Girding for the "big box invasion’
Early next fall Wal-Mart will be opening a 187,000-square-foot super store and Home Depot, a 118,000-square-foot big box. Their combined retail square-footage is 7 acres.
How area retailers, already struggling with the effects of an 18-month-long-recession, can compete with these retailing giants was the topic of the first of a five-part series sponsored by this paper and the Vail Valley Chamber and Tourism Bureau held yesterday in Avon.
Presentations were made by businesspeople from Parker, a rapidly-growing Denver suburb, that is 18 months into its own big box invasion.
“One of the things you need to do is plan,” said speaker Dawna Callahan, executive director of the Parker Chamber of Commerce.
Callahan compared the invasion to the emotional experience of losing a family member.
“First you’re shocked and angry, then you grieve and then you move on,” she said. “Those that are ready for the competition, really succeed.”
One Parker businessman who has succeeded is Dave Stoufer, who owns a 14,000-square-foot True Value Hardware store originally located at the intersection of the historic Santa Fe and Smoky Hill trails. Home Depot opened a store across the street from his business.
“They hurt us,” he said. “They took 40 percent of our business for the first month.”
But Stoufer held an ace. His store was enfranchised in the community and was selling nearly three times the volume per square-foot of comparable stores elsewhere, he said. He had a loyal customer base.
“We used to be the only show in town,” he said. “We’re still down 10 percent.”
Price is the key element of the superstore success, but it’s not a place to begin competing, Stoufer said.
“They will sell items for below cost,” he said. He said retailers have to be careful of attempting to meet the prices offered by the big boxes because in his experience, they will sell things for less than they cost, just to attract people, he said.
“We have to do regular price checks at the superstores,” he said. “Watch your inventory, overhead and service levels.”
But there are some surprises. Stoufer’s store carried Sakrete, bagged cement mix, that he expected he would lose all sales to the big boxes. That didn’t materialize because the superstores wouldn’t load the heavy bags for customers while Stoufer’s staff would.
He also conceded that home appliance sales would fall off when the big boxes arrived. They did not because his store carried the top-of-the-line models, he said.
But competition for customers isn’t the only challenge big boxes throw at a retail community. They also draw away employees, a commodity already in short supply in the mountains.
Battle for employees
Each big box will require up to 300 or more employees. In Parker the huge retailers also threw cash to draw employees. They were paying as much as $16 per hour for employees in Parker, Stoufer said.
The strategy Stoufer employed to counter this was to hire the best he could find.
“You don’t need the kind of employees the big boxes do,” he said. “They do raise the stakes on what you have to pay employees.”
One aspect of business in which small retailers like Stoufer are able to effectively compete is in special orders for items not in stock.
“We have all the special order business,” he said. “They don’t do a good job with special orders.”
He also suggests using computer technology to battle the giants.
“We can operate with less employees,” he said.
But there will be some erosion of businesses, Callahan said. But in Parker it hasn’t been all that noticeable.
Maybe it’s time to leave
But Stoufer cautioned owners of businesses that are marginal now that they may want to consider getting out.
“If you’re borderline already, get the hell out,” he said. “You’re not going to make it if you directly compete.”
While the level of competition will increase, so too, will the amount of customers visiting the area.
But the news about big boxes and their impacts to existing retail businesses and the communities they operate in isn’t all bad, said Callahan.
“They keep people in town,” she said.
Vail Valley Chamber Director Frank Johnson suggested that retailers need to find a way to use the “magnet” of the superstores in a positive fashion for their own businesses.
“The change in shopping habits has helped,” Stoufer acknowledges. But there’s another side to that. He has found the new customer base the superstores attract also has increased the amount of shoplifting his store has experienced.
The next part in the “Surviving and Prospering in an Avalanche of Change” series will be held Nov. 6. It’s entitled “Differentiating Your Business Through Branding.”
For more information about the series, call Robin Litt at the Vail Valley Chamber and Tourism Bureau 949-5227. Cost for Chamber members is $20 and for non-members, $25.
Cliff Thompson can be reached at 949-0555 ext 450 or email@example.com