Posted at 1:00 am on 06/12/2014 by Dr. Rahul Razdan
In the last 10 years, specialty
retailers have grown rapidly. The list of successful companies include names
such as Staples, Dick’s Sporting Goods, Petsmart, Petco, Sports Authority,
Hobbylobby., etc. Recently, many of these specialty retailers have encountered
challenging times due to the disruptive business models coming from the likes
of Amazon, Walmart and Target. In this thought piece, we assert that specialty
retailers could significantly benefit from leveraging local SMB service
providers as valuable customers and partners. As a customer, the SMB community
is a valuable market which can be large in its own right as well as provide
thought leadership to the broader customer community. As a partner, the SMB
community can provide valuable complementary services which can be “networked”
through the specialty retailer (similar to Apple’s iTunes store) to complement
their traditional product sales.
With this strategic direction,
specialty retailers can capitalize on their traditional strengths (brand, knowledgeable
employee force, and nationwide retail presence) with a cloud-based, SMB
optimized platform (their ITunes) to build a business with high-margin revenues
and durable competitive advantage.
Specialty retailers ranging
from Office Depot to Dick’s Sporting Goods have built very successful product
businesses. However, recently, like many specialty retailers, these companies
have faced challenges in the marketplace. Examples include significant store closures at
Staples, Office Depoit/ OfficeMax, Radio Shack, Best Buy, etc.
Figure 1: E Commerce Space
Specialty retailers are caught in the middle
of two powerful forces, ecommerce and colossal scale one-stop retail. With
ecommerce, Amazon provides a compelling solution for customers who are looking
for convenience with almost infinite inventory and are willing to wait for the
shipped product. Meanwhile, retailers such as Walmart and Target provide low
prices and the convenience of one-stop local shopping experience with a
specialized pod structure. Specialty retailers must build differentiated value
statements beyond discounting to pull customers to their stores. What is the
Initially, some of these companies have been
trying to expand their ecommerce through their own brands. As figure 1 shows,
Staples has seen some success with this model, and Office Depot also has a
presence. However, their long-term durable advantages against Amazon/Walmart
are not clear. This begs the question: What competitive advantages can
specialty retailers leverage to service their customers? In our view, they are:
- Strong Brand in the area of interest
- Nationwide retail presence to interact at the
- Knowledgeable staff
Why does focusing on local
small businesses make sense?
The SMB marketplace is a large market (over 28
Million in US alone), and for business oriented specialty companies such as
Staples, Office Depot, Best Buy, and Radio Shack, this can be an interesting
market purely from a customer point of view. Based on our research, SMB
market has significant needs which can be addressed by the business oriented
specialty retail players.
Even if the direct market is not large enough,
local small businesses are typically the thought leaders in the community for a
particular function. When your fishing guide says, this product is great, you
will listen. At the same time, these small businesses are looking for a brand
and technology platform partner to help differentiate themselves in a highly
fragmented marketplace. Specialty retailers can fulfill these needs. How ?
Imagine a cloud-based platform (let’s call it
SMB-Core for now) where complementary small businesses can either through a
self-service portal or work hand-in-hand with specialty retailers to easily
build a sales/ marketing and operations infrastructure for their complementary
SMBs in under a half hour. The cloud platform would provide the SMB:
- Home-page web presence optimized for user
interaction, search, CRM, data mining, and mobile devices.
- Ability to build Offerings which can handle
products as well as complex services working models (scheduling,
- Capability for SMBs to network with each other
to propagate trust and build larger value statements for the customer
- Built-in inventory fulfillment engine (with
automatic reorders to specialty retailer)
- Connections to the other standard cloud-based
platforms used by the business (constant-contact, quickbooks, etc)
After the SMB is on the platform, there can be
an additional ability to use the specialty retailer brand to drive traffic to
the SMB with an “itunes/ app store” style model. In this way, the specialty
retailer can become the central organizer for local small businesses virtual
With such a platform, the specialty retailer
can build a strategic relationship with the small business with several
significant differentiating features:
- Small Business will value the core capability,
and once adopted, the system will become part of the core process flow of their
company. The specialty retailer will be seen as the foundational underpinning
which enables their business. Specialty retailer could charge for this
capability ($25 to $50/month) or monetize it in other ways.
- With automatic fulfillment of consumables,
specialty retailer would have differentiated access to these businesses for
their office supplies. Today, the customer can get consumables/ commodities is
one of a number sources.
- Specialty Retailer can charge a royalty for
any traffic coming from their websites that generate a sale. (Apple Appstore
The strategic implications of the above
approach are significant:
- Specialty retailer brand is leveraged in the
consumer market for the benefit of the small business. Similarly, the thought
leaders in the community are connected to the retailer's brand.
- Since the services typically require physical
contact, the engagement through the SMB is a good hedge vs Amazon, and the
perception of technical knowledge of staff reinforces this engagement.
- Specialty Brand can now sell services along
with its products for a complete solution. This will not only create
incremental high-margin revenue, but also fortifies the speciality retailer's
traditional products business.
At Ocoos, we have been tirelessly building
such a platform to help SMBs successfully grow their businesses. We have a
fast, simple and powerful cloud-based solution that can bring significant
efficiencies and ultimately bring structure to a very large fragmented arena.
For more information on the solution, please contact [email protected].