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Canada Counts
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A survey of Canadian buying intentions.
Purchase Report

 

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Bargains, maybe PDF Print E-mail
Written by Alixe MacRae   

ImageIn recent weeks, I've received calls from both Bell and Rogers telling me how they will lower my satellite television, cell phone and internet access fees. Calls like these are no bigger a surprise than the "new lower price" signs I saw during my last trip to the neighbourhood Sears's department store - and often just as unhelpful to the consumer.

Vendors wanting to get shelf space at Target when it arrives in Canada next year know this is a tough row-to-hoe. For independent retailers, the questions are a little different.

So, how does an independent merchant compete against the big, red bull's-eye or the other mega retailers? After all, you can't afford to be the same, only pricier and you can't afford to continually lower your prices. This process can become truly frightening. To illustrate, witness a recent report in the New York Times on the Big Apple's ongoing pizza war - prices had fallen to 75 cents per slice.  There's no way an independent restaurant will make a profit at those prices.

It's important for the independent to remember the big guns will squeeze the lemon until it squeals. Want proof? There was a report on CBC Radio One the other day claiming Wal-Mart can afford to throw out copious quantities of produce every day - it's the cost of getting customers in the door.

For the independent store owner, the goal is to stay competitive while continuing to turn a profit.

You simply can't afford to sell a commodity - whether it's lettuce or entry-level motion furniture. Someone will under-price you every time. The race to the bottom is unrelenting, causing customers to rejoice and retailers to weep. The new cross-border spending limited announced last month by the federal government will only make things worse.

The questions to be asked in the face of this unrelenting competition are easy to list. The answers are a little harder to come by. What makes your store really special? Do you carry products no one else in your trading area carries? Are they sufficiently different to commend a higher price? Remember, the consumer is smarter than ever; she doesn't see a leg colour change as a big difference.

Is your service second-to-none? That's what Bay Bloor Radio claims, and every time I go to their store, it's busy. They will set-up and install the product they sell. Then, they guarantee their work. They are a great example of the premium service retailer.

Why should I buy from El-Cheapo instead of you? I recently did a price comparison for a client ended up going with the El-Cheapo option (saving the client $700 in the process). El-Cheapo didn't stock the product and charged for delivery but was still much cheaper. Your free decorating classes won't lure me to buy and neither will your bonus subscription to a shelter magazine. Don't offer me - or any other consumer - what I won't pay for myself; it's just a waste of my time and your money.

Crate and Barrel delivers unique product at a very rich mark-up (I know as I discussed their product selection process with a vendor before they crossed our border as part of a research project). They watch what they buy; then replicate it if it's a winner.

If you're an independent store owner and you don't already belong to one, you may want to join one of the buying groups. They have the clout to insist on exclusivity. If you're like Groucho Marx (who famously said "I wouldn't join any club that would have me for a member") and this isn't your cup-of-tea, you still need to form alliances with other independent merchants to protect your trading area. This isn't price fixing (perish the thought), its intelligent marketing. Don't discuss price, the police are listening everywhere and the Competition Bureau is very interested in prosecuting price collusion. Your cell phone is no longer an option. Law enforcement in this country can - and probably does - spy on all of us without a warrant.

One strategy to consider is "bundling" - offer a price that includes delivery, a two-year guarantee and a gift certificate redeemable on a purchase valued at a worthwhile price. It works for Rogers. It works for Bell. It even works for The Brick. There's no reason why it can't work for a savvy independent retailer.  A two-year guarantee is cheap, so is a gift certificate. Make the price the same as the delivery charge.

Life will be tougher with Target in the mix. While they are not the strongest furniture, mattress and appliance retailers we've seen, Target will change the expectations of the Canadian consumer. As retailers, they want to dominate, and they will in a number of categories not long after they open their first set of stores.

This means furniture retailers everywhere have to pick their turf and defend it. Just don't be stupid. Plan to win. Start today.

Alixe MacRae is one of this country's best known merchandisers, having held senior positions at a variety of well-known Canadian retailers including Stoney Creek Furniture, Sears Canada and The Bay. She now owns Concierge Relocation (www.conciergerelocation.com), a company specializing in move management, especially for dramatically downsizing seniors and their overwhelmed children.

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