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By Sarah Mote
August 15, 2013

How Your Small Business Can Beat the Big Box Stores

Small businesses have advantages over big box retailersOftentimes, the entrant of a major retailer into a rural community is seen as a sign of inevitable death for local, family-run businesses. While large corporate retailers present obstacles to these small businesses, the situation is not as dire as many assume.

The key is recognizing the advantages small businesses have over these large retailers and leveraging these to create a sustainable competitive advantage in the market place.

Here are three way to differentiate your business and maintain profitability.

1. Trust

Relationships are built on trust, businesses are built on relationships.

In comparison to major retailers, small business owners are better positioned to build personal relationships with customers. Small business owners generally take a much more active role in the day-to-day operation of their business. This allows for more frequent and authentic contact with customers allowing for trust to be built off similarities between business owner and customers.

Relationships will also form through repeated interactions overtime. The additional contact with the customer allows for a quicker response time and greater flexibility when dealing with potential problems that arise.

It is inevitable, regardless of your business size, that mistakes will be made and customers will be upset. Response time to issues as they arise is critical to customer relations. Being able to quickly and appropriately respond to customer issues will go a long way to building customer relationships.

As a small business, you are given opportunities to build trust and relationships that are impossible for large retailers to build. Capitalize on this opportunity.

2. Compete on Value

Often when a new retailer enters a market, the local stores will immediately respond by dropping their prices to match the new competition. 

While at first this may seem like an appropriate strategy, it is not sustainable in the long-term for a small business. It is not possible for a small business to achieve the same economies of scale as a large retailer; additionally, small businesses have fewer products on which they are able to spread out the fixed cost of their operation.

By matching the price of the competition you are eroding the perceived value of your products. Alternatively, you should structure your marketing strategy to convey the additional value added by your business. This value can be created by the quality of the product, the customer service, the overall shopping experience or any number of other factors.

It is easy to get caught up in a price war, but it is important to recognize that buying decisions are based upon value and not price. Show how you offer a better value. 

3. Focus on a Specific Market Segment

Often the best strategy for a small business is to narrow the scope of your products or service.

Small businesses have a limited resource pool to draw on. I is better to concentrate these limited resources on being the best at one thing rather than mediocre at several things. Identify your core competencies and develop a market niche around these competencies.   

The Key Takeaway

Recognize that while major retailers do have advantages over your small business, you also have advantages over major retailers.

Don’t try to fight the strengths of the retailers, but rather recognize what you do well, differentiate yourself from the major retailers and carve out your own place in the marketplace.

The entrant of a major retailer should not be seen as the Grim Reaper for your business.  Rather, it is a chance to get creative and capitalize on what differentiates your business.   

For more information on small business competitive ability check out http://www.jeffreympollack.com/images/documents/7.pdf

Content contributed by Kyle Ragan, AKSourceLink.
AKSourceLink is a proud affiliate of 
U.S.SourceLink, America’s largest resource network for entrepreneurs.

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