What’s better than two day shipping? Not needing to place the order to begin with. Change waits for no man and that goes double for businesses. It’s no secret independent retailers have been losing market share to their larger competition for years. There are a host of reasons why the majority of retailers have been losing ground and only a handful of ways they can claw it back.
Suffice it to say some dramatic ideas are needed. The problem with breaking the mold is the increased risk that comes with it. No one wants to be the trailblazer, they want to be second to the top and without the cuts and bruises that come from forging a dangerous path.
Unfortunately, that heightened level of risk is often the only path to greater reward. Even worse, that heightened risk is sometimes the only path during market shifts. The pet industry is currently going through a dramatic shift which has left many businesses flat-footed. Revenue is shrinking, and while some retailers have diversified their revenue through services it is often not enough.
Amazon and Walmart have always had a financial and efficiency advantage over their smaller counterparts but the disparity between the two groups has never been wider. It’s one part infrastructure, larger businesses can develop systems, tools, and processes specifically for their needs, and one part scale.
Together, large retailers can lower costs, increase internal efficiencies, and react to real-time insights. It also allows them to diversify their revenue streams, even if they’re all retail related.
That’s different. People often think of diversification as doing something adjacent or unrelated. Consider a general pet store that opens up a grooming salon in the back. The markets and customers overlap but the revenue, and nature of the revenue is completely different.
It’s that second part I want to focus on, the nature of the revenue. Retail is transactional in nature. You complete your purchase and hold no allegiance to the store you purchased it from. Grooming, washing, and medical checkups are infrequent quasi-subscriptions. The customer will usually need to purchase that service again and because the barrier to entry is higher than a retail based transaction the customer is more likely to stay in their chosen ecosystem. The nature of that revenue is recurring.
Retailers need to diversify their revenue to be partially recurring, even if they don’t provide services. Part of what makes Amazon so powerful is their ability to lock in a small group of consumers to recurring orders. This is what independent retailers need to do.
If retailers can start subscribing a small group of their most loyal customers to their essentials they can begin to solve one of their biggest problems, planning. Planning anything requires a degree of prediction, and prediction usually relies on projection. If retailers can start diversifying the nature of 5–15% of their revenue to being subscription based then they can start planning repairs, maintenance, promotions, updates, vacations, etc. because they will know with more certainty what their revenue outlooks are trending towards.
Some retailers currently do this, but certainly not enough. From an operational perspective it should be the goal to subscribe as many customers as possible to their recurring orders. This will help retailers place wholesale orders more efficiently and with reduced risk while also streamlining the shopping experience for both parties without diminishing revenue.
It’s never easy being a retailer and in many ways it’s harder now more than ever. Independent businesses need to start thinking outside the box to combat their larger counterparts. This means new strategies, offerings, and ingenious ways to use their space. Creating a stronger ecosystem is one part of the solution but more will be needed if small and independent businesses want to shift from defense to offense.