Death of the Small Store Owner?
June 19, 2012
I got a call Sunday night from a friend of mine. She owns a retail store in a small mountain town in Colorado, and she’s called to pick my brain from time to time. It’s a cute little store, focused on “green” baby products. To be fair, my friend, let’s call her Michele to protect her privacy, isn’t in it to conquer the world, or even make a ton of money. She wants something that pays for itself, keeps her busy, and maybe, if it does actually take off, provide an opportunity for one of her kids (they’re all in their twenties or thirties) if they’re interested.
So when she called me this weekend, her question rocked me back on my heels: “Am I crazy to try to run a retail store in this day and age?” She’s been running her store for a little over a year now, and with basically no investment, and no accounting of her time, she cleared about $1,000. And in that time, she moved from a tiny store in a not-so-heavily trafficked area to a store almost twice as big, and she has done virtually no advertising whatsoever. Up until her own doubts, I’ve thought she’s done remarkably well. To basically break even in the first year? That’s not bad at all. Especially when she’s running at a rate where she can buy inventory with the cash she makes from the previous month. She’s doing okay.
But her fears are very interesting, and tell a somewhat scary story for the times we live in:
- She has no website. And she’s seriously wondering if that’s a mistake. She’s older, as you may have guessed, and she’s a little afraid of technology. Her son is helping her out in setting up a web store, which should go live next month. She’s certainly had widespread demand – for occupying a little store in a quaint mountain town that on a good day is a pit stop on the way to national parks, she has seen customers return from literally hundreds of miles away, including a customer in Wyoming who orders by phone. I told her she needs a website that sells products. She’s not happy about that. But considering her customers – young mothers with money to spend – I don’t think she has much choice in the matter. In fact, we talked about how, at RSR, we’re seeing that more and more small retailers start out as online enterprises, and only move to a physical store if they really take off. And even then, they think long and hard about it first.
- She must battle showrooming. I was surprised by this, because a lot of her products are things that she sources herself. She finds women who sew and craft, and requests them to make products like car seat blankets out of organic materials or fair trade materials and the like. You can’t really get some of these products elsewhere, but even with unique products, she’s finding herself comparison-shopped. She’s tried to counteract this with events and classes, where she brings in midwives and diaper service companies and things like this, but she said she stopped holding them so often because she got tired of seeing attendees take pictures of the products with their phones and then go home without buying anything.
- She must battle vendors. One vendor, who has strict controls on how she can price her merchandise, ran an online sale via their direct to consumer site that they never would have let her run. When she called to complain, they said she could match the promotion. But the discount was so steep that she made no money off of it – and she felt compelled to match it because it was so visible online. She said it’s bad enough to have to compete against the Targets and Walmarts of the world, but her own suppliers? That was a tough one to swallow.
- She must battle segment blurring. As soon as she moved her store to the higher traffic area, two retailers already there, who, at the time, were not competitive, immediately added her product categories to their assortments. One was a gift shop – they added baby toys. The other was a book store, who also added toys. And now all three of these shops aren’t happy – they’ve crowded the market.
- No one will lend her money. She’s grown to the point where she really needs to be able to buy inventory on credit in order to stock up for the holiday season. But no bank will lend her money, even with the inventory as collateral. In my days at Peppercorn, we lived and died by the line of credit for the holiday season. But the banks are so tight with lending – especially small business lending – that Michele has no hope of growing her business this holiday season. She’s considering refinancing her home, which has to be a little bit scary for someone staring retirement in the face. And that’s not the most flexible credit line when it comes to purchasing inventory, either.
My heart goes out to Michele. She’s not in an easy business, and it’s not an easy time. It makes me sad to wonder if the old adage is going to become obsolete: “Every retailer started with one store.” I don’t mind that it may not be true any longer. But to think that retailing has become so tough that someone with a good idea and a lot of passion can’t make it the traditional way truly speaks to the end of an era. It may not be “Goodbye, retail store” but it may very well be “Goodbye, retail store owner.”