Chuck Wallington is probably one of the few retailers who welcomes Wal-Mart to the neighborhood, if somewhat reluctantly.
Wallington, who runs his family's business in Spartanburg, S.C., and his fellow Christian business owners walk a tightrope between their religious calling and the need to earn a living as they adjust to new competition from big-box retailers.
"As a Christian retailer, you're kind of torn because your mission statement, a big part of it, is getting the word of the gospel out," Wallington said. "If Wal-Mart is carrying Christian books, is that a bad thing? I'm not sure it is. But obviously, from a business standpoint, it's challenging."
From church nooks to national chain stores, Christian retailers have long had the corner on a market built on books, music and gifts. About five years ago, as they were coping with the effects of a recession and weakened consumer confidence, they found themselves up against mainstream businesses and Internet sites trying to fill a skyrocketing demand for Bibles, music, greeting cards, children's games and movies such as Mel Gibson's 2004 blockbuster, "The Passion of the Christ."
"It's like we've been playing a really strong game of college football. We came back at halftime and the NFL showed up on the field," said Bill Anderson, president and chief executive officer of CBA, a Christian retail trade association based in Colorado Springs.
Some specialty stores, particularly smaller operations, closed while others cut costs, moved to better locations, improved the efficiency of their operations, redesigned interiors and re-created business models. Others are re-emphasizing customer service.
"This is not a fight for turf," said Anderson, who was in Denver recently for the annual CBA International Christian Retail Show. "This is who is going to best serve the customer. ... It's raised the bar for us."
Wal-Mart spokesman Jack Wertz said the giant discount chain has sold Christian products for years, primarily books, DVDs and movies, though he conceded that specialty stores, regardless of the category, have wider variety and selection. Wal-Mart does not release sales figures for specific products.
The Christian specialty retail industry has begun to rebound. Christian product sales totaled $4.34 billion in 2004, up from $4 billion in 2000, according to the latest CBA study. Of that, 53 percent was purchased at Christian stores, followed by 31 percent at general merchandise stores.
Some 337 stores closed last year and 437 stores opened, putting the number of association stores at 2,144.
Store owners also have reported an increase in the average sale per transaction, but traffic has been down. Anderson said revenue growth has ranged from 2 to 4 percent, with some reporting double-digit growth.
Sitting inside the mammoth Colorado Convention Center during the show, Wallington talked about the industry and his mail order and supply business, Christian Supply Inc., which was founded 53 years ago.
He referred to the past several years as a sort of "retail Darwinism." He was forced to cut full-time workers in favor of part-time employees and he trained his staff across departments to improve versatility.
"You could either use it as a chance to be bitter or be better," Wallington said. "I think stores that are seeing some success now pretty much all chose to make themselves better because of it."
Wallington said there are tiers of retailers in the industry: mom-and-pop businesses that are almost a hobby, a middle tier where owners make a decent living with eight to 15 employees and larger stores with 20 to 40 employees.
He believes the smaller stores probably will survive because they do not necessarily have to make a profit, while the larger stores are probably safe because they have the ability to strategically make decisions and try alternatives.
But mid-tier stores doing about $1 million to $1.5 million a year in sales need to grow to survive, Wallington said.
"The ones in the middle are the ones I worry about," he said. "That's not the sweet spot. ... And unfortunately that's where a lot of our stores are. I think they need to get bigger if they're going to survive."
Wallington believes the key to long-term success is keeping the customer's attention, as well as a variety of products and unique service where his employees listen to personal problems of customers and, at times, pray with them.
"I can't imagine them going into a Wal-Mart and sharing that with the clerk," he said. "But they come into a Christian bookstore because they feel like it's a safe environment."
Kris Urdahl, who manages a 500-square-foot store at Grace Lutheran Church in Huntington Beach, Calif., said several customers have told her they can purchase some books cheaper at a warehouse club store, and she agrees.
But then she ticks off reasons why they should buy from her — the store is nonprofit, she offers more expertise and a wider variety of products.
"I think it's great that they're distributing those books. They'll get in the top sellers, maybe the three to five top best-sellers in the book market, and it's just reaching more people," she said. "I think there's plenty of room for growth and there's room for all of us."
Evelyn Martin of Arrowhead Christian Center in Johnston City, N.Y., said big-box retailers haven't been a big concern.
"People are trying out new venues like online and Amazon.com," she said. "We've had customers try those things and they end up coming back to us because of the customer service."
She believes the industry will continue to grow.
"I think that people are very aware of spiritual things right now. And a lot of people are searching," she said.