Date posted: 10/07/2017 3 min read

How to deal with an unknown giant

The greatest threat to a small business is always the unknown.

In brief

  • According to MYOB's latest SME Snapshot, 27% of SMEs feel nervous about encroaching overseas competitors, like Amazon.
  • Not all SMEs are looking upon Amazon's approach in the marketplace with dread, some will embrace potential changes on impact.
  • The obvious solution to not knowing about the changes an overseas competitor may create is doing the research.

By Tim Reed.

With repeated talk about if and when Amazon will launch into the Australian market, small businesses around the country can’t help but speculate how it will affect their business.According to our latest SME Snapshot, 27% of SMEs feel nervous about encroaching overseas competitors.

On the flip side, 26% feel positively about the prospect of a large overseas competitor coming in and rattling a few cages.In either case, unease or anticipation is being driven by one thing: uncertainty.

SMEs scan the headlines every day and can’t help but see things like Amazon launching a physical store where people can literally walk in, pick up what they need, and walk out without needing to pay.

High tide as Amazon eyes Australia

How will Amazon’s rumoured full service launch in Australia impact local retail business and change consumer behaviour?

They read about the game-changing Alexa and how Amazon has revolutionised the retail business, either with glee or dread.Australian SMEs are adaptable and rugged – they always have been.

The SME Snapshot indicates that 57% of SMEs believe additional overseas businesses in the local marketplace will force them to innovate, while 43% believe the arrival of overseas behemoths will lead to a loss of customers or revenue.

Australian SMEs are adaptable and rugged – they always have been.

It goes to show that while some are excited by the breath of fresh air international competition will bring, some are worried. In both cases though, all they can really do is read about the experiences of those in other markets and how they dealt with a big international player coming in.

The Australian market can be a truly unique beast.When Starbucks tried to expand aggressively into Australia, it found that we already had quality coffee and weren’t ready to abandon our independent stores for a glitzy chain.

Nobody truly knows how an international competitor coming into the national market will play out.

Perhaps that’s why we see a split in the SME Snapshot numbers. After all, roughly the same proportion of SMEs feel positively about the so-called “Amazon effect” as those who feel negatively about it.

Would knowing more about the likely effect of Amazon’s entry into the Australian market swing the numbers one way or another?

Or, are the differing results simply a matter of human psychology? After all, there are always going to be those who see the glass as half empty or half full.

No matter which mindset an SME owner may adopt though, there are things they can do to prepare themselves for a larger competitor playing on their turf.

Don’t panic

The guiding principle for any SME looking across the water at a looming competitor should be to not panic. You don’t actually know what effect the behemoth may have until it actually arrives. That doesn’t mean you shouldn’t prepare, but you should do so from a position of being cool, calm, and collected. With panicking comes sleepless nights, frayed nerves and bad decisions.

There’s an old psychological principle which applies when a golfer prone to slicing approaches the tee. If they think ‘don’t slice it, don’t slice it, don’t slice it’ – they’re more often than not going to slice it.

In much the same way, small business owners shouldn’t think too much about going out of business – as that sort of thinking has a way of becoming a self-fulfilling prophecy. If you’re an SME in business, you’ve more than likely built a business from the ground up. Think about what got you to this point, and what you happen to be doing right to remain in business to this day. It’s in this fertile ground where you’ll find the solution to what effect the looming behemoth may have.

Find your unique value proposition 

Why do customers come back time and again to you for services? If you’re in business at this point, you probably have some kind of unique value proposition which your customers latch onto. Is your business seen as an expert in its particular field? Do you provide quality customer service which goes above and beyond the call of duty? Or, is it that your shop has easy parking?

CEO of Business Models Inc and million-copy-selling author Patrick van der Pijl recently told MYOB’s The Pulse about the time he was called in to help a butcher in the Netherlands.

He said that the butcher wanted to take their business to the next level, and van der Pijl started by getting the owner to ask their customers what they liked about the store at that moment. The owner assumed that they had a quality product at an affordable price-point, but the overwhelming response was that they went to this particular butcher because it was easy to park in front of the shop.

Every business will have a unique value proposition for your customers – so the first step is finding out what that is. The key to finding out is simply asking your customers why they continue to use your service. If you’re just seen as the cheapest in your category you may be in a bit of strife, but what you can do through this process is also find your weaknesses and work on those.

Analyse the competition

The obvious solution to not knowing about the competition is doing research. Google is your friend here. In the age of online reviews, there are probably a swathe of user reviews that you can mine for sentiment.

What is the competition doing well and not so well? You may be facing a behemoth online retailer, and while their price points may be unbeatable – does their customer service leave a lot to be desired?

Do their customers feel annoyed every time they have to talk to a chatbot instead of a person?

Is this an opportunity for you to take your customer service game to the next level and really separate your business from the pack?

Whatever the insight is, it starts with research.

Don’t compete on price

In about 99% of cases, you won’t win by competing on price against an international player which has set up supply chains which are simply unfathomable. Competing on price is almost always a war of attrition, and that very rarely works out well for the smaller player in the game.

Instead, focus on the intangibles which have made your business a success to this point. Things like customer service and relationships may not cost you much in dollars and cents, but make the experience of shopping with you a pleasurable one. You’re far more likely to compete well on these grounds rather than on price. After all, a smile and helpful disposition doesn’t cost you anything.

Don’t rubbish the competition

It is very, very tempting to bash the competition and try to create a negative perception of the big fish when they come into the local market, but it very rarely works.

In fact, it just brings even more attention to the competitor, and they’re big enough to wear any hits you can throw at them. And you risk giving off the impression of being a cornered animal.

When cornered, an animal will often lash out at whomever happens by – and this is the image you’ll give off. After all, customers generally aren’t interested in the to-and-fro between you and your competitor. They’re more interested in the product and service you provide and getting the best possible experience.

Find your niche

In the absolute worst-case scenario, the competitor will come into the market and well and truly eat your lunch by being a better proposition for your customers. Is it time to pivot? After all, the big fish cannot be in every corner of a market all at once – no matter how big they look.

There’s always a market they overlook or decide isn’t worth the time and energy to pursue. However, that market could very well be worth pursuing for a smaller player with less stringent requirements around return on investment.

Identify the niche, and work out whether you can make a viable business out of servicing that niche. You could also look into tweaking your model to provide a greater level of product or service for a higher fee.

The number of customers willing to pay a premium may be fewer, but those interested in the greater level of service will be willing to pay if you solve a pain point for them.

Tim Reed is CEO of MYOB.

This article first appeared in the June/July 2017 issue of Acuity Magazine.