No-one is entitled to business, it has to be earned
A new supermarket has just opened opposite our local Sainsbury’s. It’s an Aldi – with a reputation for lower prices. I’ve just made a visit and was impressed. It was bright, spacious, clean and the staff were friendly and smart – those parts I wasn’t expecting it to compete on. I then made the trip across the road and Sainsbury’s (which has been there forever) was not in the same league…
I am sure Sainsbury’s is fuming at this invasion. But the reality is that none of us is entitled to business. We have to work hard and we have to deliver what our customers want, otherwise they will go elsewhere. We have to compete. When a new competitor comes on the scene or encroaches on our patch we have to up our game.
High street shops complain about online businesses not operating on a level playing field. That’s right – they don’t. New online businesses don’t have the brand recognition, the history or the customers walking through their doors every day. Their costs may be lower, but that is in part because the more established business has not moved with the times. If you look at each line item, there is no reason why costs should be different. Yes, rent and rates may be higher due to the high street presence, but that is due, in part, to a decision to lock into long rentals with upward only rent reviews. The shift to internet shopping is not an overnight success – it has been coming for the past 10 years or so and the high street retailers should have prepared earlier. The upside of a high street presence is the ease of attracting customers – people pass your shop window every day – online retailers have to work harder to get known.
So, how can Sainsbury’s compete?
First it needs to consider who its ideal customer is and what they are looking for. It’s not all about price. I am sure there is overlap between Aldi and Sainsbury’s customers (many will be customers of both) but Sainsbury’s can differentiate itself.
Then it needs to look at its costs. Aldi has just invested millions on the site, construction and training a new workforce. Sainsbury’s does not have that investment to recover. Is there any reason why Sainsbury’s staff costs should be significantly higher? Sainsbury’s is bigger than Aldi in the UK so should have economies of scale when negotiating with suppliers. Sainsbury’s has more space in its store but why should this be a disadvantage? It needs to utilise its space well – space either needs to provide a high return or be used to draw people in to increase the overall return (their dreadful cafe is not a draw, so hopefully that space is giving an adequate return through sales).
How can you compete?
Small businesses are much more nimble. Again, though, it is a case of considering your ideal client and what they are looking for. Are they very cost conscious, are they time poor or is there another need you are satisfying? Can your costs be looked at (unless they need to visit you, customers don’t care whether you work from an expensive office or your kitchen table)?
The only excuse for an existing business to go out of business is because it didn’t keep up. There is NO other excuse.
So what are you going to do to keep up (or even ahead) of the competition???