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Businesses Small Prices Retailers Customers Large Sell Larger

Id ESLPod_0984_CN
Episode Id ESLPod 984
Episode Title Competing in Business
Title How Small Businesses Fight Undercutting Prices
Text

Many "mom and pop businesses" (small, family-owned businesses) are being "edged out" (forced out of business) by large national or multinational "retailers" (stores that sell items to consumers) that use "economies of scale" (when the prices falls when large amounts are purchased) to sell their products at a lower price. But others are "fighting back" (working to not let something bad happen) even as those larger retailers are undercutting their prices.

One way for small business to fight is to improve their "customer service" (how customers are treated). The employees of large retailers may not be trained to provide good customer service, but the employees of small businesses "tend to" (usually) "take pride in" (feel good about) their work and may even know their customers personally. Customers who "value" (think something is important) good customer service may choose to shop at smaller businesses even if that means paying a little bit more.

Other small businesses whose prices are being undercut "react" (respond) by "filling a gap" (addressing a need that other businesses are not meeting) in the marketplace for a specific product or service. These businesses might become highly "specialized" (focused in only one area). Larger retailers sell the most popular items to the "masses" (large numbers of people), but smaller businesses can focus on selling less common products that have higher profit margins, but are purchased by a smaller group of consumers.

Finally, small businesses might try to "stay afloat" (remain profitable) by reducing "overhead" (expenses that are incurred regardless of sales volume, such as rent, utilities, and management). These businesses "count on" (rely on; depend on) larger retailers having several levels of management that add to their overhead which, "ultimately" (eventually) is "passed onto consumers" (included in the prices customers pay) in the form of higher prices.

Topics Business

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