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Big store or small? Why consumers care

The message to small stores and companies in the age of the Wal-Mart effect is clear: Find a niche market the big guys can’t match, leverage your experience and drench your customers in kindness.  -- By Jon Bonné
A shopper goes into a Wal-Mart in Old Bridge, N.J. As major retailers have spread their operations across the country, small businesses often must find new niche markets to compete in.Daniel Hulshizer / AP file
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Therese Bourassa-Bernier has survived Home Depot. She and her family, whose Bourassa Hardware store has served New Bedford, Mass. since 1924, watched the do-it-yourself chain arrive in town. They watched Builder’s Square come and go. Now Lowe’s is coming.

None of these these retailing behemoths have thinned Bourassa’s stream of customers, who remain faithful to a smaller shop where they know — and are known by — the owner. “They don’t like going to the Home Depots of the world. We have people coming in every day saying, ‘I can’t stand that place. Don’t make me go to that place,’” says Bourassa-Bernier.

In the age of the Big Box, Bourassa Hardware thrives on counterintuition.  It doesn't open on Sundays. It eschews advertising for word of mouth. It doesn't have sales and won't match prices, but the staff insist customers save money in the end because they get a free bonus: years of experience in finding the right tools and materials for any task.

But it seems to be part of a dying breed. The withering of small retail businesses amid the ascendancy of national chains (and e-commerce) has been documented for more than a decade. Between 1992 and 1997, Census Bureau data showed the proportion of retail workers at stores with fewer than 50 employees plummeted from over 61 percent to 36.6 percent.  Economies of scale have proven themselves.

Yet customers still make clear their desire for a personal touch. The greeters at the front of every Wal-Mart prove that. Indeed, the message to small stores and companies in the age of the Wal-Mart effect is clear: Find a niche market the big guys can’t match, leverage your experience and drench your customers in kindness.

But in the end, does that really matter?

Hard to say. After all. the march of corporate retail hasn't slowed. Wal-Mart has faced fights in communities like Greenfield, Mass., and Inglewood, Calif., but there’s always another town down the road with a welcome sign.

'Needed a draw'
Epping, N.H., which just got a Wal-Mart Supercenter and has a Lowe's on the way, courted the world's largest retailer after town planners decided it would provide needed tax revenue and be popular with residents who were driving 15 miles to shop.

"We definitely needed a draw," says Kim Sullivan, an Epping selectman for nearly 30 years. "We needed something that people will come to."

Even with the enthusiasm, the fate of local shops in Wal-Mart's shadow remained a concern in Epping. Owners of a popular grocery store retired rather than enter the retail fight.

But most will survive, Sullivan believes, because they're simply more convenient to residents who need to grab a box of nails or a quart of milk: "I'm going to support my local business as much as I can, as well as Wal-Mart, because I want them there."

Nonetheless, corporate retail is clearly where the momentum lies nowadays. Wal-Mart had 2,667 U.S. locations in 1996; it now has nearly 3,500. (Some sectors saw even stronger growth. Starbucks has leaped from 818 U.S. stores to 3,715 since 1996.)

“When the Wal-Mart comes in, most of the people shift over to the Wal-Mart. So what does that tell us? Even if they trusted the small retailer more than the large one, they still shifted, or they trusted them equally but shifted,” says Zoltan Acs, who teaches entrepreneurship at the University of Baltimore. “The fact is, people voted with their pocketbooks. There were very few examples where people said, ‘We trust the little guy and we’re willing to pay higher prices.’”

Or perhaps the shift reflects a growing gap in what we purchase.  William Dunkelberg, chief economist for the National Federation of Independent Business, notes that small firms have largely shifted from selling products, as Main Street merchants once might have, to providing services.

As major retailers spread across the country, notably in rural communities never before served by big stores, the small businesses that remain usually provide services big retailers aren't known for. “I don’t go to Wal-Mart for a haircut,” Dunkelberg says.

When it comes to buying goods, though, big retailers have essentially taken over. Modern manufacturing efficiencies get some credit too, extending commoditization not just to everyday products like peanut butter or detergent, but also to durable goods.

Farewell to the repairman
Many towns might once have had a TV dealer, for example -- not just to sell you a TV set but to fix it when it broke.  But we no longer repair most modern TVs after the warranty is void; the same goes for CD players or ovens or, apologies to the Maytag man, washing machines.  The need for product specialists has dried up; the hi-fi repairman now earns his living on the sales floor at Best Buy.

The remaining retailers often go boutique, dealing in unique merchandise -– usually high-end items -- that requires a high degree of service or salesmanship. “There’ll be lots of stuff there,” says Dunkelberg, “but it won’t be the commoditized stuff.”

Local hardware stores fit this description perfectly, and often survive by leveraging higher prices with an experienced, knowledgeable staff. These niche retailers survive because they provide a level of convenience hard to replicate by the big guys.

