Posted on: Sunday, August 3, 2003

Finding niches helps small stores survive

By Carl Manning
Associated Press

HIAWATHA, Kan. — Francis Duncan operates a farm and home store and Don Koontz runs the downtown hardware store. Like other local merchants, their biggest competitor is Wal-Mart.

"We don't try to compete with them; there's no way. We let them do their thing and we do ours," Duncan said. "If they get something we have, we just close it out."

Duncan and Koontz are among the independent retailers who have heeded the advice of economists to find a niche that will help them survive the large-scale discounters and big-box specialty retailers.

For Duncan, that means selling agricultural items such as salt blocks and bailing twine, along with lumber and fencing. Since 1985, Duncan has been co-owner of Hiawatha Farm and Home across from the Wal-Mart that opened four years earlier on the outskirts of this rural Kansas town of 3,400.

"I would rather be here than downtown or across town. Wal-Mart draws traffic. A lot of guys drop their wives off there and then come over here," he said.

Koontz knows perhaps better than most what he's up against. He managed the local Wal-Mart store for five years before going into the hardware business in 1997.

"I can't buy as cheap as Wal-Mart, that's a fact, but I can provide better customer service and that's a fact," he said. "I focus on things they don't have."

When Koontz took over the store, he shifted its emphasis from items such as motor oil to plumbing supplies and paint. He also puts a premium on special-order items such as a grill for an outdoor cooker.

"You come in and tell me what your problem is and I'll figure out what you need," Koontz said. "If you are happy with my service, how many people are you going to talk to? They say, 'Go to Don's, he'll fix you up.' "

Like other local merchants, Koontz knows most customers by their first names. For contractors, he runs an open charge account and settles up at the end of the month without interest.

The experience of Hiawatha merchants demonstrates that a large discount store doesn't always mean an end for local businesses, said Kenneth Stone, an Iowa State University economics professor.

"People say it's running small businesses out of town, but the good ones find ways to survive," said Stone, who has studied Wal-Mart's impact on towns for 20 years.

(In Hawai'i, small businesses have been challenged by Wal-Mart since it opened its first store in 1994 and expanded to six locations. As the chain plans two more stores, including one in Honolulu's central business core, fears and complaints about driving out mom-and-pop shops have been repeated, though numerous retailers have proven they can survive or thrive in the presence of the discount giant.)

Wal-Mart spokeswoman Sharon Weber said the nation's largest retailer doesn't set out to force local merchants out of business.

"Our only strategy is to bring everyday low prices to our customers," Weber said. "We never want to see any business go under."

Weber said Wal-Mart helps local economies by providing jobs, bringing in customers and purchasing from local suppliers. "We very much want to contribute to the local community," she said.

Steve Smith, a pharmacist for 34 years, built a corner drug store in 1984, about the time Wal-Mart opened its pharmacy.

"Wal-Mart made me a better businessman. You look at ways to compete," Smith said.

For example, Smith fills customized prescriptions, visits customers at home and delivers or stays open late.

Advertiser staff writer Andrew Gomes contributed to this report.