Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Wednesday, March 11, 2009

Extinct Term by 2050: "Mom and Pop Stores"?

Just travel down Fanshawe Road and you can count at least 10 big box stores – Michaels, Loblaw, Best Buy, Wal-Mart, Canadian Tire, Chapters. The main reason for Big-Box stores massive growth is because of their RVP which generally focuses on selection, and generally a low price. Another important aspect of big-boxes RVP is convenience – generally you can find what you’re looking for in the store and not have to drive around town looking for different items.

But you may ask, “Then how are there so many small independent retailers who are still in business?” The answer: relationships. Our class this week with Jill from Jill’s table has an astonishing relationship with her customers – it is the fuel that drives her business. Because of the relationships that Jill’s Table has built they are able to charge a premium price. Customers enjoy shopping there because it is a positive experience, and it is a heart-warming experience as they are supporting a local independent business. As well, relationships are extremely important because it costs between five and seven times more to find a new customer than to retain one.[1] Independents without a strong relationship with their customers will not survive in the ever-increasingly competitive marketplace, especially with the current state of the economy and where it is headed.

Big-Box retailers have more power with their suppliers than Mom and Pop stores as they buy in huge quantities with a price discount and can then lower the price to the end consumer. Although Mom and Pop stores do not receive the attractive price discounts, they have the opportunity to have more power in the relationship with customers.

What I have just previously described is how the competitive market has been in the past but it has begun to change and I predict that it will only change even more in the future. What I mean by this is that Big-Box retailers are smart and want an even bigger piece of the pie. Who do they want to take it from? Mom and Pop of course! But aren’t some Mom and Pop relationships unbreakable, ironclad, unable to be copied? Well of course some are but the Big-Box stores will stop at nothing to break that special bond.

So what are Big-Box retailers doing to break that bond? Create, build and manage their own bond and relationship with customers. One common theme emerging with Big-Box retailers is offering the same services which small independent stores offers. For example, Loblaw near Masonville Mall now offers cooking classes and hands out recipes using their President’s Choice ingredients. Not only is this smart because small retailers such as Jill’s Table offers cooking classes and recipes, Loblaw is also creating loyalty by pairing these recipes with President’s Choice products as they are only found at Loblaw locations. I have also noticed that there has been an influx of sampling stations for customers and while customers try a sample there is an interaction between the customer and employee. A personal experience of mine was when I went to Loblaw a couple weeks ago they had a special day promoting Fair Trade Products with tons of sampling stations. I tried a few different products and while I was doing so the employees were all very informative, friendly and passionate. It reminded me of the personal service that you receive from a small retailer. Although this was a special occasion, Big-Box retailers do have the resources and capabilities to offer this type of service more frequently.

Another thing that almost all Big-Box retailers are doing are introducing their own loyalty program or joining another loyalty program such as Air Miles. All stores are jumping on board because it is an excellent way to grow sales and build customer loyalty. However, one of the most valuable things a loyalty program provides a company is the endless amount of information such as who the customer is, what they are buying, what their purchasing behaviour is, how it has changed over time, etc. A company which has its own loyalty program such as Shoppers Drugmart in comparison to American Express whose loyalty program is Air Miles owns the database of information. With a partnership loyalty program retailers have to pay a fee to be part of it and another continuous fee to get the database information. This past summer I worked as a marketing analyst for Petro-Canada in their Petro-Points department and was able to see firsthand what information and insights the database provides, how that information is used and how it impacts decisions.

Large retailers are trying to create a special bond with customers with certain initiatives such as product sampling, offering similar services as small retailers and introducing loyalty programs. However, it is nearly impossible to have the close relationships with customers like at Jill’s Table. But when you think about our quickly changing world do we really ever have that personal interaction and relationship with a retailer? When the class was asked if they have a relationship with a retailer very few people raised their hands. Other examples of how the relationship has been cut out include our cell phones or home phones. We no longer have a personal representative that we know, we are always told to call the call centre instead of going into the store. Another example is at Universities now (although Ivey is an exception because it is a very small school). At UWO you are just a student number and in classes of 500 first year students the professor probably knows the names of a handful of students which would not have been the case 25 years ago. These are just a few examples of how our world is becoming less personal and relationships are disappearing.

While Big-Box stores are slightly changing their RVP so that experience is more important and thus, trying to create a bond with customers like small retailers, it is still not 100% imitable. But our world is also changing in which we are seeing many relationships disappear. This leaves the job of small independent retailers even more difficult as they have sometimes devoted their entire lives to their business and the relationships they have built. Only time will tell what happens to the Mom and Pop stores but if the past 50 years is any indication of what will happen, the next generation won’t even know the term Mom and Pop store.

[1] “Cultivating Customer Loyalty.” AFSD. http://www.afsd.com.au/article/dsbm/dsbm6a.htm

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