STRATEGY

WHEN WAL-MART COMES TO TOWN:
A LOOK AT DAVID'S RESPONSE TO THE

ARRIVAL OF RETAILING'S GOLIATH

Jeffrey E.
McGee'he

University of Texas at Arlington

Troy A. Festervand
Middle Tennessee State University

ABSTRACT

This study examines how local retailers responded to Wal-Mart 's arrival. The results reveal
that Wal Mart 's arrival disrupts existing retai ling pauerns and forces merchants to alter their
competitivestrategies. Small merchants tend to place greater emphasis on lower prices and
increased promotional activities as a response to competitive pressure.

INTRODUCTION

Discount retailing giants like Wal-Mart have changed and continue to change the face
of retailing. In no marketplace is this effect more pronounced than in small-town America.
The increasing presence of discount superstores in these markets has cast formidable clouds
of economic concern on the brows of local businesses. Many small businesses have already
succumbed and others wi I I follow unless existing firms introduce dramatic changes to the way
they do business. In searching for these answers, perhaps there are lessons to be learned from
Wal-Mart itself.

From its humble beginnings in 1962 as a smalldiscount store in Arkansas, Wal-Mart has
become the world's largest retailer. The loRy position occupied by Wal-Mart today did not
occur by accident. Wal-Mart developed and implemented an aggressive expansion strategy
with small-town markets as its economic and marketing backbone. New stores were located
primarily in towns of 5,000 to 25,000 population and typically were greeted with open arms
by both community leaders and residents. Initially, most rural towns and cities enthusiastically
welcomed the retailing giant, since a new Wal-Mart oRen meant a wider selection of products
and lower prices. These communities felt that the loss of-'Main Street" life was simply an
incidental price to pay for consumer savings and expanded trade (Carfagno, 1989; Marsh,
1991).

However, it has become increasingly apparent that the retailing giant's success oRen has
come at the expense of small town mainstays(Smith, 1989). Few local merchants can compete

'ddress all correspondence to Professor McGec.

15



against expansive 40,000-150,000 square-foot stores whose cosmetics counters alone dwarf
most "mom and pop" operations. Nor can many smallretailers match Wal-Mart's prices, which
are frequently lower than the wholesale prices local merchants pay for their merchandise. As
a result, downtown business districts begin to empty, hastening the erosion of most small
towns'ommercial identity and 1'abric (Blumenthal, 1987).

While the economic and social merit of Wal-Mart's introduct ion and continued presence
in most small towns is the topic of some debate, it is the responsive behavior of extant small
businesses that is arguably most deserving of examination and discussion, as much of the
social and economic well-being of this nation was and continues to be predicated on the
entrepreneurial spirit of small business. This study provides an examination of how retail
merchants in small towns and cities responded to the entry of Wal-Mart. Specifically, local
merchants from 5 mid-western communities were surveyed to determine the impact of Wal-
Mart's arrival on their marketing decisions and the resulting adjustments in their competitive
strategy.

PRIOR RESEARCH

Despite increased scrutiny by a coalition of politicians, historic preservationists. and
small shopkeepers in communitiesthroughout the country, Wal-Mart's impact on local retailing
communities has been the focus of little scholarly research. Moreover, the few empirical
studies that have examined Wal-Mart's impact have produced inconsistent results. Carusome's

(1976) examination of retailers in 10 small Ohio communities was one of the first studies to
address how large mass-merchandisers affect local merchants. That study found that the
development of shopping centers and large discount stores in rural communities had created
highly competitiveenvironments. The number of independent local merchants decreased by
approximatelyeight percent during the ten year study period, while the number of chain store
outlets increased by nearly eleven percent.

Walzer and Stablein's(1981) found that the growth of mass-merchandisersand regional
shopping centers in general has had important impacts on existing consumption patterns and
retail structures. They concluded that the most successful local merchants adapted by offering
broader selections at lower prices. However, they added that many other small retailers were
forced out of business.

Ozment and Martin (1990)investigated the impact of large discount retail chain stores
on the competitive environments of 164 rural counties in Arkansas, Missouri, and Oklahoma.
The results of their study revealed that the structure of retailing in areas that have large
discount stores was dramatically affected. Specifically, the per capita retail sales in
communities containing a large discounter were significantly higher than communities without
a mass-merchandiser. The authors concluded that large discount stores, such as Wal-Mart,
generally benefit host communities by generating increased tax revenues, greater product
selection for consumers, and elevating the local market's overall competitiveness. The study
focusedonexistingconditions,however,so the longitudinalimpactofmass-merchandiserswas
not addressed. Further, no attempts were made to examine the economic conditions before and
after the arrival of large discounters.

