locally or from manufacturers in the US, Canada or Europe.
Mom & Pop stores need to get better at finding way to differentiate themselves from their competition. If you can’t beat them on price then blow them away on service, knowledge, sourcing/uniqueness and quality.
This is an interesting point of discussion. I think, theoretically, it always seems to make sense to buy from locals and support the local economy, but in execution I usually end up buying from chains. Some of the biggest reasons are the convenience of returns, product availability and price. Conceptually, I want to make a difference in the local economy, but local shops are known for being much, much more expensive.
Bob, I agree that in most cases attentive, personalized service is a big plus for local stores, but I do understand the guilt deterrent.
Recently, someone opened a small men’s clothing shop in our town (yes, in this economy). I watched as he proudly set up shop and put all his personal touches into the window display. I see his kids hanging out there helping Dad in the afternoons. Then I saw the sandwich boards go out onto the sidewalk, trying to lure in first-time shoppers; then, about two-months into it, the first 30%-off sale signs.
I see the proprietor hovering by the door. His merchandise looks interesting, but I can’t bring myself to walk in knowing he’ll be watching my every move. And I couldn’t stand the thought of breaking his heart by walking out without a purchase.
I was thinking about the small businesses that I go to and why. First of all, none of these businesses are price competitive. My favorite is the dry cleaners. An attractive Asian woman always greets me with a smile, hug, and tells me I’m handsome. I have no clue how much she charges, I just find a reason to go there.
The gas station attendant–Denny–offers me a cup of coffee and tells me the latest gossip. If I called and needed a tow, he’d know who I was. I think his gas is 10 cents per gallon higher than everyone else.
Milwaukee PC – if I need help with my computer all I have to do is bring it in and they fix it on the spot for free.
Chinese takeout – always greeted “Hello Mr. Dave!” The local hardware store – they actually know where stuff is in their store and what I need.
The pimple faced crackly voiced teenagers are across the street at the big box store. Making people feel good about being in your business is one way for small businesses to compete.
As covered in previous discussions, men’s purchase/shopping behavior is different from women’s. I like to get in/find it/buy it/get out. Admittedly not all men feel the same way, but this does influence which retailers I (and other who fell the same way) frequent.
The article and survey questions listed a number of reasons that consumers might not like to shop local stores. My reasons include most of them. I don’t want to hunt for parking, want to have some assurance that they have the item(s) I seek, want to know the price will be reasonable, if I have a problem they will stand behind it, etc. This doesn’t mean I don’t shop any local stores. For example, we have a great Ace Hardware store that I frequently shop because they have all of the above and a great staff of knowledgeable people.
Bottom line, I shop at retailers who can meet my criteria, local or not.
If local stores offer a “me too” approach to customer service, merchandise content and price they will probably continue losing out to national chains. The big chains usually have them trumped on depth of assortment, price and convenient locations. And national players have become more capable of using their information systems to tailor assortments to local preferences (or, in the case of “My Macy’s,” they are at least working on it). The smaller local retailer who intends to succeed needs to differentiate itself on the basis of merchandise offering and/or superior customer service, as well as a location strategy that doesn’t depend on a single store.
One competitive obstacle independent retailers have traditionally faced is the high cost of IT. For a mom-and-pop shop or even a small chain, the cost of installing and maintaining POS, inventory, loyalty, supply-chain, price optimization, and other IT systems has been prohibitive. This forces the independents to make tough choices: either forgo certain technology investments (and therefore lag behind your chain competitors in the valuable functionalities that these systems provide), or bite the bullet, make a (relatively) large investment in one of these systems (and in the staff to provide the care and feeding), and then try to figure out how to absorb the financial hit. The retailers who don’t invest in IT end up becoming antiquated and uncompetitive, while the ones who do often have to raise prices to maintain margins.
The impact on the shopper can be significant. Without modern systems, retailers are unable to offer compelling loyalty programs, optimized prices, and speedy checkout. Manual ordering and inventory management mean more products are out of stock more often, and those products that are in stock are on the shelf longer and are more likely to be stale.
Fortunately, a sea change is underway. Software as a Service (SaaS) offerings by numerous vendors allow the smaller chains to pay for only the software they use, to avoid the headache and expense of running and maintaining the systems themselves, to spread out their payments (instead of having to pony up a hefty license fee up front), and to benefit from the vendors’ economies of scale. PivotLink, Red Prairie/Blue Cube, Retail Solutions, Revionics, Predictix, Net Suite, SPS Commerce, Incentive Targeting (my company), and others are all offering one or more products using the SaaS model, and more companies are jumping on the bandwagon every day.
