Tuesday, July 16, 2013
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Congratulations Mom and Pop!
For years, regular readers have heard me lament the demise of mom and pop stores. Once a fixture of every shopping district, their doors were shuttered once the shopping malls and big box stores overtook the landscape.
Smaller businesses just couldn't compete. I'm not talking small business by government definition. I mean the sole proprietors and LLCs of the world. Those entrepreneurs who saw a need and filled the void.
They lived the American dream. They learned a trade and provided a service to the community. They climbed the ladder of success back when it wasn't considered a bad thing to be successful. They were the upwardly mobile generation who believed hard work reaped large rewards.
The economic advantage held by chain stores caused their numbers to decline. Those that occupied the shopping malls and outlying big box stores had the benefit of purchasing in bulk. They pay a fraction of what the lone outsider does for the exact same product.
Strike one for the sole proprietor who serves a smaller market.
Free shipping is awarded to those who order above a dollar level set by the supplier. Strike two for the sole proprietor who never reaches that level, and pays shipping costs on top of higher product cost.
Chain stores have multiple outlets, one conveniently located near wherever else you may happen to shop. They can offer interest-free credit card terms if you apply for their branded store card. Strikes three and four for the little guy with one location and barely scraping by.
Yet even with one extra strike, they're still not out.
The independent business is making a comeback. Consumers are finally learning that what you gain in quantity, you lose in quality.
First is the quality of the product itself. It's common for a large retailer to ask manufacturers to bid for the privilege of selling their product.
For instance, Home Depot may solicit bids from various lawnmower vendors. Which one of you can provide a product for less than a given amount? They'll each go to their drawing board and put out respective bids for every component that goes into their equipment.
The manufacturer who submits the lowest price will setup a dedicated area of their plant to produce nothing but Home Depot equipment using the bargain components they acquired. Another section of their facility builds nearly identical equipment for their supplier distribution, using the standard components.
This is why you may have seen John Deere mowers in their store last year, but MTD this year. Next year it may be Cub Cadet or Toro.
It's also why you can have a markedly different quality of performance when you buy the identical model of a given product from a dealer rather than a large chain outlet.
The little guy is usually pretty knowledgeable about the items he sells. He can set them up properly before you even leave the store, answer any questions you may have, service the product as need be, and even get you replacement parts.
And the American public is catching on. They're returning to the local business folks in droves.
Consumers face a choice. In this cash-strapped, fragile economy, are you better served to buy a cheap disposable product or one that is dependable but costs a little more?
More and more people are choosing quality. With it comes the service offered by your local business folks.
They have survived despite the many strikes against them. Well done, mom and pop.
It's All In Your Head
What's the difference between a successful entrepreneur and a business failure?
It's all in your head. You must fail a time or two before you become successful. Those that go on to achieve don't accept failure as an option. They see it as a lesson learned and put that knowledge towards their next venture.
What makes a successful business model?
It's all in your head. What worked for one organization may not for another. Those that succeed have a vision undetected by others. If you know your product and see a previously untraveled path to promote it, take that path.
Howard Johnson did. And on top of producing the country's best ice cream, created the idea of franchising.
Johnson had no time for extracurricular activities. He woke, walked, breathed, slept and dreamt of ways to run a business. It was all in his head.
Born in 1897 during the Industrial Revolution, technology played a large role in his accomplishments. Left in debt after his father died, Johnson turned his focus to finding new ways to do business.
He went further into debt by spending $500 to buy a drugstore with a soda fountain near his Quincy, Massachusetts home. The soda fountain only sold three flavors of ice cream. And they didn't taste very good.
Johnson used a hand-cranked ice cream freezer to experiment with new recipes. It didn't take long for him to recognize that the best flavors came from using only natural ingredients. Word quickly spread that Johnson's shop had delicious ice cream.
Customers drove for miles to buy his product. Now he stumbled on epiphany number two. America would one day become a car nation.
He began to expand but never strayed from serving a quality product. He developed a concept where independent operators could benefit from the brand he created. They would operate under his name. Johnson would provide food, supplies, the logo and the building design.
The first franchise was launched. His brand grew rapidly.
Home Depot has a successful business model that allows them to offer product without putting their money up first. They supply the shelving, manufacturers pay to lease the space. A manufacturers representative will visit the store on an assigned basis to conduct inventory, replenish items that sold and tidy up the display.
The latest trend in business is peer-to-peer industries. Brought to you by various apps and social media outlets, anybody can sell tidbits or offer advice to anybody who may need the same.
Can't find a parking spot? ParkingPanda allows anyone to reserve parking in a private space someone else has made available from any computer or smartphone. Or skip the driving all together with SideCar. Hitch a ride from someone heading your way and never have to hail a cab again.
Skip the restaurant, too. SupperKing allows you to sell seats at your dinner table to anyone wanting to check out home cooking rather than menu fare. It's an iPhone app that works the same way Airbnb does in the hotel industry.
Success is all in your head. Dream it, build it, promote it. Unlock your potential. You'll find the key in your head.
Tip of the Week
In this extreme heat, know the symptoms of heat exhaustion. If you or somebody you know experiences heavy seating, fatigue, dizziness, confusion, nausea, clammy, moist skin, pale complexion, muscle cramps or elevated body temperature, they need to be treated to avoid heat stroke. Have them rest in a cool, shaded or air conditioned area. Drink plenty of water or other non-alcoholic beverages. Take a cool shower but avoid extreme temperature changes.
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