16



Stone's (1988) examination of 17 rural Iowa towns was the first study to explicitly
address Wal-Mart's impact on local merchants. Using census data, Stone concluded that per
capita sales increased faster in towns with Wal-Mart stores than in comparable towns across
the state. Stone also reported that Iowa towns within a 20-mile radius felt Wal-Mart's pull.
Retail sales in these communities declined by nearly 10 percent aRer five years. The retailing
giant's impact was more ominous for Iowa's smallest hamlets. Newly opened Wal-Mart stores
drained as much as $200,000 a year from towns under 1,000 people. Moreover, Stone
identified clothing, drug, jewelry, auto-parts, variety, and hardware stores as being especially
susceptible to severe market share losses. Hardware stores, for example, typically lost over 40
percent of their market share.

Franz and Robb (1988) examined Wal-Mart's impact on retail employment and wages
in 14 rural Missouri counties. They found no evidence of Wal-Mart producing a negative
impact on local economies. In fact, measures of income, wages, and salaries increased for all
the counties studied. While the number of retail establishmentsdeclined over the period of the
study, the authors speculated that the remaining establishments were larger and had more
employees and larger payrolls than previously existed. However, Franz and Robb failed to
compare the changes in these measures to counties without a Wal-Mart, thus, it is not possible
to tell whether the changes that occurred were directly attributable to Wal-Mart's arrival.
Furthermore, the study remains suspect because it was sponsored by Wal-Mart (Greer, 1989).

In August 1994, hearings were held before a House Small Business Committee on
whether large discount superstores, such as Wal-Mart, located in small towns have harmful
effects on small business and local communities. Based on the findings of a University of
Missouri study, the ultimate conclusion drawn in these hearings was that large discounters help
attract new business. Further just as discount stores create employment opportunitiesand keep
rural residents from having to travel to stores in distant cities, discounters create jobs and
shopping alternatives (Verdisco, 1994).

Most recently, McGee (1995) examined the retail sales and tax data from small towns
to determine the effects of Wal-Mart stores on communities in tive Midwestern states. This
latter study found that per capita retail sales and taxes increased faster in towns with a Wal-
Mart than those without. Further, noncompeting businessesexperienced the greatest benefits,
while local merchants in direct competition with Wal-Mart experiencedrevenue losses ranging
from five to fiity percent. Businesses in nearby small towns suffered as well.

While existing research focusing on Wal-Mart's impact on local businesses consists
largely of anecdotal evidence and inconclusive empirical research, there is little question that
Wal-Mart's presence has an impact, perhaps both positive and negative, on the existing retail
structure of most small towns and cities. Anecdotal evidence suggests a direct link between
the arrival of Wal-Mart and the deterioration of the central business districts of small towns
(Sheets, 1989; Marsh, 1991). Paradoxically, Wal-Mart's presence provides some local
merchants a needed competitive jolt, forcing them to develop unique niches and services in
order to survive(Cockerham, 1994). Unfortunately, this argument cannot be fully supported
since there has been no empirical research conducted explicitly examining the response of local
merchants to Wal-Mart's arrival.

17



Given the paucity and inconclusivenessof existing research, this study was undertaken
to explore the impact of Wal-Mart's arrival on existing small businesses and identify their
competitive response(s). Further, it is important to note that this research was funded totally
and exclusively through a university research grant and is in no way affiliated with any
commercial and/or retail insitution. Specific questions addressed by the research included:

1. Were existing retail businesses impacted by the arrival of Wal-Mart? If so,
what was the nature and extent of that impact? Did that impact diminish
over time?

I I. How did existing small businesses initially and subsequently respond to
Wal-Mart's arrival?

I II. Were there differences in how impacted versus non-impacted retailers
responded to Wal-Mart's arrival? If so, what were those differences?

METHODOLOGY

The data were collected from a concensus (i.e., total population) sample of 658 retail
merchants in 5 rural Midwestern towns where Wal-Mart had opened a store between 1989 and
1994. The sample focused on towns with populations of less than 25 000 inhabitants and were
more than 20 miles from a metropolitan area. These sample parameters helped better elucidate
Wal-Mart's explicit impact on the rural retail community.

