This is War!
I didn’t ask for this war. This war came to me. I just wanted to pursue the American Dream and start my own business. Isn’t that why you start a business to begin with? I had big dreams! Yeah, I knew about competition, mostly from my own experiences in sports, but I never knew how much it played a role in business. In fact, the competition in business is for life and death. It determines who eats and who doesn’t. Competition in sports is pretty friendly compared to the war that rages in corporate America every single day. Businesses large and small are fighting each other for their share of the Market and the mighty dollar.
I will never forget my early experiences in business when, at age 27, I was elected the President of the Newhall Business Association, and the group asked me if I would speak to the city council against a Wal-Mart store that was coming to our town. I remember hearing the same thing from virtually all of the other business owners – small mom and pop operations, a toy store owner, a hardware store owner, a restaurant owner, a bead shop owner. In their own way, they all said something along the lines of: “That giant superstore is going to put us all out of business.” I remember thinking that their fears were crazy.
“There must be something your business can do better than that huge store, and you can compete somehow,” I’d tell them. “Don’t just give up without a fight. The need to improve a product or service is what makes companies, large and small, better.”
I did not feel the pressure, mostly because I was young and naïve, but also because I was a coffeehouse and there wasn’t even a Starbucks in my town at that time; so how would Wal-Mart possibly affect my business? I remember saying to the City Council something about how all the local, small mom and pop business owners just had to find a better way to compete, and that I welcomed Wal-Mart to our community. No one in that business group was happy about how I represented their interests at that City Council meeting. Needless to say, I lost my title as President of the group shortly thereafter.
Less than a year later, the first of over 30 Starbucks moved into my small town. Soon after that, I heard a rumor that a local Starbucks Manager boasted to someone else that Mitch’s Java ‘n Jazz would be out of business within one year. It was then that I knew this competition was a little different than the competition I faced on a basketball court. This indeed was a lot more serious. I learned a very good lesson about the war between large corporations and small family-owned businesses… and why it is good for America when the little guy fights back!
Today, I have a partner who happens to be my brother Kyle. (At the time of this original writing, 2010). Our business has grown, and we now have products on the shelves of that same Wal-Mart store, along with several other Wal-Marts in our area. We are currently competing head- to-head against the world’s largest coffee brands – Starbucks, Peet’s Coffee and Tea, Coffee Bean and Tea Leaf, Tully’s, Green Mountain Coffee, Folgers, Maxwell House, Dunkin’ Donuts, McDonalds coffee and private labels in just about every major retailer in Southern California. This story is about the war that has been declared on Wall Street against everyone who isn’t on Wall Street – small, family-owned businesses on Main Street USA.
Our First Footprint on the Moon!
Believe it or not, the world’s biggest company actually called us, seeking our product for their stores. Wal-Mart’s Sam’s Club was gearing up for a grand opening in Santa Clarita, California, which happens to be staunch Costco territory. The local manager in charge of opening the Club, Hector Arrieta, had researched his competition locally and noticed my company’s products on Costco’s shelves. He had also heard that we were the official coffee of the City of Santa Clarita, and decided to call us and invite us to their grand opening. Hector wanted our coffee in his store.
Grand openings are exciting. A lot goes into preparing for and opening a store, and believe me, Sam’s Club does it right. Corporate and regional executives fly in on the jet accompanied by a corporate chef, who cooks for the few hundred associates during the pre-opening ceremonies the night before the big day. The day of the opening is always accompanied by remarks from city officials, donations made to local charities and an opportunity for the media to see the new store, which usually is a very positive addition to any city, as it will generate tax revenue and create new jobs.
Wanting to make a good first impression, I asked Hector if I could hang our four-foot logo sign above our sampling area; he said yes. When the local paper came later on that day and took a shot of the large store with our huge sign right in the middle of that picture, I couldn’t believe my eyes. The image was very powerful.
