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Do you struggle to beat your competition?

The difference between a profitable, well managed and growing business can often be a very stark contrast.   These differences are often the most visible within industries that have a high degree of competition, and none more so than the retail bakery/café sector.   This industry is characterised by:
  • A large number of locally based competitors.
  • Products that can largely be seen as commodity-style items.
  • Thin profit margins and long hours for the business owner.

I was amazed to see such a vast difference in appearance and style when I chose to get some bakery products for lunch early one morning.

After visiting three local independent bakeries I was disappointed to see a common trend:
  • Empty or partly empty shelves.
  • Slightly darkened stores with a drab appearance.
  • No variety on offer.
  • Less than professional approach to customer service with a bland looking dress code.
I then curiously visited two bakeries that are part of national franchises and found completely the opposite:
  • Full shelves.
  • A complete and diverse range of products to choose from.
  • All display cabinets well lit with a bright in-store appearance.
  • Excellent customer service where cleanly-dressed assistants looked me in the eye showing they wanted to listen when I gave my order.

It is no secret that the franchise chains attract a large number of customers and in general earn good profits.   But what was the most surprising were the price differences.   I wanted two bakery products that are commonly available – a croissant for breakfast and a cheese and bacon roll for lunch.   I was astounded at the differences in price:
  • Independent bakery: $3.90.
  • Franchised bakery: $5.10
I found all independent bakeries were about the same price.   They were consistently about 66% cheaper than their larger competitors!

So not only are the independent chains hurting their business by offering little choice, drab surroundings and crap service – they are also “robbing” their profits by charging low prices.  

This management approach ends up being a vicious never ending cycle:
  • Lose customers by offering a customer experience that is inferior to your competitors.
  • Charge lower prices than your competitors to maintain customer numbers above the breakeven point.
  • Pay the business owner less than what they are worth and make lower than average returns from the business investment.
This ultimately means that the business owner will not create value in the business, both when they are running the business and when they come to sell it.

As much as many business owners like to offer customers a difference to the “cookie cutter” approach of national franchise chains and large business, they are creating a path where they ultimately lose.   They earn low profits, pay themselves low wages and never recoup the value of their investment.  

Ultimately these businesses struggle to maintain profitability and value, whilst there competitors reap the benefits of larger market share, larger profits and an increased value.

I am not advocating that all businesses should adopt a “cookie cutter” approach – differentiation and developing niche markets are a powerful way to compete against larger competitors.   But make sure your business offers a credible and real alternative to your competitors:
  • Match or better their product and service offering.
  • Be price competitive – there is not point discounting by 66% unless you want to be know for cheap but crap product.
  • Deliver great and consistent customer service.
  • Allow your customers the chance to peruse your offerings in the “best light possible”.

So what can you do in your business?

Next time you are wishing you could pay yourself a higher wage, spend less hours in the business and be confident that your business can be sold for more than what you invested, ask yourself how well do you measure up to your competitors?  
  • Make sure you understand what they do better than you and how they do it.
  • Compare pricing on a regular basis.
  • “Secretly” experience the service they offer.
Then ask yourself:

What value would I create if my business was as good as or better than my competitors?

If you would like to answer this question for your business then contact Maxell Consulting for a free and confidential discussion on how you can create the value in your business that you deserve.