New ways to differentiate specialty retail stores

by Sally Bouorm | April 1, 2011 10:04 am

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By Bob Harper

Specialty pool retailers are facing stiffer competition from mass retailers, such as Wal-Mart, Home Depot and Canadian Tire. It is not surprising, as pool owners are desirable customers for any retailer. They typically have more disposable income, they need a regular supply of pool treatment products and they likely own a home and a yard that require other products to furnish and maintain. So, national mass retailers have implemented a new strategy—offer basic pool treatment products at low prices, luring these customers into their stores in the hopes that other, higher-margin products will catch their eye.

Competing with mass retailers on price alone is a losing proposition for specialty pool retailers. A better solution is to differentiate themselves from mass retailers by emphasizing the distinct value they provide to pool owners. Specialty and mass retailers offer different value propositions.

Mass retailers

• Typically focus on a broad array of product categories (lawn and garden products, paint, household goods, etc.);
• Offer a narrow, fairly standard selection of products per product category across all stores;
• Have less knowledgeable sales staff and less personalized service. Most of the time, mass retail staff members are paid to stock shelves and help shoppers find what they are looking for, rather than recommend ways to solve pool problems;
• ‘Follow’ specialty retail stores in what they carry, avoiding new products, which require specialized training to sell;
• Do not offer extra services (e.g. water testing or pool maintenance plans);
• Offer lower pricing and frequent sales; and
• Have numerous locations and extended store hours for consumer convenience.

Specialty retailers

• Typically focus on fewer product categories (e.g. swimming pools, hot tubs and other products relating to outdoor living);
• Offer a wide selection of products for this category, ranging from basic commodities to unique products. Pool owners will be able to meet all their needs in one stop;
• Have a knowledgeable sales staff that can diagnose problems and recommend effective treatments and problem prevention;
• Know their customers and their pools;
• Introduce new, cutting-edge products and technologies that offer greater benefits to consumers (e.g. time savings or better pool protection);
• Offer services, such as water testing, pool service, new pool construction and renovation. (If a specialty retailer does not build pools, he/she can typically refer consumer inquiries to quality builders in the area);
• Have slightly higher prices and less feature pricing; and
• Have fewer locations and shorter store hours.

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As the name implies, mass retailers aim to please the ‘masses’ in terms of convenience, low prices and range of product categories (one-stop shopping). They certainly have their place, but when it comes to swimming pools, they cannot match the product quality and expertise of a specialty pool retailer.

Specialty retailers fill a significant need for consumers. For swimming pool retailers, this means having the right tools and expertise to diagnose and solve problems, recommending the right products and programs, as well as staying abreast of new products, offering specialty products that mass retailers do not carry and remembering specifics about each customer’s pool.

It pays to embrace unique products

Should a specialty retailer avoid stocking commodity products in favour of unique, new products? It can be a big risk, for a number of reasons. First, the retailer may lose consumers who visit the store to pick up the basics along with more specialized accessories or treatment products. Second, consumers looking for commodity products may look to the retailer and its staff to educate them on how those products compare with higher quality, premium products. Finally, by eliminating a product category, the message received by consumers is the retailer does not care about the customers who need them.

Even though commodity products are necessary, it is obvious specialty retailers will make better margins and more effectively differentiate themselves in the marketplace by focusing on new and unique products that are not available at mass retail outlets.

For example, with the incredible growth of saltwater pools, salt has become a commodity in the pool industry. A few varieties of pool salt can be found at mass retailers and more varieties can be found at specialty retail outlets. If a specialty retailer sells a 20-kg (40-lbs) bag of commodity salt at $11.99, the 40 per cent profit margin is approximately $4.84. That same 20-kg bag of salt may also be available at mass retail outlets for half the price. Mass retailers can live with lower margins because they hope customers will purchase higher-margin products during their visit. And, given their vast purchasing power and sophisticated logistical networks, their margins may be acceptable, even at their greatly reduced retail prices.

On the other hand, if a specialty retailer sells a 20-kg bag of premium, high-quality pool salt with stain, scale, corrosion inhibitors and other additives blended in, plus a significant performance guarantee from the manufacturer, the retailer can price it at $42.98. In this case, using the same 40 per cent profit margin, the retailer would make $17.16. If premium salt is not available at a mass retail outlet, and customers understand the value they receive from the premium brand, the specialty retailer has done its job and successfully differentiated itself in the marketplace by providing value to customers that could not be found elsewhere.

