Kellogg School of Management at Northwestern University

This past weekend, we celebrated Small Business Saturday—a day when consumers are encouraged to ignore the big box stores in favor of independent, local retailers. Tapping into community values may help to combat the advantages of the “Big Boys,” who can exploit scale economies and associated cost savings to offer attractive prices that small businesses often cannot match.

But effectively battling the “Big Boys” typically requires more than simply hoping customers are willing to trade off cost savings for warm feelings about their community. Small retailers can thrive when they are able to deliver valuable services that large competitors cannot provide efficiently.  Box stores do have a variety of advantages that come from their scale, but not all activities scale equally well.  Small businesses can be more successful if they can (1) identify what they can do better and (2) offer products and services in these areas where they have an advantage.

Consider Hoosier Sporting Goods, located in downtown Columbus, Indiana. The company, up against big box chains like Sports Authority, cannot compete on price. So Hoosier Sporting Goods makes an effort to stock items that are unique, or that require additional expertise to purchase or use.

Community ties also play an important role, but in a different way than the organizers of Small Business Saturday have in mind. Because Hoosier Sporting Goods’ owner, Mike Bodart, understands his community, he knows precisely when the two high school football teams start practice, and thus when customers are likely to be in need of equipment. He also knows to carry extra school-related apparel in time for the rival football teams’ annual game.

The big chains cannot be as responsive to idiosyncratic local demand. It is easy for the chains to use their size to obtain cheap t-shirts, but it is harder for them to direct the right shirts to the right locations at the right times.

In that way, successful local retailers act as “curators” by using their community knowledge to select items that are in particularly high demand from local shoppers. I met a wonderful curator at Sundance Books and Music, an independent bookstore in Reno, Nevada.  Christine Kelly, the owner of Sundance, takes great care in knowing her customers and the kinds of books that they enjoy.  She lines the shelves with books that appeal to the frontier ethos. She also features local authors and brings unique book signing events to the store.  Sundance is not just an independent store that sells books—it is a trusted source for good reads.

Owners like Christine Kelly and Mike Bodart have a strong incentive to find out what their customers want.  Because management turnover at chain stores is often quite high, that same motivation is hard for the “Big Boys” to replicate. The best place for local businesses to channel their extra effort is on activities where larger competitors may not be able to keep up.

Small retailers who follow this approach likely did not need to cajole shoppers to visit their stores last Saturday—customers stopped in to find just what they wanted, and could not buy at the mall.

Michael Mazzeo is co-author with Paul Oyer and Scott Schaefer of Roadside MBA: Back Road Lessons for Entrepreneurs, Executives, and Small Business Owners.

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