Community Economic Development Fund

Management

All about people and processes.

How to compete against Amazon

There has been so much hand-wringing over the difficulties caused to Main Street retailers by the rise of Amazon, but the reality remains that there's still plenty of angles on which to compete.

 

First let's examine the giant, which is not just one big opponent, but thousands of little soldiers in the Amazon army. In the latest survey I've read, 58% of the sales were handled by third party sellers. Uh, that would be other small merchants. Some have storefronts, some don't.

 

How are they competing? Price. But they don't all have the same price. The lowest net cost floats to the top of the list and "wins the box" as the lingo goes. A Main Street business might need to stay out of this fight.

 

Perhaps convenience? If you need something now, there's no beating the opportunity to drive down the road and get it. (Gee, I hope the store keeps it in stock.) Even two-day Prime or next day might not be good enough sometimes.

 

What about selection? The great river seems to offer nearly every SKU in the world. And thanks to decisions by national retailers to seek efficiencies that resulted in the streamlining of their merchandise mix and the homogenization of their stores, a lot of items one used to find around town are nowhere to be seen anymore. RIP Radio Shack.

 

This leads to one of two areas where a local retailer can still shine. One is experience. If shopping at your store creates an unmatched thrill, a shot of joy, excitement, discovery, pleasant feelings and that increasingly rare human connection, then that will beat rummaging through endless pages making guesses about the quality or utility of the online offerings. This might involve making an investment in wide selection. Or it might be the physical shopping environment (which is what national retailers do because they feel they can't afford selection). Or, more likely it might require finding the right people for the staff and adopting the right policies.

 

The other factor that can lead to a winning hand for a Main Street retailer is trust. This article gives a helpful discussion of the way this round can be won or lost. Note the study that gives small business a statistical edge over large operations in trust. But Amazon is right on top of this fight by being willing to guarantee the satisfaction and performance of all of their third party sellers. Just don't bother trying to get anyone from Amazon Customer Service on the phone.

 

 

What would your employees say?

I stopped at one of my favorite spots early one morning recently before my first client meeting. That happened to be the Chick-Fil-A in Brookfield, CT.  You might know the owner-operator, Devon Scanlon, from our Small Business As Usual podcast 19-1  or her participation in our Women’s Business Success conference.

Right click/View image to enlarge

What I noticed on the wall that I hadn’t seen in previous visits was a framed whiteboard with inscriptions from 26 of her employees. Devon later told me the idea was just an inspiration they came up with locally last November to recognize the season of being thankful. They loved the result so much they decided to post it in the dining room.

If you study the messages, you find some touching expressions of the staff member’s appreciation of working on a great team, finding a second family, making friends and memories and being able to work toward greatness. Some talked about being thankful for vital life lessons, or the chance to better themselves and work toward owning a business. Others mentioned a vibrant atmosphere, great attitudes and an awesome environment.

Reading these genuine messages, I was even more impressed than I already had been with Devon’s operation (and the chain in general, which I have previously mentioned in these articles). But I saw something else, an implicit challenge awaiting any small business owner who dares to find out – What would the employees of your business say if given the chance?

Would they pour out similar sentiments? Would the invitation be greeted with polite silence and ignored?

There are probably other ways to test the engagement and cohesiveness of an organization. And to be clear, although great leadership is required to build a great culture, the expressions didn’t mention the boss. Co-workers can certainly be devoted to each other while hating the boss. But I don’t think that’s the case in Brookfield.

If you’re looking for a checklist to evaluate your business culture, here’s a good list to start with.

-- Frederick Welk
CEDF Business Advisor

 

Leave the flying to the squirrels

By Frederick Welk
CEDF Business Advisor

In surfing with my internet news reader app recently, I ran across a documentary about wingsuits. Apparently cutting out television a few years ago had deprived me of much knowledge of this insane activity that makes hang gliding and skydiving appear to be the sport of chickens. (Wingsuits give you the simulated anatomy of a flying squirrel so you can jump off a cliff and then either fall to your demise, or preferably glide until you land with a parachute in the last instant.)

I couldn’t resist mentally seeing a comparison to the approach some entrepreneurs take to starting their businesses.

The world of small business already suffers from the confusion and delusion created by the glamorizing of tech startup unicorns or Shark Tank inventors that makes gathering and spending other people’s money seem so easy.

But there is another approach that’s been around much longer and is coincidentally called “taking a leap.” The idea is that you stake your life savings on the brilliance of your idea, your bullheaded determination and intestinal fortitude. You quit a stable fulltime job and put all of your time and energy into your business concept. Some entrepreneurs seem to forget to even put on the wingsuit. Splat.

Alternatively, there are other paths to business ownership which are much more comparable to the kiddie carousel that parents ride with their gleeful toddlers.  It’s not nearly as exciting of a way in, but there are some distinct advantages when it comes to risk management.

Step one: Don’t quit your job.  Suffer a while longer, perhaps years, and (Step two) perform the feat called capital accumulation. You save up enough money to invest in a venture, while maintaining your other obligations. 

Step three: Look for a pretty sure thing. Not every productive business need be a society-changing, heretofore unimagined innovation. The world will not be offended if you choose to buy an existing business or copy another proven idea. Something that you can manage part-time while you keep earning a steady paycheck is best. Yes, this dampens the rush of terrifying excitement, but your odds of success improve immensely. An established, well-vetted franchise system that matches your capabilities and resources is a great choice.

Step four: Only quit that full time job when working in your own business offers you relatively more financial security for a reasonably predictable time into the future. And only then should you consider using your additionally accumulated capital to tinker with new business concepts and ideas to spin off into other ventures.

An alternate route in this kind of journey involves employing a prudent amount of debt capital. A lender will demand a credible business plan which in most cases serves to keep crazy flying machines grounded.

All of these conservative prescriptions may sound like they’re for cowards without the courage to challenge the Fates. But to me it’s more like the choice between the high roller in the casino, or being the house, which enjoys the boring but dependable profitability of a couple of percentage points of advantage over the long run.  

 

Are you following these seven natural laws?

Business is often depicted as a struggle, a battle, a war. It's an apt description, if only because so many business owners spend their energy flailing against insurmountable forces that they can never reverse or defeat. But it doesn't make the outcomes for business ownership hopeless or even inordinately difficult.

How many business owners do you know who focusing on beating their customers instead of improving their offering?  Or when failures occur, they look for who to blame instead of seeking root causes for future prevention?  Were you taught that business is about prioritizing increasing sales or delivering more value? And in a world where your enterprise is just a cork in the ocean, are you fighting against the flow or moving with the market?

The narratives surrounding business owners encourage the idea of fighting to their last breath or drop of blood to achieve results instead of simply doing what they know to be required and being detached from the outcome. Are you reacting to the demands of your market or creating them? And do you put your thinking into developing strategy or instead developing the guiding vision?

The game gets much easier when following what Nathalie Virem explains as Seven Natural Laws. Read about her philosophy and see if you can make your business journey easier.

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