Acquisition Advantages of Buying a Specialty Retail Business

Nov 12, 2024

IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Bill Southwell. Mr. Southwell is a senior business broker at IBA (www.ibainc.com):

Acquisition Advantages of Buying a Specialty Retail Business

The evolution of the retail landscape has changed more in the last decade than it has in the past century.  With the advent of e-commerce and major suppliers such as Amazon, the long-term prospects for the big box retailers, regional malls and even small brick & mortar retailers appear doomed to a slow dying fate.  On the surface this would appear to be insurmountable for the small independent retailers, but that is only a knee-jerk reaction.  A closer look at retail in general reveals a very different outcome for one segment that is defined as “Specialty Retail”.

Retailing in general refers to the sale of goods or services from a business directly to a consumer for their own use.  E-commerce (Amazon), general retailing (Target), and specialty retailing (Starbucks) make up the three primary categories of retail in the market today operating in this space.  Almost all retailing can include physical stores, online stores, mobile stores or any combination of the same.

So how is it that the smaller niche’ specialty retailers can ever expect to compete with the multifaceted online behemoths now entrenched in the economy?  Specialty retailers have learned long ago how to adapt, stay nimble, and remain in their lane while competing against what often appear to be insurmountable odds.  Most specialty retailers have a niche’ market that is focused upon a specific group of consumers. Niche’ marketing is a subset of the market on which product features are aimed at satisfying specific market needs, as well as the price range, production quality, and demographics that it is intended to target.  Many business analysts suggest that “Finding a niche’ differentiates the business from the competition and allows them to excel in their sector.”  Specialty retailers all have a niche’ to some degree that serves as their identity.

Specialty retailers focus on specific product categories as opposed to larger general retailers who sell several consumer goods.  Specialty stores often carry a deep assortment of brands, styles, or models within a relatively narrow category of goods.  Specialty retailing usually requires or involves detailed and specific knowledge and/or training, often with a human touch and more direct interaction.  Many consumers associate specialty stores with having a reputation for offering a higher level of customer service, and quality of products or services within a single class of products.  Specialty stores also become destinations for social gatherings for enthusiasts, especially if the store owner organizes industry special events & product demonstrations.  I recently represented a large boat retailer in Northern Idaho that specialized in all ranges of fishing boats.  This specialty retailer would regularly bring in fishermen and boating accessory suppliers to speak to capacity crowds each month in their showroom.  I also recently sold a large quilting/sewing machine store in Eastern Washington that brought in speakers for their customers each month to feature new products and techniques and provide a forum for open interaction.   In short, the specialty stores simply take things a step above to create and fill the unique needs of their specific demographic market.

Sometimes it is even possible for specialty retailers to create further distinction in their own marketing subset.  In the late 90’s I owned and operated a successful five-store chain of espresso/light fast-food drive-thru restaurants.  After 15 years in the retail espresso industry, I could fully appreciate the value and need to offer new and unique product offerings that separated my business from many other competitors in the market, big & small.  While many of the large specialty retailers in espresso like Starbucks were committed to only traditional brick-and-mortar stores (at that time), my retail concept introduced a reversible drive-thru component that was just emerging in fast food, but a format unique to the espresso industry.  At a time when Starbucks introduced the 16 oz. Grande with two shots of espresso, my drive- thru introduced the 20 oz Mondo with 3 shots, the 32 oz. Buzz Bomb with 5 shots, and a relatively unknown beverage offering at that time called Bubble Tea to further distinguish our concept & menu.  Most specialty retailers recognize the advantages of being flexible, experimenting with new product offerings and quickly adapting to changing customer needs & preferences.

Many factors are involved with the health of the specialty retail operations such as trends in lifestyles, urbanization, family, income, education and new product development, all of which contribute to the evolution of this retail sector.  I for one am convinced that the well-run specialty retail stores in the market today and those in the foreseeable future will not only survive the onslaught of e-commerce, but they will thrive!

If you have questions relating to the content of this article or the process associated with selling a business, Bill Southwell would welcome the opportunity to talk with you. Mr. Southwell is a M&A generalist by choice with experience selling a broad spectrum of privately held companies and family businesses.  Mr. Southwell can be reached at (425) 454-3052 or bill@ibainc.com.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, real estate, accounting, legal, and financial planning communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.