When business is slow and consumer spending decreases, solidarity between entrepreneurs can help drive sales and possibly cut down on marketing costs.
“There is potential in strategic partnerships to operate at lower costs through shared services or joint purchasing,†says Leonard Greenhalgh, professor of management and director of programs for minority and women-owned business enterprises at the Tuck School of Business at Dartmouth College.
Owners can form strategic partnerships with companies that sell complementary wares, those that sell merchandise that is entirely unrelated, or even form an alliance with a business that sells the same merchandise or services as theirs. A complementary alliance, for example, would allow a business that supplies parts for a home construction project to work in tandem with another business that provides the installation.
“Most minority-owned businesses are small. Ninety-six percent make less than $100,000 per year in annual revenue,†Greenhalgh says. By combining the capacities of two or more struggling small businesses, the new entity will function as if it were much larger and provide a more complete solution for the customer.
When her sales dropped by 20% in 2008, Nicole Jones, owner of Chicago-based shoe store Sensual Steps Inc., realized that she needed to unite other businesses in her predominantly black community to build awareness and drive traffic to their stores. The strategy had worked for her before.
Her shop is located in Bronzeville, an area that after several decades of blight has struggled to develop a strong customer base. Back in 2006, on the one-year anniversary of her company, Jones took the idea of driving traffic literally. She rented a trolley for $600 and had the trolley take shoppers between five different Bronzeville businesses for four hours. The strategy brought in $10,000 for her store that day and introduced her to clients who didn’t know her store existed. It benefited the other businesses as well.
This year, Jones and other business owners, along with the Quad Communities Development Corp., started UB2, United Bronzeville Businesses, a nonprofit organization created to strengthen the Bronzville business corridor. “All of our businesses were suffering [as a result of the recession]. Some stores were trying to make the decision to either close down or stay in business†Jones says. “We decided to pull together in a collective effort to share resources, share networking opportunities, and entice people to come to Bronzeville to shop.
Each of the 10 businesses involved has agreed to pay $150 towards a major media event on Sept. 25 and 26. Each store has begun carrying a huge UB2 poster that advertises all of the Bronzeville community stores. The local restaurant, bakery, and liquor store will provide complimentary appetizers, desserts, drinks, and run the trolley tour again. In addition, they want to make a movie about their shopping district to be played on local television stations. Through cooperative strategizing the group plans to spend only $1,500 dollars for a two-day event that typically costs more than $5,000.