The battle between the mass merchandisers and the small Mom/Pop retailer is a race to identify and fill trends before they become big in a specific industry. Here’s the difference between how a small business entrepreneur picks and chooses what is or will become popular and how a mass merchandiser does it.
Start a new business– The small entrepreneur does not have the capital, in money or labor, to follow what is hot in retail, gardening or home decor. Once items become most desirable then the mass merchandiser has started buying the items by the container load and it’s often from overseas, outside the U.S. As items manufactured locally become popular it becomes a matter of commerce to go to China, Taiwan, or S.E. Asia and duplicate them. Often the reproduction will be in the millions of each and the price will drop for the knock offs. That process is created by the perceived demand of the general public’s wants going forward.
The process of “anticipation” is predicated upon looking at small niches and extrapolating the small niches to the masses. If the item has merit for mass appeal then the mass merchandiser bets with future purchases and orders the items in larger quantities. Prices drop but the mass merchandiser is always the dog chasing the tail.
Start a new business – The small business entrepreneur is in a different boat
The small merchandiser is often a one or two person buying group who own the business. Approximately 3-6 months prior to receiving the merchandise they go to merchandise shows in Atlanta, Las Vegas, NYC, Philadelphia or in local communities to see what is new and novel. It is now the orders are placed for future delivery. Most small business people are buying Christmas items in the summer, Fall merchandise in the winter, etc. Due to limited capital the small business owner will “guess” on popularity of merchandise and place small orders for their shops. A typical order may be $100 – $1,000 for merchandise the entrepreneur thinks will sell and be what the customer wants once it is displayed.
If the item is popular and sells immediately there is usually a delay before the items can be replaced. Some of the items chosen do not sell and on those the entrepreneur now has what is referred to as “dead inventory”. That is cash spent with no return as well as lost opportunity to buy what is hot due to lack of cash invested in bad inventory.
It’s just a fact of life for the small entrepreneur, but it’s the lifeblood of retail. The small business owner supports the manufacturing of small lot, local manufacturers and stokes the economic flames of local business and economic growth. The small manufacturer often can not fill orders in the millions of dollars unless there is heavy investment in retooling and availability of capital at reasonable terms. Especially in the U.S. where the labor costs are high the popular items go offshore to less costly land, labor and legal liability areas.
A case in point.
In the early 2000’s one of the hottest items to emerge in home decor and retail were the live bamboo shoots that were placed in clear glass vases. Initially the item itself lacked much appeal other than in landscaping, indoor plant areas as a fill in. After several popular mass appeal home decorating magazines featured the bamboo plants in their publications it became a home decorating trend to include the plants in home decor design. The small business had ventured into the items for a trial product, or had seen the items in the magazines and anticipated the demand. The small business owner started meeting the demand with the limited inventory available for their customers. After the bamboo became hot then the growing of those bamboo shoots shifted from the local nursery supplier to the mass producers and harvesters overseas. Rather than fill an order for 50 plants, which the local nursery could do for multiple vendors, it began to fill 2 orders for 2,000,000 each of bamboo shoots.