When SM or Robinson’s comes to town

One of the biggest fears of entrepreneurs is that a larger, more moneyed and better known competitors is entering their neighborhood. A good example is the small department store or grocery about to be devoured by the likes of SM and Robinson’s. What to do?

Well, the first thing the entrepreneur must do is panic. It will summon all of your adrenalin reserve for good creative thinking.

The second thing to do is calm down and evaluate all the alternatives presented during the panic stage. These alternatives include the following:

* Scan the merchandise of the giant intruder and see where it is positioned. Usually, these behemoths cater to the C and upper D income classes. You can then either downgrade to DE and be the poorer man’s store or upgrade to AB, if your city or town can support such a store. Outside Metro Manila and Cebu, going AB is difficult but still possible.

* Transform your small department store or grocery into a specialty outlet with a narrower but deeper product line. For example, you can specialize in casual wear for younger people and carry more name brands, more sizes fitting the petite as well as the well-endowed and more avant-garde styles and colors. Cater to the hip and trying to be hip.

* Alternatively, you can go into more commodity-like goods and really price low. However, this may mean going away from retailing to semi-wholesaling where personnel and other costs can be cut in order to cover the loss of margins.

* On the more aggressive side, the entrepreneur can break all his or her piggy banks and spare no expense in building a grander department store cum grocery that will rival the giants. Renovate, face lift and jazz up the place. Add a new wing or two and expand the parking area. Maybe, just maybe, the entrepreneur can pull it off.

* Inject more local flavor into your store. House well-known local shops in your complex. Gather the area’s "who’s who" together to put on a formidable array of home-grown products and services. Differentiate yourself as the native "David" battling big bad "Goliath".

* Tie up with other local stores and form a cooperative chain with common purchasing, common administrative systems and common inventory, all aimed at reducing costs and prices.

* Transform your store into an entirely new business. You can be one big electronic game arcade and invite the Jollibees, the McDonalds and the like to your arcade for more foot traffic. This would also require some renovation but the new look should be able to attract some, if not most, of the old crowd.

* Look at the bright side. The giants will raise real estate prices in the area. You can then sell your land and building at higher prices and graciously retire.

* Do absolutely nothing in the Chinese Taoist tradition of wu wei. Wait and watch what happens. At first, the effect on your store will be devastating. Over time, some of your customers will come back. Business will not be as good as before but maybe it won’t be so bad either. Institute business measures to improve service and customer relationships. What the entrepreneur may lose out in pizazz, he or she may gain in more customized and personalized marketing approaches.

The third thing to do is evaluate the nine alternatives and use five tried and tasted criteria for evaluation. First, determine what investments would be needed for the alternative and what returns you might expect from each one of them. Second, determine what are the risks involved. Third, determine what amount of time and level of effort will each alternative require from you personally and from your business organization. Fourth, determine what alternative will fit your style and temperament. Fifth, listen to what your intuition tells you.

If none of the nine alternatives strike the entrepreneur’s fancy, panic once again and produce more alternatives. But no matter what alternative you take, make sure you know why your present customers are patronizing you. Interview them and observe their behavior. Enhance what they like and improve on what they do not like. Competition will always make you more customer-sensitive. Maybe, it’s about time you got a kick in the butt. For all you know, it might just be the best thing that has ever happened to you.

(Eduardo A. Morato, Jr. is the dean of the Asian Institute of Management and chief architect of its Master in Entrepreneurship Program. For further information/comments, you may mail him at: [email protected]).