Each week, we seek out expert advice to help a small or medium-sized company overcome a key issue .
Andy Elder felt he had a thriving little neighbourhood meat shop in the Leaside area of Toronto – until a huge retail plaza opened up down the street. It included a 50,000-square-foot Longo Brothers Fruit Markets Inc. grocery store.
Suddenly Mr. Elder’s business, which he opened in 2008, faced new stiff, competition.
His 1,250-square store, with one full-time employee and three part-timers, straddles food retailing and food service, selling premium fresh meats as well as on-the-spot, cooked-to-taste meat, or, at lunchtime, sandwiches. The store has some stools at a counter.
Before Longo’s became a neighbour, sales at Mr. Elder’s Grilltime Gourmet Meat Shop Ltd. had been going well, rising 16 per cent in the first eight months of 2012 over the same period a year earlier.
However, in the three months following the opening of the Longo’s store in late August of last year, sales fell 4 per cent from the same period a year earlier, the first drop in the business’s history, Mr. Elder says.
While sales during the December holiday season climbed 7 per cent from the same time a year earlier, and the company’s sales overall jumped 10 per cent to $600,000 for 2012, the precipitous drop that followed the opening of the Longo’s store unsettled Mr. Elder. And this year has started out worrisome for him again, with flat sales in the first month and a half.
About 75 per cent of Grilltime’s sales come from the fresh meat, fish and chicken it offers over the counter; the other 25 per cent is generated by cooked foods, sauces, rubs, marinades and grilling accessories.
Longo’s also offers fresh meat, in direct competition with the bulk of Grilltime’s business, as well as prepared meals.
Mr. Elder is also concerned that a price war between Longo’s and five other grocery stores, all within a five-minute drive of his shop, could break out, and drastically undercut his business.
“I always get concerned that they will start shooting cannons at each other and start discounting to get market share. I’m scared,” he says.
The Challenge: How can the small business compete when a large grocery chain moves onto its turf?
THE EXPERTS WEIGH IN
Kenneth Wong, marketing professor, Queen’s School of Business, Queen’s University, Kingston, Ont.
He will be hard-pressed to beat the chain grocery stores. On similar products, they will have lower costs, and thus, lower prices. That means he has to compete on quality.
As a food service, he has many problems. First, a couple of stools doesn’t make him a restaurant. He has none of the amenities nor service to allow him to offer any form of eating experience. The problem is that he wasn’t built to be a food service firm and his operation is built around retail.
Still, I suspect food service may be his best bet. However, it should be food service that stresses his unique taste that he adds via his recipes and preparation
Finally, I would stop focusing on Leaside. He sells a specialty product and, if he can offer delivery, there is no need to limit himself geographically. He needs to expand his market scope. He should also recognize that his December bump makes me think he is a source of “party food” and may want to develop some specials and promotions directed at group sales at Christmas, Grey Cup, Super Bowl and other entertainment-heavy events.
Mark Satov, president and chief executive officer, Satov Consultants Inc., Toronto
If he plays a price game, he will lose by definition. If he has something special in his place, he won’t lose customers to Longo’s on price. The retail game is about a mixture of occasions and consumer segments. So the busy mom who is doing her whole shop at Longo’s will buy the meat there regardless of the price, [but] he foodie will go to Longo’s for their groceries, the fruit store for their fruits and vegetables, and the great butcher for their meats.
He sells stuff that Longo’s and other grocers don’t. He is a specialty shop with a bit of a quirky fun feel and more credibility on the quality of his meat.
My overall advice: You aren’t going out of business. If the grocers start a price war in your area on meat, go the other way and sell the quality. Your business will drop because people bundle their shops, especially certain segments, but there is always a place for a high-end specialty.Think about expanding his service offering, highlighting the experience and quality consumers get from him, beefing up his marketing and tracking, and enlarging his service radius, either with a second retail location that benefits from shared expense (butchering, smoking, even cooking) or with delivery service combined with other marketing methods.
Mark Gregorini, owner, Frank’s Delicatessen, Sudbury, Ont.
What makes us stronger is that we’re able to hone in on a particular market whereas the [big stores] have to feed the masses. These days, people are looking for very specific things that are a little more quality-driven. I compete against the big boys by offering stuff that they don’t.
His menu seems okay and his prices seem reasonable. If it were me, I’d go for quality. What I don’t understand, is he more of a grocery [retail] store? Or is he more like a fast-service restaurant? Maybe he should focus on being a quick-service kind of restaurant and the spinoff could be the [retail.] Maybe make a grill in the centre, make it a showpiece, and then have the spinoff.
And maybe speed is another thing. I’ve found that the more complicated we make the menu, the more time it takes to make and people don’t have the time. Quality is very important but quality of service is No. 1.
I’ve always been an advocate that location is not a factor. If you have a good product and have good service, no matter where you are, people are going to search you out.
THREE THINGS THE BUSINESS CAN DO NOW
Focus on quality, not price
It’s a mug’s game to try to beat big chains on price. Quality in product and service is how to differentiate from bigger chains.
Expand your horizons
Don’t limit yourself geographically. Offer delivery or consider adding another location.
Be clearer on what you offer
A couple of stools do not a restaurant make. If that is part of the food service you want to offer, you might have to consider revamping or expanding that portion of the business.
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