Independents Losing Ground
By Tom Ryan
According to an article in USA Today, independent retailers
are fairing worse in the recession than larger chains due to a litany of reasons,
from buying clout to lack of management smarts. According to Sageworks, a financial
analysis company, sales at private retailers slid two percent so far in 2010
after tumbling eight percent in 2009. For publicly-traded retailers, sales
are up 0.5 percent in 2010 on top of a 0.4 percent gain in 2009.
One major issue
is real estate. Independents often get priced out of the most heavily-trafficked
locations. But beyond price, independents don’t have an in-house expert
to guide real estate decisions. Jim Bieri, CEO of the Bieri Co., a retail real
estate consulting firm, told the newspaper, "Many local
merchants don’t have the experience or the tools to pick real estate that’s
best for them."
Another core problem is that many independents focus on
boutique items. Recession-constrained consumers are more likely to favor low
prices over "value" as well
as lean toward more non-discretionary purchases. Said Drew White, CFO of Sageworks, "When
times are tough, people are laid off and the consumer confidence isn’t high,
people are probably going to go with the needs first."
Dan Butler, vice
president for merchandising and retail at the National Retail Federation, told USA
Today that larger companies are also more adept
at planning to mitigate a downturn’s impact.
"Larger companies are just more nimble in some of these circumstances
because they’ve got a larger staff to deploy," he said.
falling to independents:
- Limited advertising budgets
- Less "muscle" in dealing with suppliers.
- More challenges capitalizing on the internet and emerging social-media
- Fewer cross-promotion opportunities, such as tying deals to credit cards.
On the somewhat brighter side, independents were said to often have a better
opportunity to tap into local community causes and can benefit from local support
around neighborhood shopping districts. Moreover, consumers are expected to
be more willing to pay up for the service many independents are known for once
the economy improves.
"When people are feeling more confident and have more money,
they’re willing to go to a higher-service, privately held retail establishment
to get exactly what they want and get treated well," said Mr. White.
Discussion Questions: What are the major challenges independents face when
going up against chain stores? Where are the greatest opportunities for success?