How Independents are Beating the Box Stores

Small business experts weigh in on Main Street’s advantages

By Alan Wolf, YSN

When it comes to retail, the bigger they are, the harder they fall.

That’s the conclusion of small business experts, who’ve been closely watching the confusing economic environment and its impact on stores large and small.

Speaking last week at a CNBC Small Business Playbook virtual summit, top academicians agreed that independent owners’ closer relationships with their customers and vendors — and their ability to react more quickly to marketplace change — give them a clear advantage over big-box chains.

Case in point: inventory miscalls by Walmart and Target. “The big companies are really struggling with [forecasting],” said Nada Sanders, a distinguished professor of supply chain management at Northeastern University. According to Sanders, large retailers have become overly reliant on inventory algorithms to forecast demand, which has become an unreliable barometer amid today’s high inflation, supply chain bottlenecks and changing consumer spending patterns.

This gives the advantage to smaller retailers who can connect directly with their customers and better understand their needs, she said. What’s more, most large retailers don’t have much visibility below their top-tier vendors and suppliers, which generally comprise about 6% percent of the merchandise mix but 80% of the spend, making it harder to track items that are farther back in the supply chain.

In contrast, she said, small retailers can pick up a phone, build a relationship with vendors and map out a supply chain for key items based on their better read of their customers.

“Large companies can’t do that,” Sanders said. “They’re stuck because they have huge silos. As a small business, you don’t have that, so leverage that right now.”

Another suggestion, from Rutgers Business School Provost and Executive Vice Chancellor Jerry Robinson, is that independent retailers shouldn’t shy away from raising prices in accordance with their costs. “All those prices along the supply chain have gone up,” said Robinson, who’s also co-founder of the Center for Urban Entrepreneurship and Economic Development. And Main Street dealers’ closer relationships with their customers can help ease the sting.

“You’ve got to explain to them that the costs have gone up,” he said. “I believe a lot of consumers understand that,” particularly in the current inflationary environment. “It’s about being transparent.”

The major takeaway for Sanders from the Small Business summit: “Large companies are dinosaurs,” she said. “They’re very heavy, bureaucratic. As a small business, you’re very limber.”

Hat tip to CNBC.

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