The author is co-founder of the shoe brand Sante + Wade in London
Everyone loves a backward story and the final of this year’s US Open tennis championships in Flushing Meadows, New York, was an exciting example. Millions watched unsupervised 18-year-old Emma Raducanu send a series of more established players to claim the title.
It was a contemporary fairy tale that suggests that even with the right combination of eagerness, perseverance and a little serendipity, we can rise to unimaginable heights. Indeed, it is this kind of thinking that some professionals are on the way to entrepreneurship. And in the novice world, there are legendary examples of smaller companies daring and winning Goliaths. Think Apple vs. Microsoft. I did my part to praise the benefits of being small, including the dexterity that comes from our ears closer to the ground, and the ease with which small businesses can provide truly personalized experiences for our customers.
We all want to believe that bigger is not necessarily better, but research suggests that large companies are more likely than ever to retain their dominant positions. Rather than beginners disrupting the giants, big companies are innovating and investing faster than ever before, according to a study published in the Harvard Business Review in August 2019.
Indeed, far from challenging larger competitors, many small businesses depend on them for sales – especially when it comes to retail. The prospect of gaining access to their breadth of customers can make it enticing: we want our products to speak for themselves, but it only works if there are people listening. Collaborations can also be a game changer in terms of funds or to calm restless investors – it gives a small business validity.
From the outset, executives at Frutteto, a small business that makes frozen fruit ice sticks free of preservatives, wanted to work with supermarkets. “A supermarket creates brand visibility and allows the consumer to pick up the product in an environment to which they are accustomed,” says the company’s director Greig Gilbert.
While the promise of potential growth may be appealing to many small businesses, it may feel less like a fairy tale and feel more like a Grimm fable. For founders with no industry experience and a black book of contacts, it can be finding the right buyers and decision makers like navigating the Crystal Maze. Companies like Frutteto hire people to make those introductions only to discover that getting through the door is just the first hurdle.
“It was incredibly difficult,” Gilbert says. “They [the supermarkets] says they want new brands and they are willing to work with small companies but they want the margins that they [can only] get from the biggest companies.
“The way we get our product listed [with the supermarkets] is initially to sacrifice margin and give away more marketing spending than we would like. . . The goal for us is ‘not at all costs’ but almost, “he adds, noting that the company from here hopes to build demand by word of mouth.
There are other awkward realities that small businesses may have to swallow when working with large retailers. There may be excessive fines for late deliveries or, in extreme cases, the cancellation of entire orders. And this is the assumption that you can get past the roadblock of integration with the retailer’s processes. Gilbert has customers who will only accept a certain size pallet or certain types of boxes because they have automated warehouses. “It’s so difficult to manage, especially in a small business,” says Gilbert.
I can testify that I browse through 20-page documents, looking for similarities in the boarding process of different organizations.
The effort it takes to streamline these approaches is lost time as well as money. The good news is that with customers increasingly concerned about authenticity and sustainability, the largest retailers and supermarkets continue to turn to smaller competitors to provide a diverse product offering. But it will take more than a never-say-die spirit from smaller competitors before relinquishing their dominant positions.