Are Marketplaces Killing Small Businesses?
I had a conversation with a small business owner Sumit Agarwal who owns a pet store in South Delhi. For the past 15 years or so, Sumit has served the nearby customers with pet food and supplies. Sumit’s business has encountered an emotional change with so many consumers now shopping on-line. It might appear that Sumit just sells pet food and supplies. What stands out is that he and his team have an expertise about dog nutrition that creates a unique niche for his business. The challenge for Sumit is how does he position his niche when competing against a giant marketplaces competitor. It makes you wonder are heavy funded marketplaces killing small businesses?
First, let me share how Sumit and I met — He’s a clever guy. On my podcast episode about how to attract a crowd, Sonia Singh(my guest) and I were discussing why being specific with marketing will generate better results than trying to cast a wide net. I noted, “I have a yellow Labrador retriever who has itchy skin. If someone sent me a note saying they fix itchy skin in dogs, they’d have my attention.” Lo and behold, a few days after the podcast was released, I woke up in the morning and the first message in my inbox I noticed said “I fix itchy dogs every day.” The note merely said “I would need to ask you some questions in order to help your dog.” Sumit had my attention.
As it turns out, Sumit and his team have deep expertise in pet food and what might cause skin irritation or allergic reactions. They also know what pet nutrition might help with hip problems and other issues. You can tell that this is their passion. Sumit knew more about the dog food we were feeding our dog than I knew, and I was reading the label — he knew well beyond the label. Most importantly, he suggested a specific protocol to follow to determine the source of the skin/coat issues our dog has been experiencing. I asked Sumit what I should buy. Sumit commented that my best bet would be to either buy the products on Amazon or Flipkart or from a local pet store near my home.
The Perceived Marketplace Effect
As Sumit and I spoke, he echoed some thoughts that many small businesses have also shared with me. Many businesses see customers come into their stores to learn, and then they make their purchases online via Amazon or Flipkart or other online retailers. The online retailers don’t have the overhead of a brick and mortar store. For one of the products, Sumit mentioned that I can purchase it on Amazon or Flipkart for less than he can purchase it. Of course, in his local market, his online reviews show how much his customers love his store and appreciate his value. If he was local to me, I’d happily pay a premium for their high level of service and expertise.
You might be thinking, If Amazon or Flipkart and other online retailers keep this up, will we have any local experts? What will happen to the local stores? Will they be like bookstores? Bookstores — you know -those places that used to sell books even if they were not attached to a coffee house? Sumit cited research that shows that more specialty pet stores have closed in a six month period than closed in the prior five years. Interestingly, there have also been more created than ever before. The key might lie in expertise.
Enter The New Age
Fifteen years ago when Sumit opened his doors, he knew that his store would likely only serve the local community. In most small businesses, your ideal clients are located within 10 km of your store. As expedited shipping and online ordering has become more prevalent, it gets harder for retailers to compete financially with online retailers like Amazon or Flipkart when it comes to purchasing a commodity item. However, all is not lost.
While the Internet and logistics companies have made it easy to ship a product virtually anywhere — sometimes same day, there is something missing. The information and expertise that you might need as a consumer is that much more valuable.
Sumit actually has an opportunity to morph his business to serve a community that is worldwide. And, he could make a fortune without ever stocking dog food — though his local customers won’t let that happen. On his website, it leads with “Pet Nutrition Experts.” If you have a pet who has never had a problem with itching, shedding, scratching, or digestive problems, you might not care about pet store. However, if your pet is having one or more of those issues, you’d probably love to have access to someone like Sumit and his team. You’d likely be willing to pay a fee to subscribe to an information service that shows you a process to diagnose, treat, and ultimately solve the issue for your family pet. If fact you are, visit his website and let him know.
What You Can Do
If you or someone you know runs a local brick-and-mortar store, consider these steps to grow your business:
- Identify what you deliver that is a true commodity. Recognize that over the coming years, that business is likely to decline.
- Evaluate where you deliver the greatest value to your customers. How can you offer that beyond your existing market?
- Attract a crowd by answering the key questions on your website that your ideal customers would be asking
- Build a business model that is a modest subscription service to help those facing those challenges. You might offer three different levels to appeal to different types of buyers.
Morphing your business will not happen overnight. If you feel that Amazon and other retailers are messing up your sandbox, you are right. But, here’s the thing… you can either complain about it, or you can position yourself to provide value to the online community they are building that needs the expertise that you offer. Your value is no longer about delivering the commodity item. Rather, your value lies in the expertise and service the customer can’t get elsewhere.
It’s Your Turn
Which stores do you know where you value their expertise? Are they specialists, or generalists? Ask them to register at www.shopved.com that directly connects sellers to online buyers. It allows sellers from across India to promote their products for free in 5 easy steps.
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