Small businesses have always had their work cut out for them when it comes to competing with big retailers. Big box stores have more resources, reach, and connections to dominate smaller brands. Many small box retailers have to try to leverage their big-box competitors and sell inside their storefront. However, that can quickly cut into profit margins.
However, the new ecommerce frontier has plenty of opportunities for smaller to medium-sized businesses to compete with larger big-box retailers. Luxury ecommerce fashion brands can craft unique web experiences and leverage celebrity collaborations to engage their customers and sell directly to them. CPG brands can use a DTC strategy to diversify their commerce channels, which became necessary during the coronavirus ecommerce landscape.
Every brand, regardless of its niche or category, can find success online. Using marketing analytics and an effective ecommerce marketing funnel, brands can optimize their campaigns and understand how their audience interacts with their content. They can identify the most important website KPIs and conduct monthly reports to track the progress of their efforts. Needless to say, smaller brands can finally connect with their audience, sell products, and scale without depending on big-box retailers.
Let’s discuss the ins and outs of big-box retailers and hear from our CEO, Jan-Christopher Nugent, on what you’ll need to set up your brand for ecommerce success.
What is Big Box Retail Store
Big-box retail stores offer a variety of products in a large, physical storefront, like Target or Walmart. Big-box retailers continue to expand their selection of inventory, and many have even started to sell fresh produce and food.
Big-box retailers have two critical advantages over smaller brands: economy of scale and one-stop shopping. Visitors can shop for various items across various categories with ease to consolidate their shopping efforts, save time, and enjoy discounted prices. Big-box retailers stock inventory in larger quantities to save money on each item which means they can price their merchandise at lower prices than boutique stores.
How Big Box Retailers Are Logistical Trendsetters
Brands that sell inside big-box retailers must adhere to strict logistical practices. Small companies must elevate their logistics to provide a sufficient supply of their products to their big-box retailer partners.
The first thing many brands must do is use EDI software integration to exchange purchase orders, invoices, and documents quickly. Electronic Data Interchange (EDI) allows companies to automatically exchange orders and invoices between each companies’ EDI software systems. It creates a more efficient order and payment process but often requires a hefty upfront investment to get started. However, it increases efficiency and reduces the risks of errors.
Brands selling inside big-box retailers will also have to invest in effective inventory management to ship their products. Many brands have to reevaluate how their inventory is fulfilled and shipped. One solution is 3PL fulfillment.
The Problem With Big Box Retailers
Although big-box retailers offer convenience and great prices, they also present several pressing issues. Big-box retailers have a huge carbon footprint and rely on massive storefronts (often bigger than 50,000 square feet) and large parking lots for shoppers. They use predatory marketing and pricing strategies to strangle mom-and-pop stores and undermine small businesses. They offer no cultural identity, undermine retail wages, and they offer poor benefits to their employees, such as low wages and lack of health insurance.
Nogin offers a different approach. We offer commerce as a service. Our partners have the unique opportunity to compete with big-box behemoths such as Walmart and their ecommerce equivalent, Amazon. Scaling from a medium-sized enterprise business to a legitimate enterprise business is almost impossible. Many brands have to invest in expensive internal development to update their online storefronts to the latest requirements, offer discounts that cut profit margins, and spend on research and development.
As an ecommerce provider, our suite of enterprise ecommerce solutions and proprietary ecommerce business platform allow our partners to focus on growing their brand while we intelligently handle the tough ecommerce logistics and operations. You’ll never have to replatform again, and our team of ecommerce Nogin Nerds has the expertise to improve all aspects of your online operations. Our 360-approach allows our partners to become more efficient and increase profit margins while having the infrastructure to scale.
We use machine learning, AI, and marketing automation while tracking every purchase to give us valuable data on what efforts work and which ones do not. To put it simply, it’s impossible to keep up with Amazon without using your Nogin. Big retail has the advantage with budget, resources, and capabilities. They have logistics, free shipping, marketing algorithms, onsite developers, R&D, and more. Fortunately, Nogin has the same capabilities as big-box retailers but the nimbleness to help smaller brands scale faster and become more profitable.
For instance, the average brand spends 11% on fulfillment, returns, and free shipping, while big retail pays around 3.5%. Leveraging our Nogin services, you can dramatically cut costs on free shipping, fulfillment, and returns. Also, Nogin’s continuous R&D allows your brand to test winning strategies tested by partner clients.
Becoming a Nogin partner ensures your brand won’t have to worry about competing with big retail because you’ll have access to the same strategies, resources, and capabilities. The difference is that your brand will still be able to customize, shift, and pivot before the big retailers can catch up.
Big Box vs Small Box Retail: How Smaller Brands Can Compete in Ecommerce
Big-box retailers have dramatically shifted the fundamentals of ecommerce. Major online retailers are letting brands sell on their sites, but the brands have to take on all the logistics of getting goods to consumers and deal with the risk of manufacturing without advance orders.
