Many independent retail stores try to take care of everyone’s needs that walk in the door, like the larger businesses. This is not profitable for the independent retailer to be able to do this. In fact, this is one of the fastest ways for the retailer to end going out of business.

You may be thinking that you will be losing sales, if you do not. The key for any retailer is to take care of most of their customers. In many businesses, it is estimated that 80% of sales comes from 20% of the customers. By trying to take care of everyone’s needs, the inventory level will be high and a possible negative cash flow.

The independent retailer best chance to compete against the larger retailer will do best to focus on something other than price. The larger retailer will probably get a better cost-plus with extra traffic, the larger business can prosper on a lower gross margin. The independent retailer should pick a niche and concentrate on taking care of 100% of customers in that niche.

Most customers who shop the larger stores do so often because of price. Smaller retailers normally have superior customer service to the larger businesses. By having a niche will help create the perception about being an expert in that particular field. Price is not as a big issue to customers when you create a niche. Finding a niche is often just taking something you do and becoming more focused.

By having a niche, you can create unique services or products that your targeted market needs. By having these unique product and or services, you do not have to worry about direct price comparison. Customers may check the value of your products and services and compared them to competitors. Make sure your niche is unique from your competition plus, it must be viable.

For example, let’s say your niche is clothing for mature women. The larger retail store may just have a few sizes and choices. On the other hand, you can have many sizes with more choices and stress better quality. This way many customers will visit the independent retailer first, if you are in their niche market.

Services are often the best way to create a niche, even if most of your business deals with inventory. There is a sufficient amount of customers that will pay extra for extra services. However, sometimes, it may be better to have niche services the customer gets free. This will create much goodwill and give independent retailer the “WOW” factor when the customer leaves. Some examples of services are free gift wrapping, home delivery, product assembled and extended warranties.

Smaller retailers can level the playing field by creating a niche. It is not a wise business decision trying to compete with larger businesses unless you have something else to offer.