Retailers: How To Beat A Lower Priced Competitor: Your Vendor

By Bob Phibbs
April 2013

Many retailers ask this question: what do you do when you are directly competing with one of your vendors?

For example, a store selling Sony products has to compete directly with Sony online, which has inherent cost and supply advantages over brick and mortar retail businesses.

Not only is it easier than ever for customers to buy products directly from manufacturers online, but these manufacturers are also opening their own stores and using third parties to get around the very retailers who built their business.

Stockholders are looking for additional value and the easy way is to get it is to cut out the middleman; just like the customers.

The problem is, the customer still needs a middleman.

As an independent retailer, how do you turn a profit on products like this when your margins are thin to begin with?
From the point of view of a traditional brick-and-mortar retailer, adding value for the customer can be an easier proposition when you’re competing with online giants like eBay and Amazon. The very fact that you are able to provide instant in-store customer service has, for years, put you at an advantage.

But when you have to compete on price directly against vendors’ online stores, things get more difficult. One merchant told me a vendor dropped the prices at their online store below what it costs her to buy from the vendor. Sound familiar?

While you should still focus on bridging any service gaps you find in the vendor’s operations, you also have to carefully think about how to compete.
The first rule of thumb is simply to look the part of a successful competitor. It is important that your store looks every bit as professional and inviting as your vendor’s. In fact, you should put the effort into looking better than your vendor.

While you might think it looks “vintage” to keep things the way they were when dad started it in the 60's, shoppers don’t.

You just look old.

Today’s shoppers want the illusion of vintage. They want the feeling of a funky crab restaurant that is clean, the food great and the servers well trained, so they seek out Joe’s Crab Shack – part of a multinational chain. Same in retail. We want the feel of old-time clothes but want it without the BO under the arms and the questionable stains on the pants.

That means your store shouldn’t look, feel, or smell anything other than first rate and modern.

Update your flooring, clean it, if possible replace it. Replace your worn-out furnishings with new. Replace your 26? tall counters with modern counters 32? high. Replace your display fixtures that have had the chrome ripped off from all the scotch tape with gleaming new ones. Upgrade your yellowing fluorescent lighting covers and add even more bulbs or replace with new LED spotlights where appropriate so your camera equipment, vehicles, tools or kitchen appliances gleam.

Then ensure your professional and attractive displays are well maintained with a cleaning crew, not leaving it up to your sales team to deal with it when they “have free time.”

In short, minimize anything that makes you look tawdry or out of touch with the times, particularly if you are selling computer hardware, software or electronics. By cultivating the right image and going to extra lengths to provide your customers with a modern impression, you stand a better chance of winning business from the easily swayed consumer whose primary concern is the merchandise itself, not where he or she bought it.

And lose your multiple messages of SAVE NOW! FREE DELIVERY! and “SALE” in your point of purchase materials. Customers aren’t stupid and when we notice dozens of day-glo signs hanging from the ceiling, papering over your display windows and taped to every product, it looks like you’re like desperate. Even if you are, never look it.
Next, get the energy right in the store.

That means finding ways to get your vendor’s products into the customers’ hands. Finding ways to demonstrate live – not on a LCD screen – using your best and brightest people. That might mean borrowing a page from the Apple store’s original plan of holding classes in the store. That might mean borrowing a page from the new AT&T store and have cubbies where customers and salespeople can sit and talk about the products.

Niche your store to specific interests of customers. If some customers use your products for sports or music or education, build lands within your store to get customers curious.

A curious customer stays longer in the store and is more likely to buy.

I’m a big proponent of retail sales training, mainly because people turn to me specifically to share my selling system. That means back off the 50's closing techniques and see your employees’ main job as first:

1. Getting customers curious about what they can do with your products and
2. Getting your products in the customers’ hands.

It is OK if someone just spends 30 minutes “looking.” Be grateful for it!

Yes, of course you’ll want to close the sale - but that isn’t the goal of the interaction.

At the same time, how can you help your customers get more out of products they’ve already purchased? Your Analytical salespeople who pride themselves on knowing everything may not be the best salespeople because they can vomit too much information to potential customers.

But once that customer has purchased and used a product for a while, they can be eager for more knowledge about their product. You can really deepen your relationship because the customer who is most likely to look for low price is the one most interested in information. Find ways to connect to them, offer by email, text or old school phone call offering a tip for getting more out of their purchase.

The old adage that you need to know your customers is still true.

Let your knowledge guide you in selecting merchandise. Know which products from a particular vendor they are looking for, and then keep the right quantities of those products in stock.

Remember - your best salespeople should be able to poke holes in anybody’s products, so train them how to show several answers to your customers’ questions, not just their own personal favorite of one vendor.

You are not going to outdo the vendor or a retail giant like Amazon when it comes to supplying each and every make and model under the sun. Instead, direct your energy into making sure that you are able to meet the demands of your customers when they come to your store to shop for popular branded products. And guide them to the choices you have, not just the one they found online.

I have to tell you, I’m getting more calls on this subject from retailers who feel overwhelmed with all the choices customers now have.

You can’t close the vendor.
You can’t offer greater discounts.

You can be the speedboat that can react quicker to trends.
You can be the lifeboat for customers who feel overwhelmed by choice and just want someone to make the buying easy, fun and memorable.