SMBs and E-Commerce
How 97 lb weaklings can develop the muscle to succeed.
Sometimes the retail industry seems like the Clash of the Titans, with Amazon, Walmart, The Home Depot, and others battling for supremacy online and at the mall. But of course the retail landscape also comprises countless small and mid-sized businesses—boutiques, local chains, specialty stores, up-and-coming e-commerce sites, and every combination in between.
Smaller retailers have a tough time competing with the giants. But among the best contenders, this challenge spurs the kind of creativity that could boost a business to success.
Market Share at Any Cost
Perhaps the most obvious challenge smaller retailers face is price competition. Large companies negotiate preferential deals with suppliers and win customers with low prices, which they tout during events such as Amazon's Prime Day and everyone's Black Friday sales.
"The big guys are working hard to win market share at almost any cost. The small and mid-sized guys are left out," says Steve Dowse, senior vice president of product management at Blume Global, in Pleasanton, California. Blume operates a digital platform and applications shippers, carriers, and third-party logistics (3PL) providers use to manage supply chains.
Bargain pricing isn't the only expectation that Amazon and its kind have instilled in buyers. "The biggest challenge for any retailer right now is, at a minimum, meeting the free, two-day shipping expectation that most e-commerce consumers have," says Sean Mueller, vice president of business development and solutions at Symbia Logistics in Edwards, Colorado.
The biggest retailers can deliver in one or two days because they can afford to place inventory all over the country. "It puts product closer to the consumer," says Steve Congro, director, omnichannel fulfillment technology at 3PL Saddle Creek Logistics Services in Lakeland, Florida.
Big retailers also have the clout to negotiate favorable shipping rates, making it easier to offer free or inexpensive shipping. "A small online retailer might not be able to negotiate rates, because they might not have the type of volume that Wayfair or Amazon does," notes Janet Vito, vice president of marketing and sales at Austin-based uShip, an online platform that matches shippers of large items with carriers that have space in their trucks.
The battle for market share even drives some companies to offer free shipping at a loss. For example, Amazon uses profits from its cloud-hosting service, Amazon Web Services (AWS), to subsidize free shipping for its Prime service members.
Another challenge for small and mid-sized retailers is how to gain name recognition and stand out from the crowd. Not all of them have the wherewithal. That includes many of the 100 brick-and-mortar home décor and furniture boutiques that belong to Design Kollective, an online, membership-based marketplace with headquarters in Park City, Utah.
"A lot of these boutiques don't know how to create a website or how to send out marketing emails," says Scot Pace, Design Kollective's chief operations officer. Design Kollective performs those jobs for its members, helping them capture attention locally and giving them a national presence.
Smaller companies face a branding problem when they supplement their own brick-and-mortar and e-commerce channels by also selling through online marketplaces run by their big competitors. "You might move product, but you won't build your name," Congro says. A consumer who buys an item on the Amazon Marketplace will remember it came from Amazon, but might not know the name of the company that actually made the sale.
When Do You Need It?
To meet demand for fast shipping, some retailers get closer to their customers by spreading inventory among several warehouses, often operated by 3PLs. But retailers may also find that, despite the famous Amazon effect, not every customer needs immediate fulfillment.
"Retailers shouldn't break the bank to chase that approach," says Congro. Instead, they should figure out how fast their particular customers need their products. "Decide what your service level agreement will be," he says. "But more importantly, make sure you can hit it."
Dowse agrees. "Filling a customer's needs is not necessarily getting the product there the next day," he says. "It's getting it there when they need it."
In some categories, the prevailing delivery standard is so slow that the issue of next-day service never comes up. "Many furniture brands are able to deliver product in eight to 12 weeks," says Ashutosh Panchang, senior manager of business operations at Burrow, a New York-based vendor of upholstered furniture. Thanks to its products' modular construction and its use of parcel carriers, Burrow can fill an order for a sofa, loveseat, or chair in about one week, with no charge for shipping.
For customers who order large, high-value products through Design Kollective, it's perfectly all right to receive an order in three weeks. "If they order from a boutique in California and they live in Boston, they understand that there's transit time," says Pace.
Design Kollective uses uShip to transport large items within that time frame. For smaller items, such as pillows or candles, the company ships via UPS.
Besides delivery as promised, customers also expect to be notified promptly if anything goes wrong. "If I'm not going to get the book that I wanted this weekend, let me know before it doesn't arrive," Dowse says.
Smaller retailers can address those expectations through visibility platforms such as Blume's, he adds.
Shipping Costs, Customer Service
Although smaller retailers can't negotiate low rates the way giant shippers do, they can save money by working with 3PLs (see sidebar). Or, if they want to provide white-glove home delivery, they can work with uShip's platform.
"We will not be the cheapest, but the service is affordable," says Vito. It focuses on large, blanket-wrapped items, which a carrier delivers to the consumer's room of choice. The driver performs any light assembly needed and removes debris.
Although carriers on uShip usually bid for loads, the company has developed a pricing algorithm for the home delivery service. This calculates a flat rate for shipping an item to a particular destination. The retailer can use that figure to calculate the buyer's shipping charge.
"Or if they want to offer free or subsidized shipping, the retailer knows exactly what it will cost ahead of time," Vito says.
Working with uShip lets the small boutiques that belong to Design Kollective deliver to any location in the United States—a service they could not otherwise have offered.
"That was a pain point for many of these stores," Pace says. "They were competing with the online giants that can ship anywhere in the country." Now the pain is gone. And, if they like, members can offer "free" shipping by building the transportation cost, calculated by uShip, into the product pricing.
One competitive point where small retailers may naturally excel is customer service. Service is key to the strategy at Burrow, which works hard to give customers an easy and pleasant experience.
"At every point, we want to understand how customers are shopping and what considerations they're making, but also their pain points," says COO Steve Finnern.
Burrow's supply chain supports this effort to deliver a great customer experience. Consider, for example, a customer who buys a sectional sofa and then, on seeing it in his living room, decides he'd actually like something larger, with arms in a different style.
A standard furniture company might take four to 12 weeks to retrieve the original sofa and send a new one. But the tight relationship between the customer experience team, its supply chain team, and its manufacturing and fulfillment partner lets Burrow provide a better response.
"Changes to the product can be facilitated quickly, with the same timeline as the original order, getting it back to the customer in one week." Panchang says.
It's important for small and mid-sized retailers to make consumers feel great about shopping with them. "It could be through over-the-top customer service," says Congro. "Or through product personalization or customization, which the big guys are not known for."
"From small companies to large, the customer's experience and story is everything," says Mueller. "It's how you stand up to large companies and successfully sustain growth and sales."