Financial Data
Updated 17 Oct 2017


Think like a smaller retailer and you can achieve growth

These days, more and more consumers are looking for a personal touch when shopping, and smaller businesses tend to get this right more often than larger ones. Why? 


Nicole Crampton, 10 October 2017  Share  0 comments  Print


All the answers to your unique business lifestage questions

Bigger isn’t always better, in fact going small is offering retailers more growth than going big these days.

“Perhaps the new retail mantra should be ‘go small or go home,’ as the ‘bigger is better’ paradigm has been challenged virtually everywhere,” says Steve Matthesen, global president of Retail at Nielsen.

He explains that ‘hyper-localisation’ and specialisation fuels today’s retail growth. “As lifestyle and consumption habits change, we’re seeing a structural shift in where consumers shop and what they buy, and some small formats are driving big growth,” he adds. 

Mass-market retail strategies are losing relevance as consumers look for unique shopping experiences that meet their personal needs. Your customers are looking for customised and unique experiences and products, and you can’t offer them that if you only have mass-market strategies in place. It’s time to think small to enjoy big growth.

Related: The rise of the spaza shop: Why informal trading could be a great starting point


KEY LEARNING

“Customers crave the personal and custom experience from retailers. This trend transcends consumer segments including age, gender and demographics. This is a permanent shift in the way consumers shop and behave,” says Linda Kirkpatrick, executive managing director of marketing for MasterCard. For more watch here.


Here are three different elements to howsmallerin retail is becoming, not only better, but more profitable:

1. Consider supply and location optimisation

With improved connectivity within supply chains through the Internet-of-Things, retailers can now make smaller businesses just as, or even more profitable than larger chains. 

“Supply chain process improvements have made it possible to achieve similar or even higher levels of profitability with smaller stores, paving the way for smaller retail chains to expand and take share from larger competitors in many markets,” according to Nielsen. 

For example, Macy’s in the US relies on return on invested capital to tell if their new stores are performing. Karen Hoguet, Macy’s chief financial officer, said that she was surprised when a competitor began to open new stores in locations that Macy’s had rejected. Later she learned that the competitor had based its decisions on projections of growth in earnings per share rather than return on invested capital, according to Harvard Business Review. 

These new stores underperformed. “We were right,” she observed. “They weren’t great locations.”

Instead of managing a large, convoluted supply chain servicing one or two big shops, you should consider having a more focused supply chain and numerous smaller stores that offer more engaging customer experiences.  Also, imagine how much cash you could save on inventory overheads if you run smaller, more profitable locations.

Related: How your sales assistants are influencing your consumer’s purchasing decisions

2. Considerbeing more unique

The internet has given consumers access to the biggest retail store in the world, online shopping. To compete “Some manufacturers and retailers have rolled out mass-customisation options that allow consumers to create their own unique products and experiences for shoes, suits, bicycles and candy,” according to Nielsen. This not only allows you to tap into the customisation expectation of your customers, but in a small store allows you to turn a profit from this trend as well.

For example, Paris Miki, a Japanese eyewear retailer created a design system that allows customers to see what new glasses frames will look like on their face. This allows the customer to have a custom pair of glasses that suits their face. Another example is, the lighting systems designed by Lutron Electronics Company of Pennsylvania.

This lighting system allows customers to programme different lighting for different moods and events. They can change the ambience of a room by just punching in the programmed settings, says Harvard Business Review.


TRY THIS

  • Restructure your retail business to include many small stores to offer customisation and achieve growth.
  • If you were to offer a smaller store, and smaller chain you could achieve even higher profits as overheads would be less.
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About the author


Nicole Crampton


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