Competitors in Retailing

We always have competitors; our customers see to it.

Customers need another store to compare us to. “Shop around and compare,” is the most ubiquitous of consumer advice. Shopping ensures a more informed choice, uncovers price differences, and sometimes creates negotiating leverage.

If we don’t have local competitors, our customers look out-of-town or on the Internet. Not having competitors isn’t the boon we sometimes imagine since shoppers simply assume (often correctly) our prices are high, resent our “monopoly,” and are discouraged from buying regardless of our pricing and service.

Sometimes customers’ searches attract new competitors. When they call similar stores asking for our products, they’re encouraging those stores to stock them. (One customer can make a lot of calls.) Some customers directly entice competitors to add our products and services or move into our market, pointing out the local shortage of supply.

Retail Truths - The Book

Truth #153 from "Retail Truths"

A weak competitor is a useful nuisance.

The best retail scenario is to have competitors who are several steps behind us—disorganized, under-financed, technologically challenged, less desirable products, poorly trained staff …. Such stores provide the comparison our customers need and allow us to stand out in contrast.

They also deter new competitors from entering the market. Retailing, like physics, abhors a vacuum. When there are too few stores, locals are encouraged to enter the business, out-of-town stores spot an easy opportunity, and manufacturers lure dealers to town. A few struggling competitors make the opportunity appear not so easy.

Having no competitors isn’t nirvana—having weak competitors is.

Retail Truths - The Book

Truth #154 from "Retail Truths"

Good isn’t good enough; only best gets the sale.

Second-best among competitors isn’t a consolation, it’s a catastrophe. Our customers never choose the second-best value for their money; they choose the best (in their eyes) every time. No matter how close the contest, when we’re deemed second-best we get nothing.

Customers evaluate many criteria in each sale—product quality, price, store convenience, location, sales help, hours, displays …. And each customer weighs each factor slightly differently (creating an opportunity for perceptive retailers to exploit the niches). But ultimately only the store the customer judges best overall gets the sale.

Coach Lombardi had it right, “Winning isn’t everything, it’s the only thing.”

Retail Truths - The Book

Truth #157 from "Retail Truths"

We don’t see our competitors’ happy customers.

The complaints we hear about our competitors aren’t a balanced picture. Only their dissatisfied customers come see us; their satisfied customers have bought, are happy, and have no reason to be in our stores.

Whether the result of mistakes, misunderstandings, or unrealistic expectations, even a great store has a few unhappy customers. Although sometimes vocal, they’re often not representative of typical business experiences.

Remember, while we’re seeing their mistakes they’re seeing ours. Agitating and aggravating are likely to be repaid in kind.

Retail Truths - The Book

Truth #160 from "Retail Truths"

Little bits of knowledge shape potent strategies.

News articles, public records, hiring interviews with previous employees, conversations with manufacturers’ reps, service providers, and customers—information about competitors comes from many sources. It provides details about their sales, financial health, niches, and marketing strategies, as well as their challenges and vulnerabilities.

Among the things we’re likely to discover are tactics they’re using against us, brands we’d like to have, employees we’d like to hire, customers and key influencers that warrant pursuing, product opportunities we’ve overlooked, effective marketing concepts, improved operating methods, useful suppliers, expansion plans, and future directions.

We can’t accumulate all this information at once, and we’re unlikely to remember the details when we need them, so it makes sense to maintain a file on each competitor, present and potential. Whenever we come across information, we can cut it out or write it down and drop it in the file. When an opportunity arises, the accumulated information might provide just the background we need to make a strategic decision and act on it.

Retail Truths - The Book

Truth #161 from "Retail Truths"

Value, not price, makes sales.

Despite what a few customers would have us believe, they’re not looking for just any product that qualifies for its name. They have a specific need to fill and they know the choice they make will determine how well that need is met.

Selling exactly the same products in exactly the same way and on the same terms as our competitor is not a promising formula for profitability. Creating and emphasizing differences is a more lucrative strategy than being drawn into a price war.

But to do this salespeople must recognize and appreciate the differences. They must know the products—their own and their competitors’—and be prepared to show and explain how they differ. Accumulating such knowledge takes time and effort—and consequently new and uneducated salespeople compete on price.

When we show shoppers more value they’ll give us a better price.

Retail Truths - The Book

Truth #163 from "Retail Truths"

Good service is the delusion of bad stores.

Many retailers claim the difference between their stores and their competitors’ is customer service. The irony is apparently lost on them that their competitors say and believe the same thing.

Even superstores with notoriously bad service cite customer service as a competitive advantage. Meanwhile, customers have trouble naming any store with good service—but can name plenty with bad service.

 “Good customer service” rarely really is. Guiding a customer to products because they're not logically arranged and marked, showing products to a customer because they aren't out or displayed adequately, and looking up prices because they aren't tagged are not good service; they’re bad retailing.

A store that claims “good service” as its primary differentiation almost always has anemic or negative profits.

Retail Truths - The Book

Truth #164 from "Retail Truths"

An aggressive competitor deserves the bad deals.

“If we don’t take the deal our competitor will” is strange logic for taking a loss. We should help him get it; it will keep him busy while we pursue profitable sales.

It seems perverse to a salesperson to let a sale get away, especially after working hard to win it. But some sales don’t make sense: the price wouldn’t cover expenses, the customer wouldn’t be happy, anticipated service and problems are too high, collection is unlikely ….

Let them go. Sometimes when we raise the level of what we’ll accept, our competitor does, too—eventually. (Competitors are never as smart as we are, but occasionally they’re not as dumb as they appear.)

Retail Truths - The Book

Truth #166 from "Retail Truths"

An unprofitable competitor dies for years.

The problems of an unprofitable store compound and become hard to hide. Inventories shrink, manufacturers search for alternative representation, employees become disgruntled and quit, customers become frustrated and move their business, creditors take legal action, and rumors and speculations spread irrepressibly.

We’re sure the end is near—the bank will foreclose, key manufacturers will jump ship, a creditor will force liquidation, they’ll miss payrolls and lose their employees, the tax man will padlock the door, or they’ll simply throw in the towel.

Yet ownership is oblivious to what seems obvious to everyone else; indeed they would be offended at the suggestion that the store might go out of business. They defy the seemingly inevitable and hang on—for years. Partial payments keep creditors at bay, hungry new vendors front more merchandise, cash is extracted from real estate or personal assets, a relative or an over-eager bank extends a loan ….

None of which fixes the underlying problem—the store continues to lose money. They’re weak and getting weaker, but don’t expect a funeral any time soon.

Retail Truths - The Book

Truth #169 from "Retail Truths"

A retailer’s effectiveness can be measured by the animosity of his competitors.

Being liked by our competitors is not something to be proud of. If they don’t feel constant pressure from our products and offerings, we’re not doing our job.

Good sportsmanship doesn’t exist in retailing—only complaints, excuses, and accusations: “They give their products away,” “Their salespeople lie and promise things they don’t deliver,” “Their product is cheaper because it’s inferior.”

The stakes in retailing are high. When we beat a competitor regularly, it’s not respect we garner but fear and resentment.

Retail Truths - The Book

Truth #171 from "Retail Truths"