The Fight for Survival by INDEPENDENT RETAILERS

USA Today (Society for the Advancement of Education), July, 2000 by James R. Lowry

Small retailers are limited in their ability to advertise and use all of the available media. They have neither the funds nor the talent to produce effective layouts and copy. In large metropolitan areas, newspaper, television, or the favored morning and evening drive-time radio ads may be too expensive. For some, billboards may be useful, but for numerous independents, the yellow pages of the phone directory may be their best advertising medium.

Many independents are unable to use their personnel and capital resources efficiently. Training programs for the unskilled employees who compose the workforce are nearly nonexistent. Because of the low wages paid, employee turnover is often high. An indication that space and other capital resources are inefficiently used in small firms is shown by the ratio that measures the sales volume per square foot of floor space. For most lines of retail trade, studies have indicated that this ratio varies directly with the size of the store--the larger the store, the higher the sales for each square foot of floor area.

Another disadvantage is that the independents lack the ability to tap into information technology as efficiently as the giant chains. Target, Office Depot, and other large retailers have the capability to monitor instantly through real-time information what is currently selling and what remains in inventory. The huge chains link their computers to a manufacturer's computer and have their stocks of goods automatically replenished. Because of their limited staffs and finances, most independents are unable to access technology for its greatest benefits.

An additional difficulty for a small independent is its inability to innovate or experiment with new retailing concepts. A multi-unit retailer, such as Wal-Mart or Toys "R" Us, can try out a new merchandising idea in one store and, if it is unsuccessful, the loss can be absorbed by the earnings from the other stores.

Perhaps the greatest weakness of numerous small retailers is their inadequate merchandising acumen. Individuals frequently have a strong interest in a particular field, such as arts and crafts or antiques, that they want to pursue. Although they understand the technical aspects of their fields, they may not be aware of the diverse and exacting activities necessary to create a successful retailing enterprise.

Various research studies indicate the depth of the problems faced by independents. Even in the prosperous late 1990s, the retail failure rate approached the high levels reached in the recession of the early 1990s. In the bookstore industry, independents accounted for 32.5% of total book sales in 1991, but the figure had dropped to 17% by 1998. According to the National Retail Hardware Association, the top 25 chains accounted for 26.5% of all sales of lumber, building materials, paint, and hardware in 1990; by 1997, this figure had risen to 42%. In combination with competitor pressures and their own weaknesses, independents are suffering.

A three-step strategy