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Coexisting with Big Box Retailers: Success Strategies for Independent Retailers

Ken Stone (1995) author of Competing with the Retail Giants, identified big box retailers as the single largest threat to the survival of small-town independent retailers. In order for small stores to be successful, Stone recommended specific strategies concerning marketing, merchandising, business operations, and customer service. Since Stone did not test his recommended strategies, a team of University of Minnesota researchers decided to determine whether successful independent rural retailers in Minnesota were implementing any of Stone’s recommendations. The marketing, merchandising, and customer service strategies were shared by our participants. They believed these strategies made a difference in their business.

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Community-Owned Stores Provide Alternative to Chains

A small but growing number of community corporations are operating stores and restaurants around the country. In Swanville, Minnesota, for example, some sixty families share ownership of the town’s only restaurant, Granny’s Café, which opened three years ago financed by more than $300,000 in community capital. When the general store and lunchtime gathering spot in Hebron, New Hampshire, closed a few years back, more than half of the
village’s four hundred residents chipped in to buy and reopen the store as a collective enterprise.

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Wal-mart’s Growth and Vulnerable Retail Sectors

Many of the sectors Wal-Mart has targeted for expansion are now dominated by big box specialty stores like Best Buy, Home Depot, and Bed Bath & Beyond. Analysts point to the announcement by Toys “R” Us that stiff competition from mass merchant Wal-Mart was causing Toys “R” Us management to consider exiting the toy business. This suggests that even the successful “category killer” stores of recent years may face intense competition from Wal-Mart. This issue discusses some of the sectors that may face future competition.

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Niche Development in Small City Downtowns

Niche strategies position a downtown to gain dominance in a certain product or service category. There are two major types of niches. The first is Consumer Market Segments such as students, retirees, ethnic groups, tourists, office workers, artists, and medical facility users. The second is Goods and Services such as home furnishings, antiques, crafts, children’s products, weddings, health & fitness, and dining and entertainment. The examples in this issue focus on goods and service niches in small city downtowns.

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Lifestyle Retail Centers

A decline in the traditional mall or strip-mall over the past two decades has been followed by an increase in the popularity of new retail centers called “Lifestyle Retail” centers. These centers represent a departure from previous retail development that was often focused more on attracting and maintaining the relationship with the retail tenant than with the customer. Unlike previous retail development, a lifestyle retail center is meant to customize its environment to the changing lifestyle of the consumer in order to make it a stimulating and social place to gather. This issue summarizes an article titled “Lifestyle Retail” from the February 2004 issue of Urban Land.

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Lodging Industry Trends

The lodging industry in the United States as a whole achieved a room occupancy rate of 59.2-percent in the year 2002 compared to 60-percent in 2001 and 63.5- percent in 2000. These falling occupancy levels reflect the most significant decline in the industry in over 50 years. A low occupancy rate, combined with a drop in room rates have resulted in lower room revenues and profits. This article discusses some of the major trends and difficulties facing the lodging industry.

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Restaurant Industry Trends

For the past three decades, the restaurant industry has consistently posted yearly sales gains. Today’s consumers regard food prepared away from home as a necessity. Convenience, a need for socialization and gains in real disposable income have led consumers to spend more of their food dollars in restaurants. Last year, large chains for the first time captured more of the dining out market than independent restaurants. This article looks at the challenge chain businesses pose to independent restaurants, especially during these economically sluggish times.

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Business Recruitment – Attracting Retail and Service Businesses

Communities can influence business investment decisions by drawing attention to local market characteristics that might otherwise be overlooked. This article discusses how a business recruitment team can assist by identifying high potential retail sectors, compiling information of interest to retail prospects, and marketing to those prospects. The key is to demonstrate that the community is a profitable place to do business.

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Greyfields and Ghostboxes – Evolving Real Estate Challenges

Most retail industry analysts would agree that the United States is largely “over-retailed”. That is, there is currently an over supply of retail space. According to one source, the amount of retail space per capita has increased 20 percent since 19701. The reasons for this overbuilding include the evolution of new retail formats, consumer preferences for new retail locations and attempts by
national chains to gain greater market shares. As retail continues to evolve, less competitive retailers have been forced into bankruptcy or have downsized. Older retail space has become less attractive to retailers looking to develop a new image. As a result, there is a glut of vacant retail facing many communities. Increasingly, this retail space is found in “Greyfields” and “Ghostboxes.”

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