Lessons from Struggling Competitors

What can you learn from a competitor that's struggling or has outright failed? Plenty.

CompuUSA and Circuit City were two casualties in the consumer electronics retailing field that illustrate some of the pitfalls to avoid in that part of the industry. On the other hand, H H Gregg is growing--because one of its strengths is customer service, not always available at big-box electronics stores.

Whether you're part of the same industry, serve the same customers, or operate in the same markets, here are some questions to ask about struggling competitors as you prepare your own marketing strategy.

• What warning signs did this struggling competitor ignore or misinterpret? For Best Buy, multichannel marketing wasn't on the radar early enough. Best Buy correctly recognized that showrooming was a big problem--meaning customers were coming into its stores, examining merchandise, and then buying from an online competitor (Amazon in many cases). In response, the retailer decided to match the prices of selected local and online competitors during the holiday buying season just ended--but not every competitor. Customers must read the fine print to understand its policy, which opens the door to complaints and dissatisfaction. Will that be sufficient in a multichannel world?
• What are this competitor's strengths and weaknesses? In the past, Best Buy sometimes had difficulty competing with the vast product selection and low prices of its online competitor Amazon. But during this most recent holiday shopping season, Best Buy's online sales improved in states where sales tax is collected on Internet purchases--meaning Best Buy can compete more effectively with Amazon when both have to charge tax. That's a point in Best Buy's favor, showing that its strategy has possibilities.
• What are this competitor's resources and strategies? Best Buy's cavernous stores were a distinct strength in the past; now, with online assortments just a few clicks away, the company has been slow to rethink its big-box store strategy. The company's most recent sales reports showed little overall change, and its stores aren't gaining ground either. The good news is that certain categories are doing well: mobile phones, tablet computers, e-book readers, and appliances. Focusing on those--along with a smaller store footprint--might be a way forward.
• What should YOU avoid, based on what you've learned from this competitor's experience? If you're a retailer, you now know that bigger isn't necessarily better. Retailers are "curators" of merchandise, not to mention experiences. You also know that for shoppers, price matters, so don't avoid tackling that issue. And, as H H Gregg shows, service can make all the difference when you're trying to attract customers. Self-service keeps costs down but good in-store service may actually pay for itself in the form of more shoppers and more loyal customers.