Friday, June 4, 2010

Competitive Cooperation

There are two major classes of retailers. The first includes companies like WalMart, K-Mart, Target and Costco, and the second is simply everybody else. An independent retailer such as a convenience store operator cannot compete against the first class. The 'big boys' compete against each other in their own class and create a hostile environment for the rest of us.

During World War II, the most powerful competitor was the Axis — made up of Germany, Italy and Japan. The other class, we later called the Allies was made up of Britain, France, Russia, the US, Belgium, Philippines, Norway — and so on and so forth. In order to compete against the Axis during the war, countries having issues with one another such as the US and Russia were compelled to cooperate with smaller countries like Australia and Britain to compete against the evil forces that were gobbling up Europe. Otherwise, the Axis would have consumed the world and amassed the power to command control over the Earth. Had we waited a bit longer, Hitler would have been victorious and WWII would have gone on indefinitely.

Think about your competition for a moment. In addition to competing with other convenience stores, you are also competing with grocery stores and department stores, the Internet, car companies, insurance companies — everywhere a consumer can spend his disposable income.

Now, imagine for a minute your market area is a football field. The playing area of a football field is approximately 58,000 square feet. Before companies like Sears and Montgomery Ward came along, independent retailers were able to compete with each other over the entire playing field. "Big Box" retailers like WalMart, K-Mart and Costco have had an even greater effect in this combat area. Now we are competing in a space of only a few square feet. If we don't take action to change the game, soon we will be pushed back into the end-zone.

Some people believe it is useless for us to battle against the Big Box retailers. They believe we must operate in the environment they command and be content with picking up the scraps they leave behind.

World War II buffs may recall Neville Chamberlain, the prime minister of Great Britain from 1937 to 1940, who returned from Germany after his meeting with Hitler in 1938, holding a document known as the Munich Pact. It was heralded as "peace for our time". What it was was a failed act of appeasement with Nazi Germany. It was in fact, a planned co-existence in a world dominated by Hitler.

"The enemy of my enemy is my friend." A good example of this occurred when Hitler invaded the Soviet Union in 1941 and Winston Churchill declared "If Hitler invaded Hell, I would make at least a favorable reference to the Devil in the House of Commons." We had little choice but to make a pact with Stalin to save the world from the Nazis.

After studying the landscape that has evolved over the past two decades, I believe the time has come for drastic action against the first class, the big box retailers, and in order to make a difference, individually, we are incapable of going it alone. At some point in time we must define the rules of 'competitive cooperation' to strike back with enough force to save the independent retailer. The time for the new "allies" to act is now.

Sacrifices have already been made. Many of the weaker operators have already failed or are facing imminent defeat. Those that remain strong must combine their resources into a weapon powerful enough to stem the tide of aggression. We owe it to ourselves, our employees, and we owe it to the American people. Once the last independent retailer has been defeated, it will be too late.

Just as the combined power of the allies became strong enough to defeat Nazi Germany, independent retailers can become more powerful than our larger competitors as they continue to fight among themselves. The Big Boys became powerful through the use of technology during a time when the same technology was out of the reach of their smaller opponents. Today, the technology lies at our feet, but we refuse to pick it up and use it.

I'm talking about competitors cooperating in a non-competitive environment. Hey, we all plug our television sets into the same electricity. After all, who wants to construct their own power plant? Maybe there are other ways we can cooperate for our general benefit.

I have already pointed out how we can share a database of UPC codes (see UPC Codes below) to the benefit of independents. We've not even done that to any large extent. But of all the things we can do to better our chances, the sharing of computing technology is one available that has been totally ignored. Why continue to bear the cost of inferior technology that will become obsolete before you have the time to implement it?

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