| Giant chain stores with tremendous
purchasing power are creating new business realities for smaller companies and Mom and Pop
stores by selling products below cost. This forces some of their competitors who cannot
compete to go out of business, while others have to change their business model completely
to survive. Many of these companies that use creative thinking and change their business
models are able to stand up against these Giants and beat them at their own game.
One of my consulting clients, a Distributor who has been in
business since the turn of the Century had to face the new business reality of tough
competition from a giant chain store who opened new stores in his “back yard.”
Realizing they needed to change the business model to meet today’s business
challenges, management decided they needed to mainstream their operations, lower operating
costs, and implement a “just in time inventory” system at all of their branches
in order to stay competitive.
Not having “real time” information between the
branches and the headquarters was the first obstacle management had to overcome in order
to achieve their goal of “just in time inventory.” The first challenge the
Distributor faced was finding the right software house that would not only provide the
right software solution, but would also be a partner that would help meet the
company’s current and future expansion plans. The second challenge was converting the
branches’ data to the headquarters host computer.
Meeting the “just in time inventory” challenge
at all branches and providing better customer service:
Changing from departmental computer systems to a
centralized computer system was the first step to achieving the “just in time
inventory” goal at all branches. Having “real time inventory” status at all
locations enabled headquarters to achieve rapid response to low-level inventory, and
helped avoid over stocking. The Branches, having the ability to view other branches
inventory in “real time mode,” were able to ship products directly from other
locations when needed. Achieving the “just in time inventory” goal helped the
distributor lower operating costs, sell at competitive prices, and provide better customer
service.
The next step after mainstreaming operations was to
implement Web Commerce strategy that would allow the distributor to show the product
catalog, track buying trends, and update the headquarters computer with the new Web orders
in “real time mode.” Starting a new nightshift gave the Distributor’s
clients, many of whom were contractors, the ability to stop at the branch early in the
morning on the way to the job site, pick up their Web orders from the night before, while
their car engines were running, and drive away within minutes.
Beating the Giant by becoming a “one stop shopping
center” with competitive pricing:
Although, mainstreaming their operations and enabling an
e-commerce strategy improved the distributor’s dwindling business, they were still
treading water. The giant chain store in the distributor’s “backdoor” began
to sell some of the same accessories my client sold, but below their cost. By selling the
accessories below the Distributor’s cost, the giant chain store hoping their clients
would buy other, more profitable products the Distributor also sold while visiting their
stores.
Facing the giant chain store’s challenge, the
Distributor’s management team decided to match the giant chain stores prices for the
accessories they were selling, provide their customers with better service, and retain
their loyalty. Beating Giant Chain Stores “at its own game,” turned the
Distributor into “One Stop Shopping Center” where their clients could purchase
everything they needed at very competitive prices and get even better customer service.
Final Thoughts On Beating The Competition
Giant chain stores that are creating part of today’s
challenging business environment can only be beaten with creative thinking. Implementing
new ideas helped the Distributor not only meet the “Giant’s challenge,” but
came in ahead of the game by increasing their number of Nationwide Branches by 35% using
“just in time inventory” and matching their competitor’s lower price on
accessories. |