“The hardware store still serves a purpose if you want to find a little doohickey,” says Stephen J. Hoch, chairman of the marketing department at the University of Pennsylvania’s Wharton School of Business. “Going to Home Depot is going to take a lot longer.”

Hoch sees that split between commodity and specialty across most industries. Consider restaurants. We appreciate a special meal once in a while, and –- though chains like the Cheesecake Factory and Outback Steakhouse hope to rewrite the rules of sit-down dining -– we appreciate the emotional currency of a nice dinner in a fancy local restaurant. At the same time, we can't get enough of chain restaurants' commoditized food. Their goal is to provide enough consistency for us to know, when we belly up to the counter for a Big Mac, that it will taste the same from Fairbanks to Ft. Lauderdale.

Or take banks.  Some customers still want the comfort of taking their withdrawal slips into their quiet, carpeted local branch, and perhaps we want to shake hands with a real person before we sign off on a car loan. But most of us rarely speak to a bank employee for our daily transactions –- a trend aided by ATMs, direct deposit and online banking, and reflected in the shrinking number of tellers and a Labor Dept. forecast of more reductions to come.

In part, Hoch believes, these behavioral splits are dictated by an overall growth in consumerism. We buy more, we spend more and so we have less time to focus on each individual purchase.  We reserve those personal, more intimate transactions for things we consider most crucial –- or when we need advice before we buy. Otherwise, shopping is just shopping. Big-box stores like Costco exist to provide us with endless supplies of paper towels, not small talk.

“I think people are less sentimental than they used to be,” Hoch says. “Life goes by really fast. There are just a lot more transactions every day. … They have to change gears a lot.”

That quickened pace means less time for consumers to linger over their purchases, but it also increases the value of personal interactions. As such, stores like Bourassa Hardware turn their staff's knowledge into a value proposition.

Big-city shopping
These shifts aren't limited to small-town America, either. In the past decade, major retailers have turned their attentions to the inner city -- somewhere once considered, for better or worse, to be one of the last strongholds of small business. Many urban neighborhoods that relied on mom-and-pop shops and were shunned by national chains have been welcoming the arrival of the big boxes.

This newfound interest in the city shopper can be traced to the revitalization of urban communities that, until the past few years, operated on a cash economy fueled by a generally poor population with little disposable income. A growing generation of recent immigrants has helped, too. It takes root in neighborhoods like Seattle’s Rainier Valley or Chicago’s South Side, where big home improvement retailers are moving in.

The inner city has its own retail rules, though, says Harry Pestine, a community affairs program director at the Federal Reserve Bank of Chicago. Often, new stores open in neighborhoods where ethnic populations are booming. These close-knit communities, Pestine notes, require extra commitment to customer relationships — a fact not lost on the chains. Their solution: Hire locally, which not only keeps money in the neighborhood but draws workers’ friends and families, who might otherwise be hesitant to shop somewhere so big and impersonal. In multilingual areas, that can also prevent language barriers.

Ultimately, it becomes a mirror of the individual business relationships small merchants have long developed with inner-city residents. That emulation can be quite profitable, Pestine says: “If you hire from within the community, you build trust within the community.”

Yet the arrival of big players in gentrified city neighborhoods has the same impact as in small towns: It often spells doom for the small stores that had been residents’ only retail options. And because inner-city commerce is so closely tied to the individual community, changes to neighborhoods’ ethnic makeup can hurt, too, unless shopkeepers learn to sell to new residents who might prefer to buy from their own.

As with rural retailers, these small urban shops must specialize. Stores must keep a close eye on the neighborhood, Pestine says; if renovated apartments have extra bedrooms, baby furniture might soon be a hot item. “You try to carve out that niche, try to anticipate what you think is the new population that’s moving in,” he suggests.

The value of trust
Ultimately, the big-small divide rests on a basic trust equation. We rely on big and small businesses for different things, and both are finding a place in the economy — even if the role of small business has been forced to evolve.  Sure, we may know Wal-Mart greeters by name, but what draws us are low prices, reliable inventory and a consistent selection of basic brand-name goods. For that matter, we might return to Starbucks because we’ll get the same nonfat grande latte every time. (And that meticulously designed café layout feels familiar no matter how far we are from home.)

Yet we return to our barber because he remembers how to style our hair without being told. We go back to our local hardware store because they’ll make sure we walk out with the right caulk.

“In the small business, you trust the individual,” Acs says, “and in the large business you trust the brand.”

That's basically the message at Bourassa Hardware. Employees know good service takes extra work, but also know their jobs depend on building a personal bond corporate America can’t easily replicate. It's why Therese Bourassa-Bernier courts New Bedford’s growing Spanish population, and why her brother is learning Portuguese. Shoppers may come in and ask for Benjamin Moore paint, but they’re really there because she’s been known to take three hours -– on her day off, no less -- to help a loyal customer pick the right color.

“We appreciate their loyalty,” she says. “They appreciate our service.”