Shop Vs. Shop: How Not To Compete
This came up, on my tour. I strolled into a town that had two independent, "core" skate shops. I made a point of visiting them both. I am non-partisan. I'm an equal-opportunity shop-proponent. I support all core shops. Even if they don't always support each other.
The first one that I stopped in at asked me a very simple, honest, straightforward question: "How do I compete with the other shop?", he asked.
"What do you mean...?" Y'gotta admit, that's a pretty open-ended question, right there.
"Well, I need an advantage over 'the other guys'. Should I maybe, lower my prices a bit, to gain a competitive edge...?"
I looked at the boards on the wall, and the corresponding prices. They were already, pretty damned low. This guy was already taking a margins hit, right off the bat. I really couldn't imagine this dude actually lowering prices any more than he had, already.
How did I answer the question? "Whatever you do, do not compete solely on price. Ever, ever, ever".
He looked at me kinda funny. "Why not?", he asked.
Here's why. And, I've seen this happen, firsthand. Many, many times. Too many times, in my book.
When you have two shops, in fairly close proximity to each other... and, we'll assume the very worst here, and add that these shops might be bitter enemies, and have some really bad blood between them... the first, knee-jerk reaction is to try to smite the competition out of existence. The easiest...
and at first sight, most effective way to do this... is to price them right out of business. Which is, a reasonable enough assumption to make, I suppose. But, it is unfortunately- at the very best- a somewhat effective short-term tactic that does not lend itself to a healthy, long-term strategic plan.
The problem is that, when you lower prices below a "reasonable" threshold, strictly to gain a temporary, competitive advantage... and, we both know that that 'other' shop is gonna react in kind, and do the same dumb thing that you just did... you're also sacrificing margin dollars that your shop desperately needs to pay the bills, keep knowledgeable employees on staff, cover the rent, etc, etc, etc. So, in a sense, you're cutting off your nose, to spite your face. In a short-sighted attempt to spite the competition, you're also contributing to putting yourself out of business. That is why, it's just not the best of ideas.
No: It's far better, smarter, and wiser to differentiate yourself from your competition, while keeping margins high. If the shop down the street sells a lot of Dwindle, Element, and Zero? Then you can stock Real, Krooked, Crimson, and Santa Cruz. If they're more "mainstream"? Then, you can opt to be more "core". If they're left-wing zealots? Then, you can be a Reagan-Republican. If they're strictly "street"? Then, you can opt to cultivate a longboard scene in your town. Compete on customer care, product selection, and the overall shopping experience. "Don't Be Dumb; Be Different!" - that's my mantra.
The truth of the matter is, the first reaction to these things is almost never, the right decision to make. Competing on price, and price alone, only leads to Mutually Assured Destruction. The net affect just might be both shops going out of business, and a Zumiez swooping in to profit off of your idiocy.
I doubt anyone really wants that.
Bud Stratford is a skateboarding business writer with strong roots and ties in the skateboarding industry. Feel free to contact Bud at budstratford@aol.com.
The first one that I stopped in at asked me a very simple, honest, straightforward question: "How do I compete with the other shop?", he asked.
"What do you mean...?" Y'gotta admit, that's a pretty open-ended question, right there.
"Well, I need an advantage over 'the other guys'. Should I maybe, lower my prices a bit, to gain a competitive edge...?"
I looked at the boards on the wall, and the corresponding prices. They were already, pretty damned low. This guy was already taking a margins hit, right off the bat. I really couldn't imagine this dude actually lowering prices any more than he had, already.
How did I answer the question? "Whatever you do, do not compete solely on price. Ever, ever, ever".
He looked at me kinda funny. "Why not?", he asked.
Here's why. And, I've seen this happen, firsthand. Many, many times. Too many times, in my book.
When you have two shops, in fairly close proximity to each other... and, we'll assume the very worst here, and add that these shops might be bitter enemies, and have some really bad blood between them... the first, knee-jerk reaction is to try to smite the competition out of existence. The easiest...
and at first sight, most effective way to do this... is to price them right out of business. Which is, a reasonable enough assumption to make, I suppose. But, it is unfortunately- at the very best- a somewhat effective short-term tactic that does not lend itself to a healthy, long-term strategic plan.
The problem is that, when you lower prices below a "reasonable" threshold, strictly to gain a temporary, competitive advantage... and, we both know that that 'other' shop is gonna react in kind, and do the same dumb thing that you just did... you're also sacrificing margin dollars that your shop desperately needs to pay the bills, keep knowledgeable employees on staff, cover the rent, etc, etc, etc. So, in a sense, you're cutting off your nose, to spite your face. In a short-sighted attempt to spite the competition, you're also contributing to putting yourself out of business. That is why, it's just not the best of ideas.
No: It's far better, smarter, and wiser to differentiate yourself from your competition, while keeping margins high. If the shop down the street sells a lot of Dwindle, Element, and Zero? Then you can stock Real, Krooked, Crimson, and Santa Cruz. If they're more "mainstream"? Then, you can opt to be more "core". If they're left-wing zealots? Then, you can be a Reagan-Republican. If they're strictly "street"? Then, you can opt to cultivate a longboard scene in your town. Compete on customer care, product selection, and the overall shopping experience. "Don't Be Dumb; Be Different!" - that's my mantra.
The truth of the matter is, the first reaction to these things is almost never, the right decision to make. Competing on price, and price alone, only leads to Mutually Assured Destruction. The net affect just might be both shops going out of business, and a Zumiez swooping in to profit off of your idiocy.
I doubt anyone really wants that.
Bud Stratford is a skateboarding business writer with strong roots and ties in the skateboarding industry. Feel free to contact Bud at budstratford@aol.com.