Data were collected through a mail survey. The design and administration of the
questionnairerelied heavilyon Dilman'smulti-step "total design method" (1978). The initial
step involved mailing a cover letter, questionnaire, and postage-paid return envelope. A
reminder postcard was sent to al I potential respondents one week later. Finally, a second cover
letter, questionnaire, and postage-paid return envelope were sent to the nonrespondents two
weeks later.

The survey instrument was developed aRer an extensive review of existing strategic
management, marketing, and small business literature (e.g., Robinson and Peace, 1988;
Conant, Smart, and Solano-Mendez,1993; Shama, 1993) and contained questions addressing
four general issues. First, the questionnaire solicited data concerning Wal-Mart's impact on
the local retailer. Next, five-point, hikert-scaled questions werc used to collect data concerning
the extent to which local merchants altered their competitive tactics in response to Wal-Mart's
pending entry into the local market (e.g., I = not at all... 5 = very much). The third area
addressed the emphasis placed on various competitive methods employed by local merchants
following Wal-Mart's arrival ( e.g., I = no emphasis... 5 major, constant emphasis). Finally,
the survey instrument solicited information about the local retailer's age, location, size, and
level of employment. The survey instrument was pretested on six small retailers not included
in the study's sample and no key informant problems were evident.

In addition to descriptive statistics which were used in developing overall respondent
and response profiles, the Kruskal-Wallis one-way analysis of variance test was used to
determine whether or not significant differences existed in the responses of sample retailers.
The results of these analyses are described in the following section.

18



RESULTS

Overall, 222 of the 658 surveys were returned in useable form, representing an effective
response rate of nearly 34 percent. To detect any potential nonresponse bias, a telephone
survey was conducted with 30 no nrespondents randomly selected from the original mailing list.
Five descriptive questions concerning the retailer's annual sales, number of full-time
employees, number of part-time employees, age, and distance from the recently opened Wal-
Mart store were asked. Independent t-tests between the nonrespondents and respondents were
insignificant indicating negligible nonresponse bias.

PPPI P fl

Table I presents the sample's summary statistics. Most of the retailers were quite small
in terms ofboth annual revenues and number of employees. Nearly 65 percent of the sampled
stores had annual sales of less than $500,000. Most small firms employed fewer than 5 full-
time (78.1 percent) and part-time (84 percent) employees. Less than 5 percent of the
businesses had more than 15 full or part-time employees. In terms of business longevity, 28.9
percent of the respondents have been in business for ten years or less, while a similar percent
(262 percent) have been in business between eleven and twenty years Most of the responding
businesses (44.9 percent) have been in existence for over twenty years. Geographically
speaking21.1 percentof the respondentswere located less than I mile from Wal Mart, while
45.5 percent were located between I and 5 miles. Approximately a third of the responding
Iirms (33.4 percent) were located more than 5 miles from Wal-Mart.

Compared to industry averages, the sample's demographics correspond closely to
national averages in the areas of employment and annual sales I 94 Statistical Abstract of the
United States). In terms of business longevity, sample respondents appear to be somewhat
older than the national average, as only 34.2 percent of small businesses across the nation have
been in business for over twenty years. Finally, locational comparisons were not possible
given the study's focus. Thus, while regional in scope and somewhat skewed toward more
established firms (which may not be surprising given the study's focus on established small
businesses in rural communities), the sample appears to be adequately reflective of small
business in the vital areas of employment and sales.

~NI fl

A summary of Wal-Mart's impact on existing small businesses in the year following
its arrival is presented in Table 2. A majority (72 percent) of the responding firms indicated
they had been impacted by Wal-Mart'sarrival. Of those impacted, 52.6 percent reported they
had been negatively impacted, while 18.7 percent reported a positive impact. Of those
negatively impacted, 22 2 percent experienced a decline of less than 10 percent in their store's
revenues during the 12 month period immediately following Wal-Mart's entry into the area.
Further, 30.4 percent of the negatively impacted respondents claimed annual revenue
reductions of more than 10 percent.

