Business Briefing: New landscape, new rules -- Part 2

In the second instalment of a three-part series, Leslie Kossoff looks at opportunities and pitfalls for mid-sized firms.

Image: Corbis
Image: Corbis

In my previous article describing the new trifurcated competitive landscape (HW, 22 January), we looked at the big boys and what they are doing — for the good and the bad of it. Now it's time to look at the kids in the middle — all you mid-sized retailers, growers and service providers that are playing in the market. And, yes, this includes you public service types, too.

First, the bad news

No matter where you sit in the supply chain — from raw material to post-sale service providers and everything in between — if you're mid-sized, you're exposed. In fact, you're more exposed than your larger or smaller counterparts.

There is a variety of reasons for this. Chances are, you've invested more into your business in order to grow. In many cases, that means that you're leveraged and have a debt to service that didn't exist when you were smaller. As a result, unless you're either lucky or rich, you don't have the cash reserves of a big boy to pull from in the bad times.

Unfortunately, immediately on having the success of becoming mid-sized, you also become a target for the big boys. For the most part, while they don't like little guys in their immediate markets, they aren't a problem — hardly even a distraction. On the other hand, they really don't like mid-sized competitors. You offer something the same but different enough — and do so, in many cases, at the same price points — as them. That's not in their best interests. They don't want you in their market. You get in their way.

Unless you are incredibly careful, on becoming mid-sized you begin to lose your differentiation. As you focus more and more on past and future growth, it is not uncommon to lose sight of what differentiated you and allowed you to grow in the first place — such as exceptional customer service and customised product offerings, which are usually the first to get lost.

As a result, from your customers' perspectives, it becomes harder to determine why they want to do business with you instead of your larger counterpart - who is probably offering loss-leaders just to get you out of their way anyway. All of which means that the onus is on you to be really clear about what you want to achieve and what you're going to need to do to get there.

Looking for the opportunities

It's all about differentiation and answering the customers' needs — sometimes even before the customer knows the need exists. It's looking outside and beyond how you define yourself and, instead, looking at the value you can bring to solve a problem that others haven't.

It's all about taking the knowledge, skills and abilities that are resident in your organisation and applying them to situations that need solutions. That brings me, first, to allotments and how the public sector equivalent of mid-sized organisations have been missing a trick in establishing themselves as the go-to guys for local money-making.

According to allotment campaigner Catherine Campbell, there are currently 75,000 names on allotment waiting lists (HW, 21 August 2009). That's a lot of people who just want a little piece of land of their own on which to grow what they want.

At the same time, Peter Seabrook reports that in contrast and, evidently for a quick buck, some councils are purposely leaving large areas on allotment sites overgrown so that they can justify selling them off.

According to those councils, no one wants the sites anyway.

Now add in the fact that Dobbies has begun to rent allotments as part of its service offering and what you get is a new and a missed opportunity — unless someone takes action fast.

Not to put too fine a point on it, if the UK Government — from local to national — decides to take anywhere near the same tack in its cost-cutting as has my home state, California, then funding for park departments is going to be some of the first to go. It's easy. There's no perception of monetary value that the political-types can see.

They're wrong — and that's where, if you're a parks department looking at budget cuts, the opportunities now lie. Allotments are money-makers for the community. They generate rent (which is cash in hand) and, if the local council has its act together, it's been working with local growers, retailers and farmers' markets to build a cohesive local supply chain. That means tax revenues.

If you run a parks department, you've got insider knowledge. Take a look at what's what in the allotments arena and see how much land already zoned for allotments — or that could be appropriately zoned — is currently going to waste. Then cost it. Figure out how much it would cost the council for your guys to come in and get the allotments customer-ready. (Technically, it will be free because you're already part of the budget.)

Then, hit them with the money they'll be making when those allotments are rented. Even better, extrapolate outward with the help of your colleagues in other services and figure out an estimate of what the potential tax intake increases will be year on year when the excess produce moves its way to farmers' markets.

By the way, mid-sized landscapers, this is one for you, too. If there's no parks department, or the department isn't quick enough off the mark, go for it. Simply because of the scale of the project, a one-man organisation isn't going to be able to make as compelling an argument as a bigger, local provider. You need, in effect, to create the impression of an external version of a parks department to make it comfortable for the council to go with the idea.