As we all understand, the choice of store to shop is influenced by many factors, the most important being price. On the matter of cost of inventory, the disadvantage of being a small retailer continues to increase as the large chains use their enormous buying power and operational efficiency to keep prices competitive. At the same time, it is folly to believe that consumers feel connected or want to feel connected to a local retailer, rather than deal with a faceless corporation. If people can live next to each other for years and never learn the names of their neighbors, why would we believe they want to connect with a local retailer? If a large chain provides many jobs for members of a community, why would they be seen as any less connected to a community?
Our company deals exclusively with independent retailers, so this is a subject close to our hearts.
Store hours, return policies, selection and price are definitely problematic areas for small retailers. I actually knew one small retailer who closed their store at lunch. That’s right…at lunch! When everyone was free to shop them, they closed the store.
In addition to all the points Kim Crow makes, which are true, there are a couple of other reasons for consumers preferring chains.
1. Most specialty retail is un-remarkable: As consumers we live in a world of widest selection, lowest price, ultra- convenient, best quality etc. However, most local retailers aren’t the “most” at anything. They aren’t remarkable in any way. It sounds harsh but it really goes to the center of the problem.
If a retailer is remarkable, people will shop them. If they’re remarkable people will spread the word. If they’re remarkable their biggest problem will be managing growth.
So, while the mass or chain store isn’t always the best choice, in the face of an often unremarkable selection of local merchants, they become the clear choice. It’s not right, it’s not good but it’s true.
For many, the potential stronghold is service or customer experience. Sadly most are unable to create a significant enough difference in these areas to outweigh other shortcomings. Their service may be very good and their store very nice but neither are slam dunks.
2. Little awareness of the future: When you’re working 14 hours a day in your store, keeping in touch with what’s happening in the world around you is tough. It’s hard to attend conferences and research current trends. As a result, most independents are out of touch with the social, economic and technological trends that are driving retail.
As a consequence they become totally disconnected from the consumers they’re trying to serve. When Sunday shopping first began to spread, many independents pointed to it as a fad. They didn’t understand the social and economic forces that were driving the change.
3. Ethnic Consumers Prefer Large Stores: Surveys have shown that foreign born consumers in both Canada and the US prefer larger stores. In many cases it’s because they are more self-serve in nature, allowing these shoppers to avoid language barriers.
And what about the local retailers who are remarkable and who are in touch with the future? I think the sky’s the limit.
Like any other retailer, smaller local retailers have to earn their business. Merely being local isn’t good enough. Outside of convenience businesses, the best local retailers have been able to distinguish themselves as the destination of choice for the products they carry. They’ve built their businesses around a core group of customers that expanded organically as stories of special shopping experiences were spread throughout the community. They’ve achieved a critical mass of awareness and trust. Their assortments are unique and distinctive, and their employees are knowledgeable, genuine and engaged. At the end of the day, they all realize that they’re not in the business of selling things, they’re in the business of helping customers.
Others have cited the importance of differentiation. Part of the problem here is that small store operators are following the leadership of large stores, trying to emulate them in ways that are simply not viable for the small store. Rather, they should be studying other successful small stores and using those as their model. Amongst trampling elephants, it’s better to be a good mouse than a tiny elephant.
Consumers go where they can get “it” best. And “it” is often better at chains, big boxes and supercentres. The issue is for independents to step up their offering, just like their BIG competitors have to. They need to ask themselves the question, “would you shop at your store?”
I most always give the independent merchant a chance to earn my business, and sometimes they do just that. Yet too many times they drop the ball.
One of the up and coming websites to help independent retailers is http://www.independentretailer.ca. It’s a spin off of the Retail Council of Canada. There are some good tools there now, and more will be added over time.
I was reading the responses and the one from Rick really resonated. I too have found myself thinking, “No way I’m going in there and then walking out empty handed, while the owner is watching me!” And it’s a shame, because these stores lots of times have great stuff, unusual and very different from the mall retailers.
I think the best way for the small hometown retailer to succeed is to reach out to the community in no-pressure ways. There’s always community women’s groups and clubs. They should make sure they’re on the meeting agendas to meet the community and show their wares. That way the next time someone in the community has a need for the product or service, they are the go-to instead of the drive-by.
