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The New Age of Specialty Retailing By: Roger C. ParkerRetailing has always been in a state of constant change. Independent retailers have often been the first to be affected by these changes. Downtown retailers first had
to fight the threat of regional malls with their easy access, free parking, late hours and perceived personal safety. Then the Costcos, Targets and Wal-Marts came along followed by specialized category-killers like
Circuit City, Best Buys and Toys-r-Us. The Internet was viewed as the next big threat. Pop-culture magazines and newspaper articles described the experiences of families who purchased all of their luxuries and
necessities online, including food and movie rentals. Did the Internet mean the end of independent retailers? No. For every negative, there's a positive. Although online firms like Amazon.com have obviously
hurt businesses like independent bookstores, there is a less-publicized positive aspect to the Internet. The Internet makes possible a new breed of specialty retailers--stores offering in-depth, informed and
pleasurable buying experiences and close customer relationships to niche markets. The Internet makes it economically possible for independent retailers to cultivate national markets for highly specialized products
and services. Specialized retail businesses that would be totally impractical in the overhead-intensive world of bricks-and-mortar retailing where success is based on location and location means high overhead.
Online specialty retailers can offer a value-proposition that simply cannot be offered by conventional bricks and mortar stores. Let's analyze some of the characteristics of today's new breed of specialty retailers and
look at lessons they offer. Examples
Karen's Books, www.karensbooks.com
specializes in books--and, to some extent--videos about railroads. This market contains a core market of approximately 150,000 railroad lovers around the country (judged by the circulation of the leading railroad enthusiast magazine).
It would obviously be foolish for Karen to open a physical bricks-and-mortar store to serve those 150,000 "railroad readers" scattered around the country. There's simply no location convenient to more than
a fraction of her market. Yet, judging by her fast fulfillment, rapidly growing catalog and frequently-updated web site, her business appears to be doing well. Another example of successful specialty retailing is
Photo-eye, www.photoeye.com, a store/gallery which
specializes in photography books and photographic prints. Although in this case there is a physical location--located appropriately enough in Santa Fe, New Mexicom, a mecca for art and photography lovers--I suspect the
bulk of their year-round sales come from web and mail order sales. Other examples include
www.leonardbernstein.com and www.bobandray.com
. The former serves a community for music lovers seeking information about the classical conductor Leonard Bernstein, conductor of the New York Philharmonic and want
to purchase his numerous books, recordings and videos. Bobandray.com serves those who enjoy classic radio comedy. As in the previous examples, these web sites serve markets that simply could not be effectively served by
bricks and mortar stores. Characteristics of online specialists
The following are some of the characteristics of specialty retailers like Karen's Books:
- In-depth selection.
Both Karen's Books and Photo Eye maintain deep inventories limited. (Karen's Books, for example, maintains an inventory of over 700 railroad-related titles). As a result, enthusiasts can
be confident that Karen's Books or Photo-Eye will have their favorite books in stock for immediate shipment. Many of the titles available at Karen's Books or Photo-Eye are either not available from broader-based
retailers like Amazon.com or they have to be special ordered.
- Informative marketing.
The print catalog and web site of Karen's Books and Photo-Eye contain accurate, concise descriptions of the books in their inventory. Book descriptions are written from the perspective
of informed knowledge about the books.
- Customer service.
Both Karen's Books and Photo-Eye offer better customer service than broader-based retailers. E-mail questions are quickly answered. If you ask for more information about a specific book,
i.e. "Is this the best book on the topic?" or "How would you rate this book compared to competing titles?" you get a personalized response from a knowledgeable enthusiast's
perspective--from an individual you may have dealt with before. Their response will be far more valuable than a response from someone whose last correspondence referred to the latest Stephen King or Danielle
Steele book.
- Synergy sells.
Both Karen's Books and Photo-Eye mail quarterly print catalogs as well as maintain a frequently-updated web site. The print catalogs, sent by themselves as well as included with all orders,
serve as "teasers" to drive visitors to the web site for more information. Neither firm would do as well if they depended solely on either a print catalog or a web site.
