Rising business rates and overheads. Low consumer spending. Empty high street shops. There is a steady stream of “doom and gloom” stories about the UK high street and the growing pressures on retailers. If you are an SME trying to sell and promote your product, tackling and surviving this environment may feel like an overwhelming prospect. Here are five practical points to think about when facing this daunting challenge:
1. Focus on your product and really know your customer
It is a good idea to have a clear understanding of, and focus on, your target customer. Think about their age group; lifestyles (are they renting or home owners? are they students or in work?); monetary pressures (do they have children? do they have a mortgage? what income bracket are they in?); shopping habits (where else do they shop? do they shop in store or online? are they interested in fashion statements and what is popular at a particular point in time, or classic pieces?); and online habits (when are they most likely to be online? do they respond to social media interaction?). If you do not have this data, are you able to capture this information in a user friendly and data protection compliant way?
Armed with this information, SMEs may then want to focus on making or enhancing a fit for purpose product that meets their target customer’s expectations. Shopper savviness, and the trend of shoppers spending their money on experiences rather than products, has been well reported over the past few years, but a good product that meets the needs of a consumer may have a better chance of tempting the consumer away from experiences.
2. Embrace the direct to consumer model
Supplying your customers directly means that you are more likely to own your customer relationship and have better access to customer data. You can then make decisions about your product, price or marketing strategy based on your collected data. You will also have fewer links and players in your supply chain, which should give you a better margin on sales. However, a successful direct to consumer model relies on businesses being able to get their brand and products in front of customers and having their voice heard amongst all the other sellers in the market. SMEs may therefore want to focus on having: a unique product which meets customer expectations; a user friendly and attractive website (particularly with an e-commerce function); strong social media presence; and great brand ambassadors, to try and raise their profile and boost sales. Don’t forget any applicable advertising and influencer rules when advertising your products.
3. Really think before offering any price reductions
“Discount fatigue” has created a group of shoppers that are holding firm on making purchases until they are offered on sale. Remember this when setting your prices: once you lower your prices, your scope for offering further discounts and ability to pass on any price pressures onto your customers gets smaller and smaller. Consider your product against your retail price and if your focus is on quality, think twice before reducing quality to get a lower price.
4. Consider pop ups in a larger retailer or other space
A pop up or concession can give you the opportunity to enjoy retail space in the short term and/or at a lower cost, without the need to bear the high costs and risks associated with taking out a long term property lease. It gives SMEs the chance to meet customers directly and gain invaluable feedback.
Choice of location is key to increasing your brand’s prominence and to grow sales. Consider the pop up’s location (is it on or off a main street? are your target customers likely to be in this area?), adjacencies (does your product sit naturally amongst the adjacent shops and product categories?) and fit out (do the décor and surrounding environment complement your product?). If you need to change the décor of the pop up, consider if it is worth spending money on this given that the pop up will last for a limited period. SMEs should be aware that the premises owner may offer them a limited opportunity to change the fit out and will also likely expect SMEs to agree to their rental terms, without any negotiations. You should also think about how you can best leverage the success of a short term pop up for the long term.
5. Remember your termination rights
If you do enter into a formal contract with a retailer, think carefully about your arrangement with the retailer and the termination rights which you would like (for example, you may want an immediate right to terminate if the retailer enters into any arrangement with its creditors, administrators or receivers). SMEs should also think about how best to protect their stock on termination and ways to improve their chances of recovering products in the event of the retailer’s insolvency.