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04-29-05 Small retailers can survive among giants


  COLDWATER -- A positive attitude is a small retailer's most important weapon when facing competition from a retail giant superstore, local business owners were told Thursday.

  Retail expert Kenneth E. Stone, professor emeritus of economics at Iowa State University and author of "Competing with Retail Giants," spoke at a seminar sponsored by Mercer Health, the organization that includes Community Hospital, and the Coldwater Chamber of Commerce, with cooperation from Grand Lake Mercer County Research and Development, Wright State University-Lake Campus.
  It also helps, Stone told an attentive audience, to be flexible, to know the economics and lifestyle of the community and the customers, to know strengths of the business, to consider niche marketing, to hone pricing skills, to polish customer service approaches and to never try to compete head-to-head on price sensitive products.
  At Wal-Mart, which Stone began studying in 1981, price sensitive products are those few (100 up to 1500) products of which most people know the price and which are typically priced low at Wal-Mart. They are placed on end caps of aisle or at kiosks in the store.
  Stone says this makes customers think that everything is lower in the store than elsewhere, something he says is not true. In quoting Wal-Mart's pricing strategy, he said, "It has never been our intention to beat the competition on every item." Wal-Mart's pricing stucture is aimed at households earning about $35,000-$40,000 annually, Stone said.  Stone says it is possible for local retailers to co-exist with big supercenter stores like Wal-Mart. He reminded the listeners that in this free enterprise system, all firms are free to compete.
  He did not say it would be easy though.
  Stone began his seminar with a review of the typical impact a supercenter opening has on local stores in the host town during its first year.
  Local grocery stores showed a 10 percent loss of sales in the first year, general merchandisers lost 30 percent of sales overall and there was a 7 percent loss for specialty stores. Others feeling the pinch may be banks, communications, farmers and certainly gas stations, Stone said.
  If there is a sales tax and property tax, the host town tax collections will likely go up the first year but may be offset somewhat if other business fail or lose market share. There are also expenses such as road construction and possibly tax incentives.
  A Wal-Mart Supercenter, like the one expected to open May 11 on Havemann Road in Celina, typically reduces gas prices below others in the area and may engage in a price war for a few months. Then Stone said the store gradually raises the prices closer to other gasoline station prices in the area.
  Wal-Mart's expansion had been slow since its founding in 1962, Stone said. That began changing in 1988, when the company set up distribution centers central to a number of its stores, put in a scanner system for inventory and a satellite transfer that allows the company to keep up with what is sold, what needs replenished and directing products to shipping. At least one Wal-Mart truck arrives at each store everyday. Ohio has at least 66 stores, and there are 5,600 worldwide, including 50 in China.
  He told the group that it was imperative that they know the competition. He suggested checking out prices and marketing efforts of the new supercenter.


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