- Frequently updated home pages.
The home pages of www.karensbooks.com and www.photoeye.com
are frequently updated. Repeat visitors are not subjected to the same, over-designed corporate logo or distracting graphic. Instead, both home pages begin by featuring the "latest and best."
Realistic pricing. Neither Karen's Books nor Photo-Eye are "discounters," but neither do they expect their customers to pay full price. Both offer "symbolic discounts" that reward
customers and avoid a "high-priced spread" or "boutique" image. This builds customer loyalty. Even when an occasional book may be available at a slightly greater discount elsewhere, customers
will buy from them because of the superior customer service and consistent discounting they have received over the years.
Make it easy. Both make it easy to order by remembering previous order information (including credit card information). As a previous customer, I can place an order as easily as sending Karen a simple
one-sentence e-mail along the lines of "Please send me the New Haven Railroad book reviewed on page 33 of the current issue of Trains." Compare this to the hassle of driving to the local mall and going
through the hassle of special-ordering the bookonly to be told that it is either not in stock, will take ten days to arrive, and/or a deposit is required. Plus, the hassle of returning to the store when the book
arrives.
The fun factor. It's more fun to deal with businesses that know your likes and dislikes and share your enthusiasm. You benefit from better service and interaction when daling with those who share your
enthusiasm and knowledge.
Unlimited opportunities
The Internet offers independent retailers to reinvent themselves and become specialists serving niche markets. Becoming knowledgeable in specialized
areas, maintaining an in-depth inventory permitting rapid fulfillment, providing superior customer service permits independent retailers to compete not on the lowest-common-denominator of price but on the basis of
competence. Overhead-heavy mass merchandisers cannot effectively serve specialized niche markets. Mass merchandisers in expensive locations with large inventories of low-margin, high-turnover products are
locked into selling "high-demand" products at low margins to buyers who don't expect much in the way of customer service other than a low price. This leaves virtually "everything else" to
independent retailers who want to specialize in limited product areas. A local camera retailer, for example, has given up trying to compete with mall-based photography chain stores or national mail-order firms who
exist on razor-thin margins and sell exclusively on the basis of price. Instead, the store is focusing on building a national market based on the store's expertise in telescopes. Both margins and sales are increasing,
and the store is gaining a national reputation in telescopes. Equally important, by specializing in telescopes, the firm can creates opportunities for high-margin post-sale accessory and supply sales. In many cases,
just informing a telescope buyer that the accessories are available is all that's needed to make the sale. Getting started
Specialty retailing presents a potential solution to
the competitive challenges faced by many independent retailers. Instead of trying to compete with the big box stores and low-margin online vendors, independent retailers should consider moving in the direction of
specialty retailing--offering in-depth service to smaller markets. In considering such a move, the retailers should ask themselves questions like:
- Core competence.
Which areas of our traditional business represent our core competence? Where are our strengths? Which niche markets does our staff really enjoy? In the case of local camera stores, perhaps
alternative possibilities exist in medium format photography (which uses a larger film size), black and white photography or digital photography as opposed to 35mm photography.
- Market size.
Is the niche market large enough to support us? Is there sufficient buying power to reward us for our efforts?
- Competition.
Have others already established a premium position in the niche market?
- Marketing.
Can the market niche be easily reached? How can we become well known to a limited area? How can we leverage off our current expertise in the market niche? What publications reach this niche
market? Are mailing lists available for one-time mailings? (I first became acquainted with Karen's Books when I received a catalog she mailed to a members of a railroad historical society.)
- Follow-up.
What kind of follow-up techniques can we use to encourage customers and members of the niche market to recommend us to their friends and co-workers? (I first became acquainted with Photo-Eye when
a fellow photography recommended their web site to me and I signed up to receive their catalog.)
- Partnership-marketing.
What firms can subsidize our penetration of the niche market? The Photo-Eye catalog, for example, contains advertising from book publishers and photographic workshops. Camera and film
manufacturers could logically also purchase pages in their catalogs.
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