WalMart vs. Specialty: Advantage Specialty

This would be a great time to be a specialty retailer, especially if you like a good fight.  For the first time in the history of mass merchandising, the big box stores are moving into the physical territory of the specialty stores.  Economics and the internet is forcing them to do so.  The mass merchandisers are sending out scouts, and the specialty retailers can send a message back to Bentonville, by the way these scouts are dealt with.

Let me preface that no specialty store has ever been harmed by WalMart in any way (and I am using WalMart here generically, in place of all mass-merchandisers), quite the contrary, WalMart has left more disposable income in peoples' pockets, which studies show get spent at specialty stores.  The relationship between the two has been symbiotic, mutually beneficial beneficial.

WalMart did wipe out the little discounter, the five and dime, and any retailer that failed to become a specialty store as WalMart emerged.  Anyone not prepared to make more money selling less (by migrating up market in their product mix) failed.  There are plenty of enterprising people who made the shift.

But it is undeniable that when Walmart emerged, businesses did fail.  Now, due to declining growth rates, walmart and home depot and best buy are testing the waters where they will be as shredded as once the witless small business was shredded.  You can help shred them, speed the process up.

Here is their rationale:

Office Depot Inc., meanwhile, quietly began opening new shops the size of convenience stores in December. The new 5,000-square-foot Office Depot stores are barely a fifth the size of the company's traditional locations, yet still manage to contain the office supplies and copy and mail services that account for 93% of the bigger stores' sales, said Kevin Peters, Office Depot's North American retail president.

Hang on...  did they think this through?  If I can get 93% of what you sell in a closer more convenient location, why would I ever visit your big box location, except in the rate instance I am buying a cheap chair (and there are plenty of used chair locations I can get cheap and good...)  If I stop visiting the big box, then how long can you carry it?

If I am retailer, and you are offering Swingline staplers in your store for $7, which you buy for five because you are so big, and I cannot get for less than $10, because I am so small...  I will walk into your store, buy four, and then put them on my shelves, for $7.00 also.  Next, in my window, in huge letters, I am going to show "Swingline Stapler:  Home Depot $7.00; Me $7.00."  Since no one buys just a stapler, I break even on the stapler, make it on something else, and break Office Depot.

As the article linked above states, Staples is the #2 online retailer behind amazon.com, since so many people buy office supplies online. So, I would link my upscale stationary store website as an affiliate to Office Depot, Staples, amazon, etc.  I would direct my customers to those websites, and earn the affiliate fee on the sales, but credit my customers with say 50% of the fee, as a credit on their next purchase inside my store. Most of the data is available already (I know from what affiliate programs I have) so it is just a matter of some database software to record it. I hope this makes sense, if not, please ask me to clarify.  These companies are too big to have an effective defense against this, their crowding in where they cannot work will fail, and it is our duty as good merchants to hurry the process along.  Every time a secretary buys a ream of paper from Staples through your store, she gets a credit for your store, thanks to a spiff funded by Staples.

I am not a retailer, but I adore a good fight.  I envy those retailers who will be executing this strategy (it does not mater if I thought it up myself, fact is, so did 500 other people who read the same article.)

These test stores will get their knuckles rapped, but it is tradable.  Make money as they make their mistakes.

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