Mega-Retailers are Driving Smaller Players out of Business. (Essay Sample)

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June 27, 2016
Mega-retailers are Driving Smaller Players out of Business.
Today’s business reality places tangible and sometimes insurmountable obstacles in the path of local retailers gaining decent economic returns. One of these obstacles is the rise of the big-box or mega-retailers whose financial reserves, ability to fulfill and generate demand, and brand recognizability advantageously position them against these small business owners. Consequently, the latter find themselves in the unenviable position of competing against market players that charge aggressive or even predatory prices, have a wide market reach through advertising and last-mile product delivery, enjoy unrivalled economies of scale when making bulk purchases, and can provide massive promotions such as discounts and free goods to an ever increasing price-conscious consumer. The resultant competitive challenges that these local retailers face are unprecedented and threaten, as has already happened in innumerable scenarios, to drive them completely out of business.
When consumers decide to make a purchasing decision, they have an explicit expectation that they will find the lowest possible prices and widest selection of goods in mega-retailer outlets than in “mom-and-pop” shops. Quite frequently, large retailers attract consumers because they offer numerous products at great prices compared to smaller players in the same line of business. Selection and price are not the only differentiators that make these big-box retailers appealing.
In many cases, mega-retailers have the financial capability to make or purchase goods from factories and distributions centers at low prices because of their bulk purchase orders. In contrast, it is unusual to find a small player that shares a supply and logistics chain that resembles that of bigger outlets in terms of partner selection, catalog support, and supply capacity. Ultimately, smaller business players continue to purchase (original) goods from these corporations and hope to sell them at a certain margin in the hopes of generating a profit.
Saving money is one the thing that entices consumers away from smaller business outlets and right into big-box physical retailers. Consumers are immeasurably concerned about saving money and are constantly scouring for the best deals, the beat coupons, the best prices, and the deepest discounts, and unfortunately, only large retailers can offer these consistently and predictably. Competitive prices are the key to business success, and small business players struggle to compete against these physical and online mega-retailers on several fronts as outlined above.
Another case in point is the challenge these smaller ventures face in establishing a defensible market presence, creating a beachhead in consumer mindshare, and enhancing local market share. As in any business ventures, to attract and capture more customers, a strong presence is critical. In turn, projecting this strong presence requires a superlative marketing strategy. Mega retailers have the financial capacity and expertise pool to pull this off. These ventures can deploy unprecedented marketing dollars, tools, and other leverage points in their quest to generate and capture demand.
Indeed, big-box retailers use their financial war chests to impose their presence in the local markets and across a variety of channels, including radio and television commercials, pay-per-click (PPC) advertising, search engine optimization (SEO), social media engagement, print media channels, and field marketing teams. Successful use of any of these channels requires businesses to have strong financial support. For instance, big-box retailers consistently run numerous radio and television ads across different key demographics and market pools. By doing this, these players manage to make their brand name relatively well known to the public.
Undoubtedly, this is one of the biggest challenge smaller business outlets faces since they struggle to publicize their brands due to insufficient capital, inadequate domain knowledge, and lack of familiarity with available tools. Regardless, even when these “mom-and-pop” stores do leverage these channels, they cannot do so with the same level of scale or success as their more illustrious competitors. These insufficiencies underlie the unequal terms under which these two types of physical retailers compete. It is indeed tragic that local ventures cannot possibly compete with national and online retailers for consumers and neither can they offer the same variety of products, or other attendant benefits, to lure customers back into their shops.
Building on this extensive reach, mega=retailers continue to look for ways to fulfill customer demand. Key ways in which this is achieved include online or electronic commerce and quick last-mile deliveries. Some businesses, Amazon Inc in particular, have built numerous fulfillment centers near large markets from which they fulfill online orders sometimes all within twenty-four hours. Amazon Inc, a leading cause of small retail closures, also offers membership that promises free deliveries within a two-day period.
Physical retailers, on the other hand, also ran collaborations with delivery firms across dozens of major markets to ensure that customers can make their orders online and pick the by the curbside or have them conveniently delivered at cost. Small retailers cannot possibly be expected to service their customers in this way, let alone effectively transition to the online-first world of commerce and where case studies of successful attempts exist, are at a scale so insignificant in scale as to reassure buyers concerned with selection and prices. Another important point is that these retailers offer product recommendations, steep discounts, and a platform to engage with other buyers through reviews on their online sales. These challenges compound others that smaller players face such as an inability to pursue the “long game” of growth by subsidizing products, lack of human and other resources to effectively market products and the overall brand, and lack of economies of scale that destabilize their unit economics. Ultimately, the smaller retailer tends to offer a limited selection of goods at relatively higher prices and with little potential for unfailing personalization and last-mile delivery.<...