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A Boutique Approach to Loyalty, in Four Steps

4-7-2014 10-59-50 AMWhen it comes to competing against low-priced giants, specialty shops should ignore the specials and focus on the personals.

This is among the key findings of a recent report by LoyaltyOne, “Four Ways to Win for Independent Retailers.” The study reports that 89 percent of those surveyed said personal recognition is the top area in which independent merchants outperform their competitors. That outweighs the leading competitive features of large chains (one-stop shopping, at 83 percent) and e-retailers (a mobile-friendly e-store, 68 percent).

Further, specialty retailers capture more than three times consumer spending than do online retailers. Twenty-seven percent of the Canadian shopper’s dollar is spent with specialty stores, compared with 8 percent at e-retailers.

Yet the specialty shop, even with frequent visits, lags sharply behind its large competitors. About two-thirds of Canadian shopping – 65 percent – takes place at major chains. The reason: Price. Almost half of the survey respondents identified money value as the reason for choosing large merchants.

But mom-and-pop shops would make a mistake to compete on price – and it could be a critical one.

What shoppers say they like about specialty merchants is personalization and the recognition that comes with one-to-one interactions. This is not something that a price tag can cover. Independents merchants have this edge over their large competitors, but there are several other areas in which they can improve if they want to capture big-box customers. The report lists these four:

Use the connection to learn: Forty-five percent of independent retailers said they have asked customers for their feedback, but only 30 percent of consumers think retailers have done so. This could be a coverage gap, or a failure in execution. Creative solutions, like offering incentives to those who provide feedback, can be combined with affordable technology such as cloud backup services that ensure customer information is securely stored and available for staff.

Curate, curate and be local: Survey respondents said they choose specialty shops not for quantity, but for quality. In fact, 42 percent of respondents said they feel overwhelmed by the choices at large merchants. Independent retailers should see their selection as an exclusive opportunity, offering items that appeal to the immediate geography. And speaking of geography, they should take advantage that their shoppers are more likely to support local suppliers.

Be more social: Shoppers are more likely to advocate an independent brand than a large one, so indie shops should be where word-of-mouth is most prominent, and that is social media. Sixty-seven percent of small merchants in the study reported a good return on investment from their social activity. But social media shouldn’t be approached willy-nilly. Merchants should choose the outlets that make the most sense, determine frequency that won’t be tiresome and be sure the messaging is more informative and collaborative than self promotional.

Reach, but stay local: While independent merchants capture a greater percentage of the wallet than do online merchants, they are not guaranteed to maintain it. More affordable technologies can enable merchants to operate an online store – even if just to carry a few best-selling items. And while effective loyalty programs can be complex to implement, merchants can seek partnerships with other businesses that do have a program in place. They can share the data and gain greater understanding of the customer both within and outside their stores.

It is easy to succumb to the temptation of price competition, especially when operating in the shadow of a major brand. But for independent merchants, the key to maintaining an edge is in ensuring that every new service and endeavor adheres to what makes them so special to begin with: personalization.

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