19



Table I
DDD ', s„„;„;r
(N = 222)~

What is your approximate annual sales level?
Less than $250,000 39.3% (87)
$250,000 to $499,999 25.5% (57)
$500,000 to $999,999 20.4% (45)
More than $ 1,000,000 14.9% (33)

Including yourself, how many full-time employees does your business employ? (mean = 4.2
employees)

Fewer than 5 employees 78.1% (173)
Between 5 and 10 employees 13.7% (30)
Between 11 and 15 employees 5.0% (11)
More than 15 employees 3.2% (7)

Including yourself, how many part-time employees does your business employ? (mean = 3.7
employees)

Fewer than 5 employees 84.0% (186)
Between 5 and 10 employees 9.6% (21)
Between I I and 15 employees 3.2% (7)
More than 15 employees 3.2% (7)

How many years has your store been open? (mean = 26 years)
Fewer than 5 years 7.9% (17)
Between 5 and 10 years 21.0% (46)
Between I I and 20 years 26.2% (58)
More than 20 years 44.9% (100)

I low many miles from you business is the recently opened Wal-Mart store: (mean = 9 9 miles)
Less than I mile 21.1% (47)
Between I and 5 miles 45.5% (101)
More than 5 miles 33.4% (74)

~Some percentage and sample size totals may not equal 100% and 222 respectively
due to rounding errors and nonresponse to some questions.

20



Table 2
Wal-Mart's Im act Measures
(N = 222)

Which of the following statements about Wal-Mart's arrival is true?
Wal-Mart's arrival had an impact on my retail store 72.0'/v
Wal-Mart's arrival had no impact on my retail store 28.0'/v

During the 12 month period immediately aRer Wal-Mart arrived, your store's sales...
Did not change 28.8'/o

Decreased by less than 10'/o 22.2'/o

Decreased between 10'/v and 25'/v 25.3'/o

Decreased by more than 25'/v 5.1'/o

Increased by less than 10'/v 12.1'/0
Increased between 10'/o and 25'/o 6.6'/o

Increased by more than 25'/s 0.0'/o

How long did it take before the impact of Wal-Mart's arrival began to diminish?
Less than I month 2 6o/o

Between I and 6 months 7.7'/v
Between 7 and 12 months 4.6'/v
More than I year 7.7'/o
Wal-Mart's impact has not diminished 40.8'/o

ln addition to the 28 percent of the respondents who indicated that Wal-Mart'sentry into
the local market had no impact on their firm, 18.7percent of the respondents indicated they had
been positively impacted by Wal-Mart's presence. Of this latter group, 12.1 percent
experienced a sales increase of less than 10 percent, while 6.6 percent of the positively
impacted firms reported sales gains of 10 percent or more.

~Di f I

In terms of impact duration, a majority (40.8 percent) of the respondents indicated that
Wal-Mart's impact had not yet diminished. Those reporting that Wal-Mart's impact
diminished in less than 6 months and between 6 months and a year were 10.3and 12.3 percent
respectively. More profoundly,40.8 percent of the sample responded that Wal-Mart's impact
has not diminished. No distinction in the direction of the impact (i.e.,positive or negative) was
ascertained for this latter response category.

Preem tive Cpm etitive Res onses

Table 3 presents the preemptive responses of local merchants to Wal-Mart's pending
arrival. As can be seen, the results provide some anticipatory insight into the competitive
behavior of small firms. In most instances, the responses indicate minimal preemptive
competitive behavior. Rather than a statement of apathy, perhaps the absence of more

21



provocative preemptive actions on the part of existing small businesses suggests an almost
passive acceptance of an erosion in their market position, as well as a "What else can I do?
attitude toward available competitive responses.

Table 3
I.peal Merchant's Preem tive Res ense to Wal-Mart's Arrival
(Total Sample, 14 = 222, Responses Presented as Percentages'

To what extent did your stare engage in eacli of the following measures prior to Wal-Mart 's
arri val?

(RmgrdSe RhOIgii %tnt
ds(j) Q}Xlh& @sass(lE0 EOmlb Qhdb

Added new product lines 40 24 19 12 5

Altered labor force 66 17 10 6 I

Altered store hours 70 16 II 2 I
Changed marketing strategy 34 23 25 14 4

Changed advertising message 42 20 24 10 4

Diversified into other businesses 54 14 15 10 7
and/or services

Increased promotional budget 48 21 21 7 3

Increased civic involvement 57 25 12 5 I

Increased sales promotion 43 23 21 10 3

Loosened customer credit 70 14 10 5 I

Modified target markets 38 18 28 13 3

Pruned some product lines 37 20 22 13 8

Spent relatively more on radio 49 21 17 9 4
and/or print advertising

Used more price incentives 34 28 23 10 5

Responding firms were most active in adjusting their products lines (i.e., 21 percent of
the responding firms altered their product lines significantly [much or very much] by pruning
products). Relatedly, 17 percent of the respondents adjusted their product mix by adding
products, while a like number of firms diversified into other businesses and/or services.
Contrastingly the least engaged inpreemptive responses (either not at all or little) consisted of
labor adjustments (83 percent), store hours (86 percent), civic involvement (83 percent), and
credit practices (84 percent).

