Beating The Odds – Part 2

We’re picking up our conversation on one of our great clients at American Retail Supply, McLendon’s Hardware, which has seven locations throughout the Seattle area.  To review part one, refer to the last blog post (Beating The Odds).

Competition Makes Them Better

I’ve done a lot of research over the years on how to compete with the national chains.  I’ve been sharing that information with my clients in my monthly newsletter for 21 years and my bi-weekly email retail tip since 2004.  In my research I found that those companies that survive and thrive look at the new competition as a challenge to get better themselves.  McLendon’s has done this also.

For years McLendon’s knew they should be looking into better automating their inventory and point-of-sale computer system.  When the retail giants came to town they made the investment in their future but also were sure to invest in new software that really helped them stay focused on their customers and not allowing the software to take away from their exceptional customer service.

Other areas in which McLendon feels the competition has made them better are display, advertising and pricing.  McLendon says, “We never really concentrated on end caps other than to put things on them.  Now we have a person in every store hire just to do that.”

McLendon’s realizes that with the big guys right down the street they need to be much more aware of price competition so they can be seen as having “good” prices.  Their advertising person consistently pushes to have “hot buys” in their ads.

What can you learn from the competition to make you better?

Variable Pricing Structure

McLendon refers to his variable pricing structure as A item, B item, C item pricing.  “A” items are very competitive, commodity items, that everyone uses and everyone knows the price.  McLendon knows his prices must be “good” on these items.  They don’t need to be the same or lower than the retail giants, but they need to be very close.  “B” and “C” items are not as competitively priced and the company can get better markups.  Sadly, too many independent retailers refuse to accept this type of pricing strategy.

Buy Right

McLendon’s, like many who compete well with the mass merchandisers, is a member of a buying group.  They buy a lot of their product though True Value.  With the exception of direct import items, McLendon feels their costs are in line with the retail giants.  But he believes the retail giants often get advertising allowances that he does not get.

Don’t Compete Directly With the Retail Giants

McLendon’s knows their niche-huge selection and great service.  In addition, McLendon’s now very carefully considers location as a niche when opening a new store.  When opening a new store McLendon asks, “Is it their market?”

The retail giants in the hardware business like to be near freeways and locations that attract large number of people.  McLendon’s looks for a niche that is not close to freeways, has a good population base, but isn’t a place that the retail giants are likely to put a store that requires a huge population to support.

This is huge.  How can you position your product and/or services to go where the competition ain’t?

Brand Names

A strategy retailers like to use to compete with the retail giants is to carry brands that the giants don’t carry.  In the past, McLendon’s tried to carry brands that the big guy didn’t carry.  With the number of competitors now in the market, and the huge popularity of a few brands in the hardware business, that strategy doesn’t really work.  As a whole, McLendon’s tends to carry quality brand products.

Hours of Operation

Historically hours of operation for McLendon’s shows the company’s long roots and reflect the work ethic in the community – early to bed, early to rise. The company has always opened early and closed early.  Today they’re finding they need to extend those hours.

Store used to close on Sundays.  Today, Sunday is the company’s second busiest day of the week.  McLendon’s stores used to close at 6:00 PM.  Now they close at 8:00.

Temporary Sales Decline

McLendon’s has found that retail giants moving into their market is a cause for concern and an opportunity to improve, but it is not a cause for panic.

Like retailers across the country, McLendon’s has found that stores sales drop somewhat when a retail giant opens a store close to McLendon’s.  but like many independents, McLendon finds that within nine months sales are back to where they were before and growing… maybe not growing as fast as they did before the big guys moved in, but growing.

You Can Thrive

Mike McLendon and McLendon’s Hardware have proven that yes, you can thrive in the shadow of the retail giants and compete with them, but not directly against them.  McLendon’s focuses on a broad product line, great customer service, and a niche location to not only survive, but thrive in the shadow of retail giants.

Discover more ways to improve your business by requesting one of my free books: How to Control Your Business and Your Life and The Happy Customer Handbook

by Keith Lee