Where to for the specialist channel in 2010

MARKETING

Independent specialist retailers are now faced with a totally different marketing environment compared to when they first entered the industry.

According to what I have observed and researched during 2009 I believe the answer to this question very much depends on the entrepreneurial mindset of each and every individual business owner within the specialist channel.

And based on this criterion, my crystal ball currently indicates that the signs are not that positive for 2010.

Although some will succeed and grow many will struggle to survive unless they change their mindset about being in this industry. Here's my reasoning.

Sign #1 - the new competitive environment for the specialist channel

As Graeme Samuel from the ACCC pointed out recently, few industries have experienced the levels and magnitude of upheaval that this sector has.

The schematic below highlights the major shift that has taken place within just one of the five competitive forces at play within our industry - the intensity of competition.

And clearly, this shift has impacted on the mindset of many specialist retailers especially as a high proportion of them joined the industry back in the analogue era when the industry was vibrant, healthy and growing.

Marketing was done by the manufacturers and wholesalers, while the levels of cost pressures and competition were generally low. Many of you reading this article will no doubt recall many other good things about being in business in the 'good old days.'

But all that has changed. IBIS World provides a brief description on the specialist channel in one of its recent research reports by explaining that the specialist segment comprises a high number of photo retailing businesses that are owner-operated and generally single-site stores.

The report also adds that they are likely to be run by self-employed individuals and partnerships.

Surviving and growing within this new environment has become a major challenge for many of these smaller, independent operators who don't have the broader, advanced business skills or other key resources required (time and funds, in particular) to effectively and efficiently compete against the array of players now in the industry.

And as the majority of these specialists continue to see or hear about their share of the 'consumer wallet and mind' being steadily eroded, many independents cannot see a future for their business or doubt their own personal ability to compete.

My research indicates that most specialists simply don?t have the marketing or entrepreneurial resources (time, money, knowledge, support and mindset) to effectively respond to the wage, equipment or rent cost pressures that prevail - let alone the funds to develop marketing campaigns that reach beyond their store into their competitors - territory.

As the marketing gurus Kotler and Keller say, many markets (ours included) have become too competitive to focus just on the consumer. Establishing a competitive advantage in such a market is predicated to a degree on a firm's ability to develop a range of dynamic capabilities which I'll touch on later.

Nonetheless, the opportunity the chart highlights for the photo speciality stores is their 'extensive' product and services mix compared to the other players. Irrespective of their pricing strategies, business owners in this channel have a terrific opportunity to leverage their 'extensive' product ranges, their 'extensive' expertise and their 'extensive' personal service capabilities to attract consumers who want help to satisfy their image capture, storage, sharing and display needs. Needs which by the way are both growing and becoming more customised as highlighted in the Franz and Glomb article 'Why so glum' Entrepreneurial opportunities abound in photo imaging.'

Sign #2 - Entrepreneurial proclivity and growth

As mentioned, the key factor to achieving success in this new environment is an individual?s entrepreneurial mindset. At first mention the word ?entrepreneurship? has different meanings to different people. For some, it triggers the idea of risk and is often used to describe a person who is starting up a new business (an entrepreneur) but it can also be used to describe the way a management team performs in pursuing and achieving a particular business outcome (an entrepreneurial approach).

With photo retailing becoming more competitive creating a competitive advantage rests heavily on a retailer's predisposition to also accept entrepreneurial processes, practices and decision-making.

A management-orientation of entrepreneurial proclivity is an important contributor towards a retailer's ability to develop its range of knowledge resources about customers, competitors, suppliers and regulatory bodies.

Entrepreneurial proclivity is characterized by innovativeness, pro-activeness, competitive aggressiveness and autonomy. It drives smaller retailers to build their knowledge resources so as to enhance their capabilities to take advantage of market opportunities.

Some argue that important to the theory of being an entrepreneurial business is the manner in which risk-taking is articulated with an ambition to grow. They point to a strong link between strategic attitudes to grow and innovation of products or services through a set of three core competencies:

1. Changing business processes

2. Planning capacity

3. Getting bigger in terms of employee numbers.

The issue of growth is a constant goal for most business owners and a company can't outperform its rivals if it competes the same way they do. Growth is again dependent on the availability of both knowledge and resources which are regarded as assets in a firm.

Now take a look at this model which shows the five segments within the specialist channel identified from a research study I completed earlier this year. The key point this schematic attempts to illustrate is that dependent on their entrepreneurial mindset in relation to their level of marketing orientation and the handling of competitive or cost pressures on their business, specialist retailers will fall into one of the five segments shown.

The interesting observation about succeeders is that they appear to be high in their marketing orientation and effectively address the competitor or cost pressures that play upon their business. And generally they display those entrepreneurial characteristics and competencies outlined above.

Here?s one more interesting perspective I came across from one academic (Hyland) who says everyone wants success but goes about getting it in different ways as they have different ideas about what leads to success. Direction or the particular goal being sought and intensity of effort invested form the two main characteristics of goal-oriented behaviour. However, people sharing the same goal in the same environment may not necessarily share the same reference criterion.

Sign #3 - how ready are you for 2010?

I personally hope that the majority of the specialist channel will show strong signs of returning to the once vibrant, healthy and growing channel it used to be. However I have no magic wand so whatever occurs in 2010 will ultimately have its origins in the way you think about things - your mindset! How you respond to your weaknesses and threats and optimise your strengths and opportunities that surround your business will very much depend on how you think and feel about your capabilities to accept, avoid or alter them.

Table 1 below was also developed as part of my research study earlier this year on the specialist channel and makes for a very practical starting point. Essentially, it says you have a 50/50 chance to succeed in 2010 but only if you choose to change your entrepreneurial and marketing orientation.

An entrepreneurial mindset and a strong marketing orientation are proven approaches that make a significant difference to the financial performance of a business. All the signs are out there for continued growth from a consumer point of view in 2010 so to optimise this opportunity no matter the location or size of your market here's why the following related factors will become more important to your success in 2010:

- The re-positioning of your specialist store and its value proposition to your key target audiences.

- Business planning and measurement of the key performance indicators which are critical to you.

- The pro-active management of the seven Marketing P?s (product, price, place, promotion, people, processes and physical environment).

- Cash-flow budgeting.

- The privacy-compliant collection, analysis and use of customer data combined with your transactional data.

- Advanced selling skills for yourself and your staff.

- The provision of online printing services.

I wish you every success!

TABLE 1

Survivors, Strivers, Seekers and Sitters

Marketing orientation - Favourable

Entrepreneurial orientation - Favourable

Marketing implementation - Limited

Entrepreneurial proclivity - Weak

Knowledge of and training in advanced

marketing practice.Weak

Tactical and strategic planning skills - Weak

Marketing measurement skills - Weak

Access to resources (time, funds, people) - Limited

Perceptions and tension within the supplier/retail channel. - Mixed and Negative

Perceptions of the Photo Marketing Association - Mixed and Negative

Market share threat from consumer electronic, mass merchant and online competitors - High

OVERALL SCORE5/10