The first time I was truly introduced to the idea of calculating my market share was from Roy H. William’s second book Secret Formulas of the Wizard of Ads. It was 2003 and I was trying to learn all I could about marketing and advertising. My math was rudimentary. I didn’t adjust for local economy or youth population. Simply raw numbers. I came up with our market share at about 12%.
At first I was a little disappointed. Roy teaches that the gold standard for any business is 30% market share. That’s a big number. Despite its dominance, even Walmart only has 25% of the grocery market. The optimist in me, however, said 12% was a good starting point and now I had a goal to shoot for. I had just read an article (which 14 years later I cannot find—go figure) that said only 9% of the general public was inclined to shop at local indie stores in the first place. I was already 3 points above that number.
I never did reach 30%, but I did have some other revelations about my Market Share number.
First, after going back and adjusting my market size for economy and youth population, our 12% was really closer to 16%. It stayed in that neighborhood until a Walmart Supercenter opened in 2005. We dropped into the 14-15% neighborhood and stayed there until Amazon became a serious player in the toy industry around 2010-2011. We stayed around 12.5% for the next several years until we closed. Even though you can beat a big guy head-to-head, the more big guys in town, the more businesses taking a piece out of the same pie.
Second, that original 12% number got me thinking. A full eighty-eight percent of the market were NOT currently shopping with me. That’s almost 9 out of 10 people. When you look at it that way, it changes your perspective on a lot of things.
In terms of marketing and advertising I realized I didn’t need to reach the entire market to grow my business. If I could just convince 1 more person out of 20 people to shop with me I would have growth beyond my wildest dreams. I really only needed to convince about 2 more people out of 100 to shop with me to have double digit growth. If you only are trying to sway two people out of a hundred you might say something totally different than if you’re trying to sway fifty out of a hundred. With two you can say something direct and personal to a small audience that gets right to the heart of the matter. Trying to reach fifty, you say something generic and non-offensive hoping other forces will come into play to swing them to your side.
In terms of product selection I realized I didn’t have to be all things to all people. I could pick and choose the products I wanted based on my beliefs in the products and how they benefited my customers. Not only does that help with the buying decisions, it helped us stay true to our core values in terms of what we sold and why.
Speaking of Core Values, we didn’t have to be someone we were not.
Meg Cabot said it best when she said, “You’re not a hundred dollar bill. Not everyone is going to like you.” We didn’t have to be liked by everyone. Sixteen percent is a pretty low approval rating. Yet it was higher than any other single store in our market.
Knowledge is power (France is bacon). Knowing your market share might be the piece of knowledge that finally liberates the way you think about your place in the market and the risks you can now safely take with your business.
PS Let me first admit that 16% is actually pretty high for an indie retailer. Many of you might do the math and find yourself in the 3-5% range, especially if you have other indie retailers fighting for the 9% that skews shop local. But before I pat myself on the back, you should know that in the early 1980’s we were at that mythical 30% gold standard and then some. Of course that was before Jackson got Walmart, Target, Toys R Us, Sam’s Club, a second Meijer, a new KMart, and a whole slew of other big chains in town (without a population growth to match), and well before Al Gore invented the Internet. We were the large store that was here first. That’s what gave us much of our edge. But even if you do find yourself in the 3-5% range, if the market is big enough, you can do a lot of business with only 3-5% of your market. Plus, when you only have to convince 1 more person out of 100 to get 33% growth, advertising becomes a whole lot more fun.
PPS It used to upset me that about half my friends were not regular shoppers at my store. My parents saw about that same percentage from their friends. Then it dawned on me … Fifty percent of my friends versus twelve percent of the general population. I was ahead of the game. I slept much better that night.