How Local Companies Can Compete With Amazon... And Win

The death of retail has been predicted for decades. Digital revolution has brought with it the ability to sell massive quantities of products without setting up a store and often without even owning the product.

How can small local stores compete?

The martial art of Kung-Fu is about redirecting your opponent’s energy to your own advantage. Using some marketing Kung-Fu provides help for small businesses by turning the disadvantages of local stores (lack of selection, higher price, cost of physical space, lack of digital customization) into advantages.

These strategies are tools for small business to compete with the big guys; let's dive in.

Lack of selection

Ecommerce isn’t constrained by what it can fit into a high-rent store downtown; it can create global distribution chains to store more goods for cheaper than is possible for any local retailer—but, more is not always more.

In the music industry, curation service Songza grew to over 5.5 million users and was bought by Google for upwards of $15 million. The more recent Apple Music service is similarly using people, not algorithms, to curate music for customers. There’s just too much music out there for us to choose the best stuff ourselves.

Choosing is hard; the Paradox of Choice is a phenomenon in psychology where the more choices we have the less happy we will be with the choice we eventually make. Researchers think that when we have too many choices we can’t know whether we made the best choice, even if we otherwise would have enjoyed what we choose.

Smart retailers and restaurants use this to their advantage by offering customers less selection. Instead, focus on curating a small selection of great products or menu items. Customers will appreciate that you (the expert) have made the hard choices for them and they will be happier—both consciously and unconsciously—with whatever they end up buying from you.

Pro Tip

Sell local products to double down on your exclusive selection. Large companies can curate music, products, and food, but their scale doesn’t allow them to sell locally produced goods.

People love supporting local business, by stocking local goods they can support both you and the creator.

Higher prices

Even with the smaller footprint of a local business you can’t hope to match the economies of scale of large companies.

Embrace your higher prices to convey high quality, experience, and service.

We wrote previously about pricing strategies, in this case you can use prestige pricing to show customers that your business offers high quality products. Combined with good curation and the following two strategies you will have no problem getting people to pay more and leave happy.

Cost of physical space

One of the major reasons for higher prices is that you have to give customers a physical store they can visit. The store often is located somewhere with higher land value, and higher rent, so customers can easily get there; this is in addition to storage facilities that everyone else also has to pay for.

There is no question that it’s cheaper to sell online.

That said, there’s a reason Apple built retail stores when it was already successfully selling hardware online—customers want somewhere they can go to interact with the product.

Customers won’t know how clothing from an online store fits and they won’t know how a new dish set looks until it arrives. Sure, if they don’t like it most online stores offer refunds, but the whole process can take days or weeks. Your store allows them to get around this hassle by trying on and handling your products so they get it right the first time.

Physical stores are an advantage, even if they do cost more.

Lack of digital personalization

Let’s be honest, you’ll never know your customers as well as some of the larger online businesses—recent research shows that with 150 likes Facebook knows you better than your family.

The difference is that small businesses can offer human personalization rather than digital personalization.

People don’t like it when an algorithm (or the company behind the algorithm) knows too much about them. Many are turning off cookies, using tracking blockers, and staying away from websites that collect too much information. In contrast, if you remember something about your customers they’ll be pleasantly surprised.

When a computer remembers you it’s cold and creepy, when a person remembers you it feels special.

In Practice

To combine these strategies curate a small selection of quality (perhaps local) products (#1); make customers feel at home in your space (#2) by getting to know them (#3); and, don’t worry about higher prices (#4), it expresses the quality, service, and space that you have created.

Some customers will always prefer the low prices and algorithms of online shopping, but for those who want a personal touch and some local charm make your store the place to go.

Have some ideas on how local businesses can take on the big guys? Let us know by commenting below.