Seth Godin – how indies can compete

Author, entrepreneur and teacher Seth Godin is one of the most respected thought-leaders on how to be successful in a capitalist economy. More than 600 people packed into a central London theatre to hear him talk about his ideas back in January, which coincided with the publication of his book The Icarus Deception. Here, he talks to Nick Shanagher about the challenges facing independent retailers.

NICK SHANAGHER You talk about the advantages of the industrialist machine and big retailers like Tesco in the UK. How does a local shop compete?
SETH GODIN Any retailer who thinks he can operate as a smaller version of the big guy is going to fail. The reason is that the big guy is better at doing big than he is. So you can’t say that we’re just like the big guy, but smaller. That doesn’t work.

You have to say we can do the things the big guy cannot do. For example, the big guy has to have policies and you don’t. The big guy has to have meetings and you don’t. The big guy has to wait months to put something into the world and to test it and you don’t.  So when you start doing things that only the little guy can do, people who want the little guy will come to you.
We’re so tempted to industrialise. We’re trained to be big. We don’t understand the huge advantage of being small.

So, for example, just outside New York City there’s a pizza place on Coney Island that every morning makes a batch of dough. And when the dough is gone they close. If they run out at three o’clock they close. If they run out at five o’clock they close. No big business would ever do that. But that’s precisely what the people who go all the way out there to eat go for. Because it’s not Pizza Hut.

NS How should a retailer work with a symbol group?
SG Your shop does not have to be a version of Tesco. This is hard to do and the reason is that if you act like Tesco then whatever you do is not your fault. Because you’re just doing what the big guys do and you’re just getting by – don’t blame me. If you buy that back end, that fascia, whatever happens in your store is not your fault because you’ve given direction to someone else.

NS So what should you do?
SG What I am arguing as passionately as I can is that you need to start making it your fault. Start going to the world and say here, I made this.
This is why you should have become a retailer in the first place. Retailing is a personal act of connection. It is something that happens face to face.
You have to bring your face into the store and figure out how to make that connection into something that people will pay for.

NS That may be true, but at the back end how you profit depends on how you buy, doesn’t it?
SG You’ve done it again. No. That is only true if you are an industrial retailer. An industrial retailer is going to make his profit by lowering his costs. An artisan retailer makes his profit by raising the value.

NS But against that vision, surely most shoppers have been industrialised into accepting that everything is the same and price is the only differentiator?

SG Yes. So what we’ve done is brainwashed customers into saying that everything is the same so buy the cheapest. The only way out of that is to just get the few customers that are willing to hear that everything is not the same.

I’ll give you a very specific example. Even from thousands of miles away I know the restaurant chain Ottolenghi. There are three or four of them now.
Do you think he is charging a multiple of his cost to sell you baba ganoush? Or do you think that there’s this huge profit margin?

The profit margin is significant because you’re buying vegetarian food for 10 times what it costs him to make, because you are not buying it based on the fact that he’s getting pulses or lentils or whatever cheap. You’re buying it because he told you a story. Because you have read about him in the newspaper. Because you have his cookbook. Because going to the store makes you feel differently.

NS So making people feel good is important?
SG Exactly, making people feel good is what’s available. Tesco can’t do that. But the local guy can.

NS But what if you are in an area where people just want to buy deals?
SG You make a choice. If your choice is that you’re going to act like Tesco, don’t be surprised when Tesco does it better than you. Don’t whine