To me, it was no different than the first footprint on the moon. It symbolized so much in my eyes. Even though we had yet to sell a single bag of coffee in Sam’s Club, my optimism had never been higher. When I was hanging the sign, deep down, I wondered whether or not we really belonged here. I looked around, saw hundreds of huge brands aisle after aisle, and thought: Who am I to raise my insignificant logo among the world’s best brands? I looked back at my logo. It was my banner, my flag, yet up against all the big and mighty brands, it looked so frail and weak. However, when the paper came out the next day, I saw our flag raised high in the heart of the world’s largest corporations, and pride swelled up inside of me.
It was a very significant moment; on the one hand, we had not generated a penny from this, yet on the other hand, it was a moral victory. It made me feel like we did belong. It changed my perspective. It caused me to begin to dream a little bigger. Reach a little further. I looked around at all the power brands and I wondered…Where are they? Where are their people? Why am I the only one here supporting this grand opening? And of the few vendors that actually did show up, none had the display that we had! We had set up four high and tight looking pallets of our freshly roasted coffee and sampled from a table in front. It was easy to see who cared the most and who was giving the opening 100%...It was the rookie! The new kid on the block! The scrub! And it occurred to me that I did not see any coffee business owners at the grand opening – no VPs from Starbucks, no managers, heck, not even a sales rep showed up!
From that point on, Starbucks didn’t look so big to me anymore. I knew I had a distinct advantage. We offered to brew our coffee for the festivities and went so far as to bringing our mobile espresso trailer to the building, pouring iced blended lattes for all of the associates and execs. On opening day, we sampled our product in the store to customers who commented to Sam’s execs that they were pleased to see Sam’s support the LOCAL coffee guys. Today, we out-sell every other bagged coffee in that store, all because Hector believed in us.
Marketing teams across America are trying to convince consumers that their products are local and handcrafted. They often donate tons of money to local charities to establish themselves immediately within communities. Even the world’s largest corporation, Wal-Mart, now has smaller ‘Neighborhood Markets.’ Big businesses are trying to look and act LOCAL. After all, shopping local is the buzz, and 70% of consumers prefer to do so. But consumers beware… if it says Made in China, I don’t care what it is; it isn’t local!
Location, location, location…
The battle begins before you even have a business location. Strip malls throughout America are littered with national companies (chains) from restaurants, hardware stores, coffee shops, juice shops, donut shops, grocery stores, and video stores, either corporate-owned or franchised-owned. The battle begins with the landlords and building owners of Main Street and who they prefer to lease their space to. If you were a building owner, who would you rather lease your space to? An established, well-known business with strong brands, resources, credit, national advertising campaigns and cash? Or a high risk, under-funded, unknown mom and pop start-up? Thus the battle for the best location begins. After all, location, location, location is an extremely important factor for most brick and mortar businesses.
This happened to me…
When I brought my business plan to the landlord of a heavy traffic retail center in the heart of my town, it quickly went to the top of his list, in front of 22 other businesses that were bidding for the spot. That alone was quite an accomplishment in my mind. Once I sold the landlord on the coffeehouse idea, he said we were his #1 consideration. I was excited and anxious to get that location. It had the perfect area outside for a patio and plenty of parking; it was also anchored on both sides by a grocery store and a large drug store. I would drive by the location often and imagine my business there, imagine people enjoying my products every day. Well, just as we were getting ready to move to the next level and go over the paperwork, I was suddenly informed that the location was no longer available. I asked what other business would go there and was informed that it would be the first Starbucks in my town. I was devastated! This not only meant that I lost a great location, but that I would be competing against a huge company who already had the advantage.
Where are the local, small family-owned businesses?
We usually end up in the secondary locations, because before we even enter the war, we enter with a disadvantage. Then, when we are up and running, the sheer power of our competitor’s brands (and consumer loyalty to those established and powerful brands) make it very difficult to open and compete with impact. It is quite a challenge to compete against a team of experts in product development and marketing, to go up against an advertising agency in New York with consumer research knowledge and data unavailable to the common mom and pop business, not to mention the multi-million dollar advertising budget the large competitors use. It makes me so proud to know that small business employees make up 70% of our nation’s workforce. We are competing and we are winning! .
This is war in corporate America!