Ensuring success in specialty retail

How can specialty retailers be successful in light of the growth of mass retailers? First, it is important to understand why customers visit the store to ensure it meets their expectations. Pool owners shop at specialty retail stores to find unique, quality products and to learn about the best ways to care for their pools—not because they are less expensive. They also know specialty pool stores are the best places to find the newest products available to solve specific pool problems and to limit the amount of effort needed to maintain their pool during the season.

Attending trade shows, reading trade publications and working with vendors to get the necessary product and sales training are great ways to stay abreast of the new product curve in order to anticipate and meet customer expectations.

The next step is to build customer satisfaction and loyalty. By meeting or exceeding customers’ expectations, they become satisfied and loyal. It is very difficult to lose loyal customers who often provide valuable word-of-mouth referrals, so the more loyal customers a specialty retailer has, the better.

Compared to mass retailers, there are a number of reasons why specialty retailers have an easier time building the satisfaction and loyalty of pool owners:

Year-round service

Specialty retailers have a longer window of time to serve their pool customers. Mass retailers usually offer pool-related products during late spring and the first half of summer. After early July, they typically liquidate their remaining stock via clearance pricing to make room for fall and winter products.

Specialty retailers, on the other hand, start their season at the beginning of the year and often hold ‘Pool Schools,’ other promotional events and early-bird sales. They are also available to serve pool owners throughout the entire swimming season and into the fall, long after mass retailers have reduced their pool product offerings.

Personalized atmosphere

Specialty retailers recognize that swimming pools are a major investment. Sales staff can ask intelligent questions to understand needs, wants and objections and proactively sell a range of products to meet those requirements. They also have the time and capacity to record this information about each customer, so they can ‘wow’ them at their next visit with personalized service. With loyal customers, retailers can also anticipate their needs and wants by selecting product offerings with specific customers in mind.

Vendor training

When selling new, unique and premium pool products, specialty retailers can take advantage of training programs from vendors to help them successfully recommend and sell these products. Pool customers expect a high level of expertise from specialty retailers and these training programs are very helpful in building this.

Utilizing marketing techniques

Next, maximize personalized marketing. Mass retailers do a great deal of mass marketing via national print and broadcast advertising, direct mail programs and couponing. This is an effective tactic for them, as their target market is extremely large.

Specialty retailers, however, are trying to reach a specific audience—pool owners in their direct vicinity. Therefore, personalized, targeted marketing is a better scheme. For example, specialty retailers can personalize product promotions to their customers, e.g. marketing new saltwater pool products to saltwater pool customers and promoting new stain and scale products to clients who have struggled with these problems in the past.

As a specialty retailer’s target audience is so well defined, they can employ more personal communication methods, such as e-mail (for those customers who have shared their e-mail address), regular newsletters and educational events at the store, in addition to advertisements, social media and coupons in local outlets.

These methods generally deliver a higher response rate and a better return on investment (ROI) compared to national mass advertising. These communication methods also reinforce the personalized service specialty retailers offer, boosting customer satisfaction and loyalty.

Finally, as a specialty retailer it is important to merchandise the premium products well. Since new and unique products provide more attractive profit margins and help differentiate the store from mass retailers, they should be placed in high traffic areas using shelf and point-of-purchase (POP) displays and vendor-supplied marketing materials to promote them to customers. Promoting the products that are most effective and command the best margins can only benefit the business.

Additional tips

To help avoid ‘apples-to-apples’ price comparisons, a specialty retailer should try not to carry the same brand of commodity products as nearby mass retail chains. The retailer should still carry some commodity-type products, such as basic pool salt and chlorine, but they must be selected carefully and placed in less-visible areas in the store or used as loss leaders to gain new customers.

Specialty retailers should also consider how they price the commodity products they carry. Costs do not need to match prices offered by mass retailers; however, large price gaps should be avoided, as customers may decide to purchase their commodity products elsewhere. A difference of approximately 10 to 15 per cent is safe.

To acquire competitive information on pricing, assumptions based on advertisements from nearby mass retailers should be avoided. Specialty retailers should shop competing stores to get first-hand information about what products are sold at nearby mass retailers, in addition to how they are displayed and priced.

By embracing the value a specialty retailer adds to the marketplace and properly differentiating the store from nearby mass retailers, it is possible to build long-term customer satisfaction and loyalty.

 

Bob Harper is general manager of pool products at Pristiva, a Compass Minerals company. He has more than 20 years of experience in the pool and spa industry and is an expert in saltwater pool systems. He can be reached via e-mail at harperb@pristiva.net[3].

Source URL: https://www.poolspamarketing.com/trade/new-ways-to-differentiate-specialty-retail-stores/

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