Next up in our guest blog series, Nikki Baird, managing partner at RSR Research, joins us to discuss how small retailers can win in the digital economy. Nikki has an extensive background in retail technology with experience ranging from small retailers to consulting services for Fortune 500 retailers, distributors, and manufacturers. As co-founder of RSR Research, an industry market intelligence firm specializing in the impact of technology on the extended retail industry, Nikki focuses on trends impacting the consumer-retailer relationship. She also acts as a frequent Forbes contributor for retail trends in technology.

We caught up with Nikki to discuss technology in small business and retail operations. See what she had to say:

Retail as an industry historically has ignored technology. While most of the benefits of technology investments (up until the beginning of the internet age) have been accrued by only the largest retailers, even these retailers invested grudgingly – regarding IT as a cost, as opposed to a source of competitive advantage.

But things have changed drastically since the rise of the internet. The tech-driven capabilities that once lived only within the largest retailers are now available to the smallest. And ironically, the largest retailers increasingly seek the intimacy and personal relationships that the smallest retailers are best known for.

Why have things changed so much? The rise of consumer technology is mostly to blame – as the physical hardware has gotten cheaper, the software running on those devices has become more and more sophisticated, culminating in the smartphone, which is still having an impact on both consumer behavior and how retailers respond to that behavior.

It is the largest retailers that have been hit the hardest. From CompUSA and Circuit City at the beginning of the economic downturn to Sports Authority in the last year, the largest retailers – especially those that sell multiple national brands – are getting squeezed, by Amazon with its marketplace and seemingly infinite assortment on the one side, and the brands themselves that increasingly sell direct on the other. Companies that once won by having “the most of the best brands” no longer have the most, and no longer are deep enough in any one brand to satisfy consumers.

What that leaves room for in the marketplace are retailers who are curated, authentic, genuine, and increasingly, also local. That is the face of independent retail today. The biggest shift is from a retail brand value proposition of “I have the best brands!” to one focused on lifestyle expertise, philanthropy or community connections, meaning, passion, and a focus on experiences, whether all of that is delivered online, in a store, or both.

Even better, the battleground for the hearts and minds of consumers is not in big TV advertising budgets or, for that matter, big IT budgets. Retailers increasingly need to be where consumers are – and that’s on social media and mobile.

Unfortunately, even those retailers that are primarily online sellers, most didn’t get into the business out of a passion for technology – they have a passion for the products they sell and the lifestyle those products enable. And that means that even though the playing field has been substantially leveled thanks to many different internet technologies, small retailers are losing because they don’t have the time, the interest, or the know-how to play. But there are definitely opportunities for small retailers to outwit their larger competitors online, and most don’t require an IT person, let alone budget:

  1. Exploit social channels.
  2. The largest retailer’s Facebook page looks exactly the same size as the smallest’s. And retailers at both ends of the spectrum have the exact same opportunity to reach an audience in social media. What works in the small retailer’s favor is risk. Big companies with lots of followers worry about making sure they offend no one – which means they also inspire no one. Small retailers, typically with a strong personality fronting the company, have the prefect medium for showcasing their passion and authenticity in a way most large retailers fear – because they don’t want to offend anyone.
  3. Put your entire catalog online, whether you sell it online or not.
  4. This one is for small retailers with stores. Retailers of all sizes struggle with whether to display assortment online when it is out of stock or sold in stores only. But consumers increasingly begin their shopping trips online. And if retailers are not there with the assortment and matching search terms, then they’ll never get a chance to compete for the consumer’s business. If you sell it, it should be listed online, even if you have to put a badge on it that says “Available in stores only.”
  5. Blend content and commerce.
  6. This is another place where large retailers simply get in their own way. In big companies, content is created by the marketing department, and the online product listing is maintained by the digital merchandising department. That means when you go to most major retailers’ sites, you’ll find products listed in one place, and content listed in another, and nothing linking the two, even if the content refers to product the retailer actually sells. But content is an important path to commerce. It attracts consumers who learn interesting things from you, which leads to trust, which leads to an interest in buying from you. Why would you make that hard? If you’re a beauty brand and you blog about the benefits of honey as a skin care ingredient, why wouldn’t you link to the products you sell that have honey as an ingredient within the blog? If you’re a pet supplies retailer and you blog about the benefits of a certain kind of leash in training dogs, why wouldn’t you also link to the products you refer to? It’s amazing how many retailers don’t do that – but most amazing are the largest retailers, where, not surprisingly, organizational silos get in the way.

The largest retailers used to have everything going their way: economies of scale, supply chains, massive marketing, and IT budgets. But now sometimes they find that these things may get in their way. Consumers are ripping apart the benefits of scale and supply chain through omni-channel shopping, and the biggest budget in the world is not going to buy a brand any kind of advantage on platforms like Facebook, where authenticity and genuineness matter so much more. The time is right for small businesses to make their move.