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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Thursday, July 14, 2005
Trends Affecting Small Independent Retailers
I finally had a chance to read a powerful white paper about trends among small retailers, called "Challenges of the Future: the Rebirth of Small Independent Retail in America." It is a very good roundup of the trends and pressures affecting small business retailers today.

Here is the background for how the white paper came to be written:

"This white paper originated from an observation and a supposition by Jim Baum, a highly active and successful Morris, Illinois small, independent retailer. His observation was that macro and micro trends affect the small independent entrepreneur differently than their large competitors. His supposition is if small independents could just step back, take a deep breath and think about what's really happening, what's changing and what's just over the horizon, they might act differently. They might change how they do things. They might experiment more to take advantage of new emerging opportunities. They might see solutions more clearly. They might find new ways to connect more closely to their marketplace."

The white paper identifies eight trends affecting small independent retailers today.
  • Personalization - "Knowledge of customers' birthdays, favorite colors, time of day they like to shop, and other information is not just pleasantry any more. It can be an essential driver of sales. So while big companies employ slogans like 'reach out and touch someone,' it is more likely the small independent retailer who can actually shake their hand."

  • Value equation - Customers are more becoming more demanding and expect more value. "And so, the traditional retail power structure has permanently shifted from sellers to buyers. Doing business as usual can mean doing no business at all. Buyers now hold the trump card."

  • Increased Competition - Competition is growing in strength and numbers. "Because of the presence of the Internet and the increasing clout of large national chains, small independents must not compete on price. To do so is a death wish. It is not sustainable. It is not winnable. And it will likely lead to ruin.

    The real strengths of successful small independent retail revolve around specialization, differentiation and finding profitable, defendable and sustainable niches."

  • Changing Demographics - Three demographic trends are bringing profound change and opening up new opportunities to serve these demographics: (1) the aging American population, (2) the growing Hispanic population, and (3) Generation Y -- born between 1981 and 1995 -- which is the largest American consumer group in history.

  • Community Activism - "There is a growing national trend of community resistance to unrestrained retail development in order to protect local community personality, feel and values."

  • Health Care Costs - "The most important domestic problem in the U.S. is the healthcare insurance crisis. While this affects everyone, it hits the small business especially hard due to the runaway costs of providing benefits to employees. It creates a real competitive disadvantage."

  • Changing Consumer Attitudes and Behavior - "The traditional customer definitions and delineations have been blurred by the sheer volume of marketing activity across the entire socioeconomic spectrum. * * * Consumers want a transparent buying process devoid of hassles. A retail experience that fulfills these dual emotional needs will be highly valued."

  • Urban Sprawl and Real Estate Development - "A recent trend in new retail development is to create community spaces of mixed-use that exhibit a strong sense of place. Many of these developments called 'the new urbanism,' incorporate features more in keeping with feelings of towns and neighborhoods vs. traditional large retail centers."
Download the entire white paper on retail trends here (PDF).

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