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 contactors, the ability to stop at the branch early in the morning on the way to the jobsite, 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.
Since 1980, Dan Kaplan has helped businesses just like yours stay competitive with Distribution Management Software Solutions that can offer a global view of your customers, inventories, finances and sales. For free articles on how to mainstream your operations, lower operating costs, and implement a “just in time inventory” system that results in substantial savings and improved productivity go to: http://www.smcdata.com/articles.html
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By Dan Kaplan
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