So how does a brand adapt and thrive in this new ecommerce world? Jan-Christopher Nugent, the CEO of Nogin, says brands have to adopt a customer-focused, data-driven perspective that employs cutting-edge technology.
1. Deliver an Exceptional Online Experience
“It’s not just about the retailers, it’s about the consumer and delivering a great experience wherever the consumer wants to buy the product, whether it’s the brand’s online store, retailers such as Amazon or Nordstrom, or a physical store,” Jan Nugent states. “Brands really have to understand technology, but most medium-sized brands don’t have IT organizations or developers, which is why Nogin has created an ecommerce operating system for all aspects of this shift, both the technology and the people. Forty percent of physical retail stores have gone away, and most of these brands have only made up twenty percent of that online—their organizations still haven’t shifted to be high-tech, internet organizations.”
Nogin helps brands make that shift seamless. Nugent advises that companies start by looking at their marketing strategy and making sure it’s focused online. That means looking at traffic to see where customers are coming from, whether it’s the brand’s online store, social media, online retailers, or even a physical store, so brands aren’t just driving traffic to their online store, but to every channel the brand offers.
2. Provide Exceptional Customer Service
It’s also essential to have a phenomenal customer experience, with products easily accessible across all channels. What defines a phenomenal experience has changed substantially from the past—such as the advent of same-day delivery, easy returns, and an experience tailored to individual consumers—and brands have to keep up so customers will keep coming back.
“The level of sophistication of a lot of these entry-level technologies is fine when brands sell to a small audience, but when brands make it a serious part of their businesses, they need to be plugged into more advanced capabilities,” Nugent says. “Ninety percent of these brands don’t have an IT department, developers or internet experts, but if you look at the pure online retailers, 80 percent of their organization possess those skills.”
3. Leverage Machine Learning, AI, and Marketing Automation
It’s crucial to use forward-thinking technology. That’s where partnering with Nogin provides significant added value. The company can develop customized solutions for brands that have limited technological resources, as well as those that have people in place who can run the technology. “We invest so much more heavily in research and development because everything is happening so fast,” Nugent says. “Most brands are focused on considering the tech capabilities that are popular today because they’ve been contacted by a salesperson or an advertisement, whereas big retail and folks like us are developing for what’s going to be significant four to five years from now.”
Using innovative solutions from Nogin gives brands the data they need to enhance the customer experience and strengthen their ecommerce businesses. It used to be that the internet treated consumers as if they were all the same. But today, data focuses on organizing consumers into groups where brands can deliver experiences, products, and content unique to them. Nugent gives the example of a company selling rain boots online. Three years ago, the brand would have advertised a 20% off sale on the boots during the summer off-season. Today, data can tell a brand that people in the Northeast are in a rainstorm, and the brand could offer free same-day shipping on boots to people in that area.
Data can also have surprising and valuable results—Nugent recalls working with a fashion brand that thought its primary customer was a man interested in luxury watches and vacations. Still, it turns out the main customers were families who wanted matching outfits. The brand was able to tailor its content specifically towards both groups. Because Nogin has a deep knowledge base for data-based buying patterns, it can help brands compete with big-box retailers with large data pools built up over many years with millions of dollars.
FAQ
What are the characteristics of a big-box store?
Big-box stores are characterized by their large, warehouse-like structures, extensive range of products across various categories, and competitive pricing due to bulk purchasing. They often provide one-stop shopping experiences and are typically located in suburban or urban areas with ample parking.
What is considered a big-box retailer?
A big-box retailer is a large retail store offering a wide variety of products, often at discounted prices. Examples include Walmart, Target, and Home Depot, which stock everything from groceries and clothing to electronics and home improvement items.
What are the negative effects of big-box stores?
Big-box stores can negatively impact small businesses by undercutting prices, leading to reduced local business diversity. They also contribute to urban sprawl, have large carbon footprints, and often offer low wages and minimal benefits to employees.
How do you compete against big-box retailers?
Competing against big-box retailers involves focusing on niche markets, providing exceptional customer service, offering unique or higher-quality products, and leveraging ecommerce platforms to reach a broader audience without the overhead of large physical stores.
Why are big-box stores able to sell goods at prices so low?
Big-box stores can sell goods at low prices due to their economies of scale, bulk purchasing power, and efficient supply chain management. They often negotiate lower prices with suppliers and optimize logistics to reduce costs.
What is another name for big-box retailers?
Another name for big-box retailers is “superstores” or “megastores.” These terms emphasize their large size and extensive range of products.
What is the main advantage of a big-box retailer?
The main advantage of a big-box retailer is the convenience of one-stop shopping. Customers can find a wide variety of products under one roof, often at lower prices, saving time and money.
