One area I’ve realized that local businesses can still win is in reacting quickly to market situations. My local small-town bank can throw together a flood loan package to help people rebuild from this storm much faster than the corporate banks in town can manage. Sure, the bigger banks could offer MORE loans because they have more assets, but the smaller banks can get there first, offer a special deal, and then the big banks won’t get the opportunity.
Small businesses can adjust quickly to local happenings. In my town, there’s a big flood going on. The local hardware store is doing great business. The coffee shops could (though they haven’t yet) make a killing getting temporary permits to sell their product outdoors, as there are crowds formed on either side of the river to observe this primal experience.
Sam Walton, founder of Walmart, used to do this in a way. Back when he was maneuvering a Ben Franklin store and getting in trouble weekly with the home office, Sam would shift things around to match the current needs in town. For instance, he’d have umbrellas ready to go in droves for the flood, were Sam operating in my town. He loved small town business dynamics and he worked them exceptionally well. Walmart didn’t just grow because they offered low prices. His book is an interesting exploration of this, if you’re interested.
What do the little guys have that the big guys just can’t emulate?
Local Business Power
They have authority to act. Smaller businesses have fewer levels between the bottom and the top. Sometimes, it’s the same person at the cash register that owns the shop. They have the ability to weigh the pros and cons of a snap decision, and determine if offering a product or service to match a local dynamic will be beneficial in the future.
Small local businesses have relationships with other local businesses, so they can choose to negotiate package offers. For instance, a local flower shop could team up with the chocolates shop to offer a “buy chocolates and flowers and save big!” coupon. This would, of course, benefit both businesses, and drive more local retail traffic.
I should mention all the service businesses that are local, but in most cases, local service is still the norm. We call the local plumber. We try to use the local mechanic. I think that’s just normal, right? I can’t think of many national services that compete well in local markets. (Can you?)
Corporate Attempts
Starbucks is sometimes considered yet another evil empire, though they started out as a local coffee shop in Seattle. Smaller towns have ongoing battles when a Starbucks coffee shop wants to set up shop in town. For some reason, Dunkin Donuts (the other major competitor in the US) doesn’t seem to raise the same ire.
And yet, Starbucks works hard to build local community. They donate money to local causes. They put up local message boards. They promote all kinds of local events and sometimes invite in local artists and musicians to further integrate the shop into the community. I don’t see a problem with this. As I write this, I’m sitting in my small town coffee shop and bakery, and I prefer such places to a box-repeat-box implementation like Starbucks, but I don’t fault a Starbucks for trying.
Walmart tries also, believe it or not. They have all kinds of community programs, pump money into local charities and events, and works to try and integrate people into the retail “conversation.” People tend to view them as evil because lots of smaller businesses have felt the pain of their price power differentiator. My family lost a grocery store to Walmart. I’m sure there are countless other folks who’ve run against the buzzsaw of their prices.
So, can corporate players “act” small town and compete against small businesses in the fast reaction business? I don’t think so. I think they can compete on price, and avaialbility and all that, but they can’t react as fast. They have chains of command and margins to consider, and all kinds of friction that will hamper them from offering a reaction play. In those little niche moments, small businesses build strong brand loyalty by stepping into the fray and reacting well to the local “pulse.”
What’s your take?
[email]
Subscribe to [chrisbrogan.com]
tags: smallbiz,entrepreneur,local