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Competing With Super-Stores And Discounters
By Orvel Ray Wilson   Printer Friendly Version

You are not paranoid; they really are out to get you. Warehouse stores like Sam's, Price Club, Bizmart and Office Depot are doing their damnedest to steal your customers. And they're gaining ground. The number of warehouse club stores nationally has expanded from 400 to 550 in the last two years, while sales have grown 25% from $27 billion to $34 billion. Last year, "retail computer store" made the list of the top 10 businesses most likely to fail, while the average profitability in retail fell to .4% (that's right, point four percent).

Roughly one in five households now shops at a club store, and these outlets tend to attract more middle and upper-class consumers. More than half these club-shoppers are consumers, (as opposed to businesses) but their market share will continue to grow as discounters broaden their services.

"Forget everything you learned about the consumer of the 1980's," says Bill Kelly, Senior Editor of Sales and Marketing Management magazine. Demographic trends and a persistent recession have conspired to turn free-spending, status-conscious consumers into value-oriented bargain-hunters.

As the baby-boomers get older, they're starting to save for their childrens' education and for their own retirement. The result is less disposable income for games and gadgets.

When times are tough, buyers think twice about spending. They're buying real tools to do real work. They're more sophisticated, and more demanding. Their time is valuable and expensive. They want to maximize every investment, and that includes quality, ease of use, and service life span.

Don't Hit Them Head On
While these trends make it seem that everyone's shopping price, successful retailers sellers look beyond the obvious. Guerrillas Resellers must actively differentiate their business if they are to survive against these strip-mall Goliaths. Agile and lightly armed, the guerrilla prevails by adding value, keeping close to the customer and building margins through ancillary services.

Vertical Focus
While the super-stores are trying to be everything to everyone, an effective guerrilla tactic is to go after one particular segment of the market, and then do it better than anyone else. Personal Support Computers in Los Angeles is a prime example of a retailer who is selling successfully in a brutally combative market. They've maintained a thriving business in a languishing economic environment by catering to the entertainment industry in the applications areas of desktop publishing, video editing, multi-media, education, and networking. The store's staff is bi-lingual, and highly knowledgeable on both Mac and DOS platforms. This vertical market focus makes them "the place to go" for help with these specialized and high-end applications.

User Friendly Guerrillas can also gain a competitive high ground by being responsive to customers' needs. Unlike the cold, mercury-vapor-lit warehouses, these resellers are easy to reach, easy to talk to, and easy to do business with. They return their calls. They give out their numbers at home, at the office, in the car. They keep phones staffed at night and on weekends, even if only by an answering service. They are in touch, and they do everything immediately. While their bargain-basement counterparts are just moving boxes, guerrillas are designing solutions to customer problems. Attractive merchandising can boost sales and strengthen anemic margins. This includes warm lighting, cool music, and soft chairs. Guerrillas create a comfortable environment that encourages browsing.

Market Aggressively, But Carefully Mass-merchandisers have to mass market with broadcast advertising. Guerrillas compete by narrowcasting their message to specific groups most likely to buy. Say something to somebody or you may spend a lot of money saying nothing to everybody. Build a database of everyone who walks into your store, then use regular mailings of postcards or coupons to push in-store promotions. Publish a newsletter to keep in touch, announce new products, classes, user-group meetings and special deals.

Dogged Follow Up
When the judge asked Willie Horton why he robbed banks, he replied, "Because that's where the money is." Guerrillas aggressively cross-sell, up-sell and re-sell their existing customers for the same reason. According to Karl Albrecht and Ron Zemke in their book, Service America!, it costs five times as much to create a new customer as it does to make the same sale to an existing customer. Once the primary need has been filled, secondary needs are going to surface. Within a few months, your customers are going to start looking for new software, and expansion items like tape backup, expanded memory, or a color printer, and they would rather buy from someone they know. Guerrillas capture these sales by following up by phone one week, one month, and three months after the sale, and then every six months thereafter. Drop in on customers. Ask the magic selling question, "Is there anything else you need?" The potential earnings from high-margin upgrades, add-ons and repair services can mean the difference between profit and loss.

Start Your Own Club
Part of the attraction of the price-clubs is that people like to feel as if they belong. Guerrillas turn this to their advantage by issuing their own membership cards. Preferred customers can qualify for discounts on supplies like printer toner, ribbons and diskettes. Actively ask for (and reward) referrals. Repeat your marketing message again and again and again. Make sure it clearly says, "We want you back." By building long-term relationships, guerrillas turn their small size to their advantage, and the giants don't stand a chance.

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