How a Small Business Can Beat Large Competitors
When Small Packs A Punch
You may have heard the rumors some months before, but now it’s confirmed. What you had most dreaded is finally going to happen. The biggest chain store in your industry is all set to open a branch just across the street from your store!
Such a scenario happened to us several times and we tried all sorts of strategies and tactics to remedy the situation. Some of our actions worked while some were futile and just worsened our condition. In one instance, it became painfully clear that we should have taken the best site instead of settling for a cheaper location. We thought that with so many possible businesses that could take that expensive location, it was unlikely to be the same as ours.
But do not panic when competition comes. There are many ways to respond effectively. You will discover that you will get better cooperation from your workers during times of crisis. They will be more supportive since they know that if your business goes under, they will lose their jobs. Next, assess your resources to see how much you can afford to spend in reinforcing your business. This will enable you to consider only the realistic options.
Looking back, I tried to see the best moves we made and also the blunders committed. With the advantage of experience and additional research, I have come up with lessons you may apply in competing with larger businesses.
• Modify your pricing. There are two common pricing mistakes to avoid. The first is to do nothing and the second is to meet all of your competitor’s prices. The first mistake ignores the fact that people will be comparing prices. If they find that yours is higher for the same item or service, then you can expect that many will defect to the competition. The second blunder ignores your actual costs and the perception of consumers. It may not be feasible to lower your prices if your cost of goods is higher because you do not have the same volume or clout with the suppliers as your bigger competitor. What you can do is to lower prices only on the items that will most likely be compared. After having modified your prices, you must promote the items that you have discounted, otherwise people may think that they have not been changed.
• Go all out in the first month. The first month is critical. If you do well during this period, people will be impressed and are less likely to desert you. Your workforce, too, will be more motivated if they see that you can stand up to the newcomer. Exert special effort during this initial month!
• Look for additional sources of revenue. Look for new items or services to offer. If you are a restaurant, it may be time to accept catering. You can also look at the possibility of industrial accounts. There is no limit to what you can try.
• Plan many months in advance. Having sufficient preparation time is critical. Having several months to plan and implement your defenses gives you a tremendous advantage. You may even be able to do time-consuming tasks like renovation. This is why some savvy stores cover their construction area until they are ready to open. They do not want to tip off competition about their impending opening. It is up to you to monitor developments in your area before it is too late.
• Renovate your shop. Try to do this especially if your place looks shabby. This is quite costly but it also sends the strongest signal that you’re ready to fight for your market share. If you cannot afford a major renovation, then see what can be done with a limited budget. One of the most crucial things to check is the condition of your signage and facade. Customers prefer to patronize stores that look like winners.
• Look for areas where you can be more flexible. Explore ways you can be more accommodating. Maybe now is the best time to accept credit cards. Offering free delivery may be also be considered.
• Improve your service. One great advantage of small businesses over large chains is that their workforce is made up of mostly regulars instead of contract workers that only work there for six months. This means that you can better afford the training investment in your regular personnel.
• Raise your hygiene standards. One of the most often cited reasons why people go to well-known stores (especially food stores) is the belief that they are less likely to suffer from food poisoning. Have regular pest control and excellent food safety policies.
• Monitor your purchases and inventory carefully. It is unavoidable that there will be some slowdown so be extra careful not to be over stocked.
• The best defense is offense. Even if you do all the possible moves right, you will still likely lose sales because every peso sold by your competitor would be a peso less for you. Looking forward, you must also plan to expand to other locations—perhaps beside your competitors!
*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.