In the presentation I wrote, “Little things to do to make ‘09 turn out fine”, this is one of the aspects we discuss; a retreating competition can open up many opportunities for your business to grow. There is a reason why ‘Recession’ and ‘Rear View Mirror’ both start with the letter ‘R’; they are for people that look at their business that way. There is a wonderful view when you look through the windshield.
Retailers court customers of failing rivals
When retailers go out of business, it confuses shoppers but creates opportunities for the competition.
And when it’s tough for any retailer to survive, any way to find additional customers is a good one. So more stores are increasing efforts to attract customers of struggling rivals.
Staples responded to Office Depot’s decision to close 112 underperforming stores by sending e-mail that said in part, “We invented the office superstore in 1986 and we aren’t going anywhere. And remember, when other suppliers are closing their doors we’re here to stay.”
Electronics and appliance retailer hhgregg has twice extended a promotion in which it allows shoppers with Circuit City gift cards to apply them toward 20 percent of their hhgregg purchase.
Hhgregg spokesman Jeff Pearson said the promotion is more about trying to attract new customers and less about hurting a competitor that is already in bankruptcy.
“We are certainly trying to be sensitive to the business environment that all retailers are under, and we are wanting to see more customers,” he said. “It’s similar to a marketing event where [we offer] a percent off. It’s really an opportunity to have customers experience hhgregg.”
This type of strategy is common, said retail analyst Britt Beemer, of America’s Research Group in Charleston, S.C.
When the Sharper Image filed for bankruptcy and closed its stores earlier this year, its competitor Brookstone offered to accept then-worthless Sharper Image gift cards for a 25 percent discount. It’s something Beemer called prudent marketing.
“You’re not kicking the guy while they’re down,” he said. “You’re taking care of their customers. When they file bankruptcy, all you’re doing is assuming responsibility and you’re taking care of their customer when they’re going to go out of business soon.”
Shoppers should expect to see more of these promotions in 2009.
The International Council of Shopping Centers estimated that 148,000 stores will close in 2008, the largest number since 2001. The council also said 73,000 stores will close in the first half of 2009 as the recession drags on.
But current financial conditions may prevent some companies from fully taking advantage of these opportunities.
In late November, Best Buy reported third-quarter profits down 77 percent and announced a voluntary buyout program for employees.
That makes the company hesitant to spend lots of money on anything right now — even though there’s a golden opportunity with one of its biggest competitors, Circuit City, filing for bankruptcy and closing stores.
“We believe that the environment for consumer spending is likely to get worse before it gets better,” said Best Buy CEO Brad Anderson. “In fact, we can foresee a period in which consumers may significantly shift their spending behaviors, which could have a dramatic impact on retailing.”
