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  • Writer's pictureNick Andriacchi

Smaller Niche Staffers Generate Higher Margins

Updated: Nov 21, 2023

With Thanksgiving around the corner, folks are sorting out their grocery lists for the upcoming festivities. Mashed potatoes, cranberry sauce, and pumpkin pie will likely make their usual appearances, but the main star of the show will be the All-American turkey.

Lot's of turkeys are sold during this holiday. For smaller grocers, competing in a high volume, low margin environment is difficult - just like staffing industry.

Here is a very relatable story I like to share around Thanksgiving from my days in the grocery business.

As margins decreased with mainline turkey sales, we as an independent grocer, decided to not compete for that business but instead specialize in an alternative product. We sold less of it but at higher margins which was much better for our business model.

On top of that, we came across as experts in the field.

I worked at Bertucci’s Meat Market, a family owned butcher shop in Chicago, IL. Thanksgiving became a difficult time to turn a profit because our main focus was on one product: protein. Although turkeys are in demand at that time of year, supermarket chains tend to sell turkeys below cost as a loss leader. They are able to recoup their losses by selling other groceries at higher margins. That was not a strategy we could compete with, so we looked for other ways to satisfy consumer demand and generate a profit.

Our solution was to offer free-range turkeys from an Illinois farm for those who prefer to buy an organic, locally sourced, and animal friendly product. We were able to differentiate ourselves from the larger competition with a reputation as a full-service, premium protein purveyor and attracted customers who were willing to more pay for quality and service. We did sacrifice some sale volume but, in-turn made our holidays more profitable.

How does this relate to staffing? For example, even now, the greatest concentration of contract jobs are within low-skilled placements. Light industrial, construction clean-up, and warehouse placements come to mind. For small to medium-sized staffing agencies, it is tough to compete as strictly a general labor provider because the larger national agencies drive margins down, especially for low-skilled labor. Because the jobs in question do not require specialized training or knowledge, end-users of staffing tend "commoditize" this type of talent and seek the lowest price possible. Don't get me wrong, large volume is wonderful if the margin is enough to justify lower pricing.

Like the butcher shop, small to mid-sized staffing agencies can differentiate themselves by catering to an under served but in-demand markets (ones that may be overlooked by offer staffers). Another option may include focusing more on smaller-volume accounts that the big national firms don’t usually pitch, and/or allocating more resources to semi-skilled, skilled labor where more recruiter expertise is involved. They can also differentiate themselves by specializing in specific industry fields. Boutique staffers that specialize in a specific field tend to get much better margins as the job orders are tougher to fill.

Last thing. If you act as a solutions-based consultant that provides guidance and expertise that benefits your customer, then they will be willing to pay more. Add better quality applicants and exceptional service, clients will know that yours is the shop that can deliver what they need.

For some ideas on how to approach your customers with solutions, please click this post:

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