You also need to see yourself and act as more. Remember those tax revenues. You want not just to present a cost-to-revenue comparison for your clearing services leading to allotment rental. You also want to ensure that you are making the case — with alliances in hand — for the farmers' market and other tax revenues that will result from this oh-so-brilliant decision on the part of local government.

Why not be the driver that creates a world of new opportunities? You are, as long as you want to be.

A step further

Sticking with those allotments and their associated opportunities, this is also an excellent chance to build public-private sector alliances. In fact, for those in the retail game, this is a perfect opportunity to add to your take without having to take away any of your space.

Whether it is a deep-seated fear of the local planning boards or simply the fact that you'll do anything you can not to have to deal with them, from the comments made online there are a lot of reasons why retailers don't want to follow the Dobbies model and offer allotments on their own property.

Fine. But what about doing deals with the local authority to provide everything from discounted materials through to training programs for the new allotment renters? How about dropping coupons in the local newspaper (online and print) letting it be known how committed you are to your community. Not only do you congratulate the new allotment renters, you're there to help.

There will be loss-leaders involved In some cases, which is why this may not make sense for the littlest guys. But, if you're playing hardball with your suppliers and making sure you're getting as competitive a deal (or close) as your big boy counterparts, you should be working with strong enough margins to be able to withstand a limited loss leader.

A side note here. For an excellent discussion on margins, it's worth taking a look at the article "Analysis: Focusing on the bottom line" (HW, 24 July 2009), in particular, Piers Mummery's comments.

Remember, you know better than your new customers what they are going to need as they build out and then grow on their allotment. There's no reason why you can't have a rolling coupon deal - just like the big food companies and grocery chains - week on week. That will keep bringing the newbies in and remind your existing customers why you really are the answer to all their questions. All of them. Even before they know they need to ask.

Telling the story

All of which leads us to three seemingly unconnected but actually interconnected pieces — trade shows, member organisations and telling the story. We will start with the last.

At the Four Oaks Trade Show, garden retail consultant John Stanley made it clear that it's no longer enough to "sell stuff". You have to sell your story — you have to make yourself the compelling buy, then your customers will want to buy from you.

The reason this works is because, by doing so, you're creating a relationship with the customer. It's not just about your product. It's about you and why it makes sense for them to do business with you.

This logic extends far beyond the end user. The competitive landscape is such that every business at every stage in the supply chain needs to build those relationships as differentiators. You need to tell your story.

That's why the recent increase in the numbers of specialist trade shows and the decrease in specialist member organisations are interesting aspects of the same trend — and in both cases provide new opportunities for the mid-sized player.

In both instances, the first questions you have to ask are: Who am I trying to attract? Whether expanding your existing customer base or delving into new territories, who needs to know about you? And what do they need to know? What is going to be that thing that makes you the go-to guy who sticks in their memories when they're thinking about buying in your segment? What's the story you're going to tell — and sell?

Corporate buyers are no different from end-user customers. Whether you are supplying to growers, retailers or gardeners, you're dealing with people who have set goals and budgets. They know what they want to see at the end of the day and they're looking for those businesses that will help them get there successfully.

They don't want to waste their time and they're always looking for that entity that's going to get them there better, faster, cheaper and more consistently than any of the other players.

That's why at the same time we're seeing an increase in specialised trade shows, we're seeing a decrease in member numbers of specialised organisations. End users need more answers faster — and the perception is that they will get a bigger bang for their buck having a potential one-stop shop in a broader-based membership organisation. In this case, the logic is that they will find the necessary specific information provided in the wider world — without having to go searching.

The answer, as is always the case, is in the solutions that you provide. That's why — and here we are at full circle — it is more important for mid-sized providers to keep their exceptional service and customised product offerings in the forefront after they have grown from a little guy to the middle of the landscape.

The more you focus your operating costs on being the best in the field, the less your competition — big and small — will be able to make a compelling case against you. Being in the middle may be temporarily dangerous, but it is also the next step to becoming a big boy.

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