Resisting the Giants: Small Retail Entrepreneurs vs. Mega-Retailers - An Empirical Study

Abstract

Mega-retailers are widely criticized as causing devastation among smaller retailers, particularly in mid-sized markets in the United States. Others argue that small retailers can survive “in the shadow of the retail giants,” by offering levels of customer service that the mega-retailers can’t provide due to their very size. This paper reports the findings of an empirical study of the perceived impact of the recent opening of box-retailers, such as Costco and Home Depot on locally owned/operated small retailers in the northeastern Ontario city of Greater Sudbury, Canada from 1999 to 2003. The sample included 78 smaller store owners, on average in operation for the last 21 years. Aggregate results confirmed the hypotheses that small retailers suffered lower sales and clientele since the arrival of mega-retailers, and could clearly identify their and mega-retailers’ respective competitive advantages and disadvantages as compared to each other. Respondents had a significant perception of having an advantage over their mega-competitors in the areas of Store Cleanliness, Value for the Customer, Products’ Quality, and Store Layout. While a number of respondents suffered lower sales, about one-third of them (the Resisting Retailers) had average sales growth of over 21%. Differentiation and Niche Marketing were the main aspects of a successful competing strategy adopted by resisting retailers against mega-retailers. Some of the strategic moves adopted by resisting retailers amounted to a “Vacuum Strategy,” which includes the refusal to carry brands available at mega-stores, and the refusal to service such brands or to have anything to do with megaretailers, refusing any alliance with them and making it known to customers.