Big box retailers have such an advantage on price because of the economy of scale. I had a guy who owned his own shop who eventually came to work for the company I was working for. He asked how we could sell a particular product at $60 when the cost was $58. Our cost was $29. So we were making over 50 points when he would have been selling them basically at cost. You can’t open the doors with much less than about 30 points of margin and he couldn’t go below $80 to make any money. It’s a sad thing, but big boxes will win on price every day.
Hours of operation is a big problem. Most local shops work the same hours I do! Most also lack the marketing savvy to attract customers. They often have what it takes to compete on some level, but they don’t leverage it.
While I’d rather people think of me as an independent thinker, the truth is that I drink a lot of Kool-Aid. (I do mix a few different flavors together–maybe some of it comes out tasting new.)
I worked with Maritz Inc. for close to 20 years, so I have gallons of customer-service and Deming-esque Total Quality Kool-Aid coursing through my veins.
As a Mac and iPhone user, with the Mac part going back to 1987, it’s a wonder I don’t drink Apple juice for breakfast every morning.
My latest flavor–added to the others–comes from a guy named Dan Kennedy, who’s a top direct-response writer who is also the figurehead of a national organization that helps small businesses learn to use direct marketing to grow into bigger businesses.
His top theme is that the road to success for anyone, but especially for startups and local businesses: Be different. In other words: Whatever the other businesses in your category are doing, do the opposite–or at least do something very different.
It’s the only way out of the trap that the article–and all the commenters here–have so eloquently described, where local retailers just can’t deliver price, convenience, service and selection as well as the chains.
So it seems to me that leaves niche marketing–the same thing that drives success for startups in most other industries: just as new consultants, manufacturers, online services, professional-service firms, publishers and other new businesses need to do, local retailers need to look for very specific needs in the market they can fill–and fill them with service levels that deliver a Wow! experience to customers who up to now couldn’t get service at all.
Yes, it’s true some local stores have limited hours and even higher prices than some national chains. But, all across this country there are extremely successful independents who are able to favorably compete with national chains by attracting scores of local consumers. The question is HOW? They do it by offering distinctive merchandise; a vastly improved shopping experience than their competitors and by truly serving the needs of their customers.
If you would like to know how it’s done, my new book “Retail Superstars: Inside the 25 Best Independent Stores in America” tells how these amazing independent retailers attract local customers as well as customers from miles away.
Retailers, regardless of whether they are local or a chain, have a responsibility and opportunity to create a value proposition that resonates with their customer. Most local retailers don’t have the expertise in marketing, merchandising and management to compete effectively. Fortunately, it is available–just call me.
At this point, the poll tells us that “PRICE” is considered the primary reason consumers shop at chains. In reality, local stores in most categories can compete on price. Furthermore, the best local merchants make price moot.
So, let’s not be too quick to categorize the issue as local stores versus chains. The real issue is great retailing versus those who aren’t great retailers. Perhaps a higher percent of local stores (against chains) don’t demonstrate great retailing. But, every community has local merchants who compete favorably against chains and illustrate the strength and opportunity for small business.
There are various reasons why shoppers may pass the local stores to shop at the chains. I would think lack of product selection and higher prices would rise to the top. But guilt? That I simply don’t understand.
That said, what local retailers should do is dabble in more creative retailing. No faceless chain knows this consumer better than they do, so local merchants should work alone or partner with other local merchants to create unique loyalty/reward programs that target the needs of local consumers (e.g., supporting the local high school basketball team). Similarly, local merchants need to ensure local consumers know they support the community by sponsoring local fairs, festivals and other activities (maybe that will help overcome some shopper guilt).
Local merchants can also stock unique products that aren’t available at the chains, like products handcrafted by local artisans. And taking that a step further, the local store should explore partnering with the chains to get their unique, local-made products into the chain’s local sites.
There are opportunities for local merchants. It’s obviously more difficult to compete against the big chains and all their resources, but being creative is a good start.
This appears to be a global trend as I experience similar issues in the European region although the loss of business from ‘local shops’ is mainly in respect to food purchases. The likes of Tesco, Metro and Esselunga offer convenience, price, range, service and make it very difficult for smaller ‘ma and pa shops’ to compete.
However, there are exceptions, particularly with respect to fashion and ‘eating out’. Where town centres have ‘destination’ stores such as Marks & Spencer, Mango, Zara and large department stores, the trend is very different. Smaller stores can compete on service and quality and shoppers will visit and buy from local outlets in these particular towns.
