Why do customers shop at local small businesses?

October 9, 2011

— Stephanie Rabiner is a contributor to FindLaw’s Free Enterprise blog. FindLaw is a Thomson Reuters publication. This article originally appeared here. —

Despite hard times and shrinking profits, Americans still shop at locally owned, independent retailers.

A new small business survey from American Express polled 1,000 consumers aged 18 and older. Ninety-three percent of respondents believe that it’s important to support local small businesses. And on average, they spend about one third of their monthly discretionary income at these stores.

How can you capitalize on this information?

Survey respondents primarily shop at small businesses because of friendly employees and product knowledge.

Additionally, 87 percent of respondents share favorable opinions about a business, while only 69 percent share negative feedback. The majority use word of mouth and social media. Only 13 percent use sites like Yelp! and Citysearch.

Do you already have the right employees with the right knowledge? If so, the small business survey seems to suggest that you should work on peer-to-peer advertising. Yelp! receives a significant amount of attention these days, but social networking appears to be a better use of resources.

Does your business have a Facebook? A Twitter account? You can use both to advertise specials, run contests, or let your customers know about new stock. Retweets and “Likes” are also the modern day “word of mouth.”

For customers who are not technologically inclined, you could also consider a referral program. Offer a small discount to those who send business your way.

If you learn anything from the small business survey, it’s this:

You should look for ways to use your high rate of customer satisfaction as a marketing tool. Encourage your repeat customers to share the love, and in return, maybe offer to share a little wealth.

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Ms. Rabiner,
I enjoyed reading your post and was pleasantly surprised to read that consumers still shop at locally owned, independent retailers. The links and statistics provided were especially informative such as how you stated, “in a small business survey, ninety-three percent of respondents believe that it’s important to support local small businesses.” I was even more surprised that consumers spend about one third of their monthly discretionary income at these stores. I agree that these independent retailers’ main advantages over large retail chains are friendly employees and product knowledge. There’s a book, The Loyalty Effects (a Harvard Business School Publishing) that reiterated your point and showed successful companies in any field of enterprise had one common trait—they had low employee turnover rates. Additionally, I think the ability for smaller independent stores to cross-train employees is another significant advantage over large retail chains that have employees specialized in departments. From a consumer standpoint, you want to be able to walk in the store and ask anyone in there for the help you need rather than having to be directed to the right person. An even better situation is walking in a store and knowing the person working inside on a first-name basis. This level of familiarity and comfort provides a certain amount of loyalty and trust that can often supersede lower prices. What’s your view on cross-training vs. specialization of employees?
While, these small stores have certain advantages, I also think it’s still very challenging for local owned stores to compete with the convenience level of megastores like Wal-Mart and Target where a customer can buy all their desired products (clothes, food, electronics, and more) at one store. How do you think small retail stores can compete with the convenience levels that Wal-Mart and Target stores provide, especially as they continue to expand and become even more popular? Large retail chains also have much more resources in learning about their consumers. For example, are you aware of the checkout scanners and data-mining software that provides retailers with insights into local preferences and buying behaviors? I think these types of consumer research tools would be very beneficial and is becoming necessary for any sized retail chain, large or small.

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