The large sandwich shop with all the money and resources wants every single sandwich dollar from every consumer within a certain area so as to not cannibalize their sales. They also want the hamburger eater to switch to a sandwich, and they want the brown bagger to spend $5 on a foot long sandwich (Subway promotion). In order to ensure all of this, they advertise on so many mediums that all the customers of small sandwich shops knows about the deal his competitor is offering. There is no doubt that small businesses are up against formidable opponents. However, the smallness does have its own advantages. Smaller local businesses usually know customers better than larger businesses do. At the field of battle, Generals (small business owners) are competing head-to- head with Sergeants (large corporate managers). These Sergeants have strict orders to destroy all local competition from five-star Generals back at HQ. Their immediate advantages include brand awareness, customer loyalty and overall familiarity with their products.
For example, if a consumer who wanted to eat a quick, inexpensive dinner had a choice between McDonald’s and Joe’s Hamburger Stand, who would they go with? Chances are, that consumer knows what’s available at McDonald’s and has at least one personal experience of which to draw from (if not hundreds). So they can quickly make a judgment about going to that familiar fast food joint versus one that they have never seen or experienced, along with only a guess based on a quick first impression. It seems strange that someone might think that a mowed lawn in front of the store would equate to a tastier hamburger, but consumers make those kinds of assumptions all the time. Consumers make flash-first-impression-judgments when they are in front of two similar stores and need to decide which one will get their business. The consumer has no reference to draw from in regards to price, quality and service. He/she can only go on what they see – the packaging and the store itself.
Believe it or not, the cleanliness of a business sends a strong message that the business is at least well maintained, and that the owners/employees take pride in it. The chances are higher for a potential customer to think maybe they take that same pride in their products and/or services. Also, what message are you sending with your business name? Are you quality-based? What is your pricing expectation? (If your name is Joe’s Hamburger Stand, the expectation could be low-priced, as opposed to Le Chen, where the presumption would be higher priced). Any signage in the windows? What does it say? Is it sending the right message to the right consumer?
I see so many shops with unappealing signage. For example, why would I ever go to a donut shop that simply said “Donuts” out front, when a Dunkin’ Donuts or Krispy Kreme is a block away? I mean, yeah, the sign is simple; yeah it gets to the point; but what image are you trying to portray? What makes you different from every donut shop? What separates you from the crowd? Do you have any pride at all in your donuts? I mean, at least call it “Joe’s Donuts.” That tiny detail would tell me that there is an owner who is willing to put his name on the product; therefore my chances of it being good are higher than a shop that’s simply called “Donuts.” Reality may be a completely different story. “Donuts” may have the best donuts in town. They may be delicious and even better than Krispy Kreme. How do you portray that message to the customer who doesn’t know “Donuts” but has been to various locations of the always fresh and delicious Krispy Kreme?
Everyone wants the same dollar
How do you know if your donuts are better (or at least different) than Krispy Kreme’s and Dunkin’ Donuts? How do you know if your sandwich is tastier than Subway’s, or if your hamburger is juicier than McDonald’s? Whatever your advantage is, however small, you must use it. This is war. Act like it is war. Every dollar that is spent at your mom and pop donut shop is a dollar that Krispy Kreme AND Dunkin Donuts want. Oh, and let’s not forget – even Starbucks and McDonald’s want it too. And it doesn’t stop there, because the grocery store wants you to stay home and eat in order to spend your money with them. And Denny’s wants you to sit down and enjoy breakfast, while the small mom and pop breakfast restaurant across the street also wants your business. 7/11 would prefer that you spend it with them on a Danish and coffee, while Shell is hoping you spend it with them while filling up. So do you really think you stand a chance at getting that dollar at your donut shop when tens of millions of dollars are spent to lure it away from you and toward any number of alternative choices (none of which are named “Donuts”)?
Even if you are the only donut shop in town, you are not the only person fighting for that dollar. To make matters worse, gas prices are taking an extra dollar out of every consumer’s pocket for every gallon right now. That’s a donut per gallon. So, my friend, there are less dollars to go around for that morning donut, and now the bigger companies really start to need it. They have big scary things like boards and shareholders to answer to, so they will fight even harder when there is less to go around. We are at war, and the sooner you realize that, the better.