While a number of tactical issues and practices were examined in this phase of the
research, it is interesting to note that the two most prevalent preemptive changes engaged in
by responding small businesses were strategic in nature. When measured by a composite of

22



the responses classified as either engaged in somewhat, much, or very much, changes in
marketing strategy and target market were the two most pursued preemptive responses (43
percent and 44 percent respectively). These latter findings suggest that small businesses
recognize that tactical responses are least effective and are short-term responses at best.
Further, if the small business is to survive, then repositioning via a change in overallmarketing
strategy or target market olfers the greatest opportunity for continued success.

Not all small businesses were impacted negatively by Wal-Mart's entrance into the local
market. As indicated earlier, 18.7 percent of the respondents experienced a sales increase,
while 28 percentof the respondentsexperiencedno change in sales levels. Given the presence
of these three groupings, a comparative analysis of preemptive actions across groupings was
conducted. These results are presented in Table 4 and indicate that while significant
differences in level of emphasis were found for 13 of the 14 preemptive responses across
impact groups, the most potentially insightful finding dealt with the marginal preemptive
emphasis given to all areas by all groups.

The findings for the negatively impacted group mirror the findings for the entire sample
presented and discussed earlier. The four preemptive actions taken most o(ten by this group
fell in the areas of product (addition and deletion) and strategy (includes target market
selection). It is interesting to note that even these action areas received mean emphasis scores
below three, perhaps providing a measure of response ambiquity on the part of this respondent
segment.

Compared to the negatively impacted group, the Iindings indicate that both the
positively impacted and no impact groups engaged in virtually no preemptive actions of any
type as indicated by low mean emphasis scores of 2.02 (product pruning/no impact) and 1.68
(product addition/positive impact). This research did not explore underlying reasons for
responding firms actions or inactions.

On-Goin Res onses

Table 5 presents the results addressing the competitive methods used by small retailers
since the mass-merchandiser entered the market. These findings generally were consonant
with the previous findings on preemptive actions. The most emphasized (considerable and
major) competitive methods used by small businesses were carrying higher quality
merchandise (66 percent) and providing heightened levels of customer service (62 percent).

Recognizing that two of Wal-Mart's primary competitive weapons are low price and
promotional strength(i.e., advertising expenditures), it is not surprising that the least engaged
in competitive responses (composite of no and very limited emphasis) were to carry lower
priced products (72 percent), pricing below competitors (65 percent), and to increase
advertising (64 percent).

23



Table 4
Results of Kruskal-Wallis Test of I.ocul Merchant's Preem tive Res onse to Wal-Mart's
Arrival

CgmqpKf8ke Rh@mm RtqySe Qb)
Iliitllgt.g:QhgZXO

Added new product lines 2.50 1.93 1.6&8 11.51"«

Altered labor force 1.82 1.41 1.06 14.21»»»

Altered store hours 1.50 1.39 1.25 1.73

Changed marketing 2.76 1.97 I . 18 37.15«««
strategy

Changed advertising 2.46 1.82 1.62 55»«»
message

Diversified into other 2.35 1.67 1.25 15.74"««
businesses and/or
services

Increased promotional 2.29 1.55 I . 18 32.67«*«
budget

Increased civic 1.93 1.43 1.37 16.09"'"
involvement

Increased sales 2.41 1.70 1.50 21.19««*
promotion

Loosened customer credit 1.58 1.43 1.06 6.68«

Modified target markets 2.73 1.83 1.50 34 49»»»

Pruned some product 2.74 2.02 I. 13 22.62«««
lines

Spent relatively more on 2.25 1.67 1.50 15.30«««
radio and/or print
advertising

Used more price 2.65 1.86 1.43 28.64«"«
incentives

'Means reflect average response based on the following five point Likert scale: I = Not at All;
2 = Little; 3 = Somewhat; 4 = Much; 5 = Very Much

«p& 05. ««p& 01 ««'p& 001

When considered on the basis of impact, significant difYerences were found for all but
one of the response strategies examined. These findings are presented in Table 6. In all
instances, negatively impacted firms took a significantly more aggressive posture compared

24



to the two other groups. In what might be considered the most salient finding of this latter
analysis, the results indicate that all three groupings emphasized the same two competitive
actions(albeit with significantly different levels of emphasis), high quality merchandise and
customer service, areas thought to be weaknesses for most mass merchandisers.

