How to Innovate in a Small Family Store to Avoid Bankruptcy

Three simple steps that will allow you to turn things around and start making money instead of draining them.
How to Innovate in a Small Family Store to Avoid Bankruptcy
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The business life is buzzing in Amsterdam. You can find whatever your inner entrepreneur desires: headquarters of large corporations, ambitious medium-sized companies servicing those corporations, and small stores taking care of everyone else. They exist side by side, so different in how they do things -- digital and innovative vs. old-school and simple -- and yet so similar in their ambition to find, get and keep customers.

I’m enjoying the life of an international digital nomad but every now and then I long for the cuisine of my homeland which brings me to the small family-run grocery store in the middle of busy Amsterdam. Usually, I see the owner cheerfully greeting his visitors, but last time he looked worked up. And it’s not a surprise considering that during his daily twelve-hour shift there are more random people that stop by and don’t buy anything than actual paying customers. 

When we see that somebody has a business, be it a restaurant, a boutique, a beauty salon or a small grocery store, we assume that it is doing well financially because otherwise it simply wouldn’t be there. But in many cases, the owners continuously invest their savings and take out loans to keep it afloat. They do the best they can to attract customers but they stick to the same strategy that got them into money trouble in the first place.

What they need to improve their business situation is a bit of innovation. In spite of how expensive consultancies are trying to complicate and mystify the word Innovation, in practice, it starts from doing things faster, more efficiently or simply better for your customer than you used to. That, in turn, improves your business and allows you to make money instead of draining them.

3 steps to innovate a small store without extra investments.

When a person decides to open a small shop, instead of doing elaborate market research they usually think along these lines:

“I want to open a store”

“I’ll get whatever such store needs to have” (using the example of big chains and small competitors)

“And whatever I would want to have”

That is why the typical corner food stores have a tendency to stock a variety of items similar to the big supermarket chains. But they don’t have enough customers to sell all of them before these products expire. And even if they did, the shelf space is very limited to present all that variety.

As a result, every week a small grocery store has to write off many expired products that went unwanted or unnoticed. The catch here is that the owner would then stock up these same items again. And again experience losses. How can you get out of that vicious circle?

Step 1: Collect Data 

So here is the first step. Considering limited floor size and limited customer flow, learn who your customers are and what they buy.

During two months, write down in a journal what kind of people come to the store -- their age group and gender, occupation and whether they are a tourist or a local -- it is not difficult to find out in a casual chit chat. Next to that take note of what they bought and how much money they spent.

After a month or two you will have an old-school hand-written data lake from which you can get really important information that will allow your business to make profits: What group is your biggest paying customer; What they buy the most and what they never buy.

Step 2: Optimize 

Stock what your customers buy

Based on the information you have, you can stop ordering products that your main paying customers never or hardly ever buy. That will enable you to have not just a random variety but a very targeted assortment that stays fresh and sells faster.

Arrange things in a way that would reach your target audience

Now that you know who comes to you regularly and buys the most, another big improvement can come from the way products are arranged in the store and in relation to each other: higher or lower on the shelf, in the front or in the back of the store, what gets bought together with what.

A great example is a store-chain from Argentina, called Dia Dia. After similar research as described above, they noticed that their buyers had very little time to shop and usually looked for a quick meal, not a whole-round shopping. So Dia Dia arranged the front of the store accordingly: one part had all the items you’d need for a quick mix and match of breakfast, second for lunch, and last for dinner. That way their customers didn’t need to walk around the store losing time and looking for each item separately. The sales of the store went up.

Step 3: Measure and Reflect

Always take time to reflect on your actions. When you make any changes, base them on your solid numbers from step one. Resist taking suggestions from people who tell you what they want unless they are ready to pre-pay their order. 

With every new change, take note of what you did and what were the effects: are people buying more or less, how much of the stock is wasted, etc. You can keep a similar journal as in step one to make sure that you always know who buys the most from you and whether your store offers them the perfect shopping experience.

I am a big supporter of small businesses -- little corner stores, cute boutiques, tiny cafes -- because they bring diversity and uniqueness into our globalized averaged-out world. It makes me happy to see a proud shop owner doing the thing he or she is passionate about. If what we need to succeed in business is to innovate -- to find new and better ways of making our customers happy -- then it’s not just corporations that deserve to know how to. With the simple actions I described in this article, I hope you can make your first solid steps to more customers, more sales, more prosperity.

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