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Retail SMART |
Don’t be the Runt of the Litter! |
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By:
Dennis A. Conforto
Chairman & CEO of A-Z Media Group, Inc. |
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Have you ever noticed that there is always one little kitten or puppy that’s the runt of the litter? I have, and I know why: It seems that when feeding time comes, the little runt is always pushed to the side. Over time, if the runt is left completely unassisted or ignored, this can prove to be completely unhealthy for the runt.
It’s no surprise that this concept holds true for scrapbooking retailers as well. Most independent retailers feel like they are the runt of the litter. They see themselves getting smaller and the larger getting even larger. Unless you make a significant change, this too will prove to be true in your business.
In my lead article of this series, "The Retail Grind," I listed ten things you had to do if you wanted to get out of the retail grind. Step two was to be number one or two in market share in your category for the given market you are in. In other words: Don’t be the market runt.
To be number one at anything, you have to know exactly what the competition (numbers two, three and four) are doing well. Most retailers will spend time talking about what their competitors are doing wrong rather than focusing on what they are doing right. I can tell you that the true market leaders spend their time looking at what their competitors are doing right and what they are doing wrong. If you’re in retail and you’re going to catch anyone doing something wrong, make sure it’s you catching you.
Truth is, if you want to protect your business and limit the number of competitors, you need to have a huge market share percentage. There are really just two things you need to know if you’re going to win the game of market share:
1. Know how much business the marketplace is doing. Do this by estimating the sales of other scrapbooking stores in your market. To do this take the average of $200 in sales per square foot. Figuring out their square footage is easy.
2. Know how many people live in your market. Consider your market as not much more than 15 miles from your store, since 90% of your business will come from within that zone.
Armed with these two pieces of information, you can better understand the size of your market. For illustration purposes, let’s consider the following: you have 2 other stores in your market, your store is 1,000 square ft., the store south of you is 1,500 square ft., and the store north of you is 2,500 square ft.
Store 1. 2,500 Square ft. x $200 = $500,000
Store 2. 1,500 Square ft. x $200 = $300,000
Store 3. 1,000 Square ft. x $200 = $200,000
Total Market Share = $1,000,000
In this case, you are store number 3 and you would have 20% market share.
Let’s take the next step: Let’s say the population of the market area within 15 miles was 100,000 people, and let’s assume that each person provides $10 in sales and that there are 4 people per household, meaning there are 25,000 households. To achieve the market’s $1,000,000 in sales, people spend an average of $40 per year in your area (2500 households x 4 people x $10 per person). Now, to figure out the percentage that are scrapbookers, take your average sale per household per year, at say $200, that means that about 5,000 of 25,000 homes in your marketplace were scrapbookers or about 20%.
Armed with this information, you now know that 20% of the market are scrapbookers and that your share of that market is 20% (20% market share). The question is what would a marketer do with that information? I know what I would do:
· First, I would own a higher percentage of the consumers that were closer to my store than the two competitive stores by focusing my promotions closer to my store.
· Second, I would see a great opportunity in the 80% of the market that none of the stores were getting. And I would use co-opetition, which means I would cooperate and compete with them at the same time, through education and advertising. The goal is to increase the market, so that if you were to get the market to increase to 50%, then between the three stores, there would be enough of a market for each of you to win.
Now, how do you go from the number three runt of the litter to number two and then number one? Push harder and smarter at the point of customer contact. Ask the consumers what they want everyday, and then give it to them. Survey them, don’t guess and don’t run on your opinion. Run your business on fact not feelings. If you run on the facts you won’t be the runt of the litter for long!
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