Table 5
Local Merchant's Com etitive Methods since Wal-Mart's Arrival
(Total Sample, N = 222, Responses Presented as Percentages)

To what extent has your retail organization emphasized each competiti ve method since Wal-
Mart opened its stare (or since you opened for business)?

Qhdlm0 (sbtIIS (Qgtstggtjg

Buying convenience (e.g., 24 37 39
delivery)

Carrying higher priced items 32 40 28
Carrying higher quality 15 19 66
merchandise

Carrying a variety of product 23 49 28
lines

Carrying lower priced items 49 41 10
Civic involvement 32 41 27

Depth of product selection 26 48 26
Holding sales 30 46 24
Increased use of advertising 44 37 19
Monitoring competitor's 30 50 20
pricing

Post-purchase service 24 31 45
(e.g., liberal return policy)
Pre-purchase service 18 20 62
(e.g., personal attention)
Pricing below competitors 40 50 10
Sales promotion (e.g., 37 46 17
coupons)

Stocking private label brands 39 32 29
Stocking unique products 24 37 39
Stocking highly recognized 25 41 34
brand names

Store layout and merchandise 20 42 38
resentation

25



Table 6
Results of Krusksl-Wallis Test of Merchant's Com etitivc Fm basis since Wal-

art'rrival

iigaSSe RhyXfte Itgtt Rd}5e
i Ballad) ', 'liqjaX6 ' tlqtt.t.g

+ (t,gtf 8(i

Buying convenience 3.17 IL87 1.93 9.96»«
(e.g., delivery)

Carrying higher priced items 2.91 2.64 1.43 20.20«««

Carrying higher quality 2.52 2.62 1.68 7.69«
merchandise

Carrying a variety of product 2.16 1.74 1.43 7.59«
lines

Carrying lower priced items 2.85 2.42 1.75 11.72«»

Civic involvement 2.75 2.53 1.56 13.25»««

Depth of product selection 3.76 3.67 2.68 4.57
Holding sales 2.69 2.29 1.93 7.33»

Increased use of advertising 2.40 2.34 1.56 8.31«»

Monitoring competitor's 2.60 2.39 1.87 5.04
pricing

Post-purchase service 3.13 2.92 2.00 8.34««
(c.g., liberal return policy)
Pre-purchase service 3.80 3.43 2.31 11.87««
(e.g., personal attention)

Pricing below competitors 2.27 1.97 1.62 6.49«

Sales promotion (e.g., 2.56 2.11 1.81 7.48»
coupons)

Stocking private label brands 3.20 3.02 1.75 13,57«»«

Stocking unique products 2.81 2.83 1.87 7.80»

Stocking highly recognized 2.67 2.59 1.60 6.88«
brand names

Store layout and 3.12 2.87 2.12 7.25»
merchandise presentation

'Means reflect average response based on the following five point Likert scale: I = No
Emphasis; 2 = Very Little Emphasis; 3 = Some Emphasis; 4 = Considerable Emphasis; 5 =
Major, Constant Emphasis

«p&05 ««p&01 «««p&001

26



DISCUSSION AND IMPLICATIONS

Wal-Mart's entry into local communities clearly has an impact on existing retail trade

patterns. Although not all small retailersare affectedadversely,the overall impact can be quite
negative. The results of this study indicate that the average local merchant generally can
expect stagnant revenues, if not significant declines. further, this does not appear to be a
short-term phenomenon.

Aside from revealing the impact of Wal-Mart's arrival on local retailing communities,
the results of this study strongly indicate that individual retailers respond differently. The
manner in which the local merchants respond to Wal-Mart's arrival may very well be the key
to their store's long-term success. Competing on price, Wal-Mart's primary competitive
weapon, may be futile. Small merchants need to be more creative in addressing the
competitive challenges that mass-merchandisers present.

Wa!-Mart, other discount chains, and the so-called "category killers" are all successful
because they exploit buying power, distribution power, and sophisticated technology.
However, these factors facilitate success primarily because they can be deployed uniformly on
a large scale with little room for customization. The latter is where the small retailer can excel.
True, the local retailer must remain relatively price competitive,but the local merchant is much
more likely to appreciate the nuances of the local customer. Consequently, these merchants
should be better able to satisfy their clientele by offering a deeper selection of higher quality
products and superior customer service.

In other words, the local merchant must become a much better niche marketer.
Successful small retailers of the next decade will elYectively compete "around" the mass-
merchandisers instead of trying to compete "against'hem. These small merchants will use
their superior customer knowledge, intelligent stocking, and service to better ensure their
continued economic vitality.

27



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