Other reasons for loss of business from town centres is the lack of investment, poor and expensive parking facilities and up to 25% of shops now being closed down due to the recession.
Recent research in the UK has identified that there are two types of shopping. There is ‘doing the shopping,’ i.e. buying food, groceries, necessities etc., and there is ‘going shopping’ that is a leisure activity for buying clothing, entertainment, etc. Needless to say the latter is enjoyable and the former is a chore. Hence the trend to buy online for weekly groceries but to enjoy a shopping day at those local town centres that really try to attract the consumer.
One final point. Many of the large retailers now operate effective Loyalty Programmes that are influencing customer behaviour.
Great topic and even better conversation. I think deep down everyone always wants to root for the underdog, the small independent and local retailer vs. the large national mega-chain! While it’s pretty tough to beat them on convenience, availability, price and advanced technology, there are still lots of ways to compete and if my theory is true you’ve got most people rooting for you to succeed.
Personal touch and experience is key. I don’t understand the discussion on ‘guilt’. If you are feeling that way in a small shop, then that retailer is NOT doing their job. That is the last thing a small local shop should be impressing upon their customers. They have to build an environment of warmth, trust and education. A customer should be able to spend time browsing, inquiring, and chatting with someone that has a passion for what they do, something you will rarely find in a larger chain format.
It’s tough for a small retailer to stand out in a sea of mega nationals, but I believe small retailers can take advantage of some of the low cost ways of using technology to better engage and service their customers. Blogs, Twitter, and online stores can give you a bigger opportunity than before when trying to stand out against these giants.
Independent retailers will always exist and those that can stand out and provide the best service will be able to compete against the larger stores and thrive.
Most people “want” to shop at the local stores, for the most part it is a more relaxed and enjoyable experience. Most of the time it’s more personalized and you feel good about your community. There are reasons why I stay away from some of the local stores in my town and it has to do with the product, selection and longevity of the store. Would you by a camera from a store that you thought might be out of business in a few weeks or months?
It really speaks loudly that the poll continues to show that PRICE (46% now) is what RetailWire readers say is the difference. It clearly is the LACK of any other difference that leaves price such a large factor (not the only factor). And that is the plague of independent retailers. However, I would add that location/convenience is probably the biggest factor because we wouldn’t go out of the way to shop a lot of places we all do shop. Independents are loathe to pay the high-rent for the traffic that chains know they must have because their differences are not better differences.
One question I ask clients is “Tell me about a place you do business that you would sorely miss if they were not there tomorrow.” It usually takes some thinking then they come up with something like Applebees unless there is a truly great independent restaurant in the area. It’s most always a restaurant though.
I’ve been talking about Uber-differentiation on my blog www.blog.horticulturaladvantage.com as a way to differentiate that differentiation is not enough if it is not enough to get enough business–regardless of the price.
I hope this article wakes up some independents, especially those I’m going to send a link.
Retail leakage has been a problem in many Chicago neighborhoods like my own, Edgewater, for some time. With 66,000 people in two square miles, Edgewater has considerable buying power, yet there are few decent clothing retailers, housewares stores, shoe stores, etc. At least 50 percent of retail dollars leave the neighborhood.
However, two recent developments are sure to push that even higher. First, the sales tax was raised to 10.5% Second, the parking meters were privatized. Rates quadrupled to at least $1 per hour, hours of operation expanded to 6 a.m. to 9 p.m. seven days a week and meters allow for only two hours of parking.
Now I do as much shopping online with Amazon as possible. Jeans, coffee, shampoo, deodorant, socks, Pyrex bakeware, anything OXO, laundry detergent…it’s amazing what you can buy and get delivered tax-free with no shipping charge. Twice a month I drive to Indiana where there is no sales tax on groceries and gasoline costs 50 to 60 cents per gallon less than in Chicago. With the mileage my Hyundai gets, the cost of gas to go there and back is less than round trip L fare. The savings in filling up the tank alone pays for the trip. Each spring and fall, I also leave Illinois to buy clothes at outlet malls in Wisconsin: prices are considerably lower and the sales tax is just 5.5%.
I’d certainly like to shop at local stores. But by buying online and out of state, I will save upwards of $1,000 this year. Something for local merchants to consider when politicians come knocking on doors looking for campaign contributions.