Shop small shop local is dead, or is it?

The rise of a giant

The pressure on small businesses started before the internet technology revolution. Walmart did an outstanding job of making it difficult for the small business to compete on even ground. Between offering cheap Chinese alternatives and an expansion model that put a Walmart within a short drive for every American, the shop small shop local landscape was quickly fading. The irony of this is not lost on me that Walmart itself started as a small 5 & 10 store in Bentonville Arkansas back in the late 50’s.

Despite the rise of the Walmart goliath an even bigger threat to small and local came in the form of a small online bookstore being run out of a garage. Today, that bookstore is the world’s largest e-commerce company, Amazon. Just ask Alexa and your order can be dropped from a drone in your front yard that afternoon. I must admit it, I have found the convenience of Amazon very alluring, and many times have shopped lazily from my couch.

I’m a lazy shopper

It’s this shop from home mentality that has hurt the small local business. Amazon has made it so easy and there are lazy people like me all over. They would prefer to shop from the couch rather than hop in a car or even walk down the street to a local shop.

Arguably, Amazon has been the biggest disrupter the retail industry has ever seen. And, it is not just the small retailers, it is the big ones too. Just ask Toys R Us, Barnes & Noble, or practically any big box store out there. Even the goliath Walmart has felt the pressure from the Amazon effect. They have had to re-invent themselves and have even taken a few pages from the Amazon playbook to remain competitive. Walmart Plus is an Amazon Prime example.

For a small business, competing in this fast-paced new age may seem to be an obstacle too big. But I would argue huge opportunities lay in wait. These same technologies that help Amazon become a global giant can help small businesses thrive. Whether it is increasing reach beyond the local street or changing their business model. They just need to be willing and agile enough to adopt and take advantage of new opportunities.

But do not get me wrong, by no means am I saying technology alone will help small businesses defeat the giants. Small businesses will need to find a way to separate themselves. They need that secret sauce. Check out our Grove U article A Good Company Do You Make – What makes a company good for investing?

Secret Sauce

I spent over thirty years in professional services. I know what you are thinking, “What the heck does that have to do with small business and secret sauce?”

Well, it is closer than you may think. As funny as it may sound, with professional services, all I really sold was people. The differentiator really came down to the individual consultants (a small business.) I would tell my consultants their path to success, or secret sauce, was in their ability to be an expert in their field and more importantly being able to become a trusted advisor coupled with superior customer care. For those consultants who lived by these rules, they were very successful. For those who did not, well let’s just say they did not last.

So how does this relate to a small business being successful in this new age? It relates because as a small business, you may have a product or even a service but selling on price alone will not differentiate yourself. And we already know how that worked out.

If you are familiar with the professional services business, then you know we lived and died by the billable hour. The best consultants never worried about having enough billable hours. By becoming a trusted expert with their customers, the hours came. Customers would find ways to keep them working.

Today it is the same for a small business. You need that secret sauce to get me off that couch. If you can’t compete on price you need to bring some other value. And that can be expertise and customer care.

I Will Survive

There is a small family-owned bike shop near my house, I’ll call it Joel’s little bike shop. Joel doesn’t have a fancy website or an app; he does not have to constantly market his store on everything social media. But still Joel’s little bike shop has survived both the Walmart goliath and the Amazon boom.

When I look at what Joel sells it is absolutely nothing I can’t get cheaper by asking Alexa. What Joel does have is that secret sauce to get me off that couch. He has all the expertise I need when it comes to everything related to bikes, someone I can trust, and provides superior and personalized customer service. I do not get any of that from Walmart or Amazon.

For this I will get off my couch and go visit Joel’s little bike shop and I do not mind if I pay a little premium for his service.

For the Good

Here at Mangrove Investor, we love small companies doing big things for the good. So next time you’re shopping from your couch, maybe consider visiting a local retailer. You may be surprised at the value you get. Plus, it is your community so why not give back.

For the Good,

Michael Nichols