Editor's Note: This is the second of a two-part series on how retailers can and are battling Wal-Mart as the big box moves into town. To read the first installment, click here.
OAK BROOK, Ill. -- Some owners of mom-and-pop shops often wonder if operations like theirs can compete in a retail landscape dominated by consolidators and corporate [image-nocss] giants. One example of a small operator prospering against the likes of Wal-Mart Stores Inc. just might bewell, Wal-Mart Stores Inc.
Wal-Mart, today the world's largest retailer, traces its roots to a single store at the foot of Arkansas' Ozark Mountains. The company's founder, the late Sam Walton, built his empire by focusing on the fundamentals while flying below the radar of corporate rivals.
CSP Daily News spoke recently with William H. Bill Marquard, who as co-founder of Ernst & Young's Strategic Advisory Services consulting practice, helped Wal-Mart develop its merchandising processes and a five-year strategic plan. His new book, Wal-Smart: What It Really Takes to Profit in a Wal-Mart World (McGraw-Hill, 256 pages), explains how retailers can compete with the industry giantsor even grow into one themselves.
CSP: Who was the ideal audience for Wal-Smart during your research?
Marquard: Wal-Mart's sphere of influence affects the local mom-and-pop convenience store and even some major chains. When I wrote the book, I wrote it with a much broader audience in mind to answer the question: How do you triumph against the giants in any industry or even become a giant yourself? The lessons don't apply specifically to retail but to any industry.
CSP: What lessons can smaller independent retailers learn from the book?
Marquard: There are three different strategies: differentiate, emulate, dominate. The best way to compete against Wal-Mart is to not compete against them. You carve out a niche that they can't. With Wal-Mart, it's clearly difficult to micro-merchandise the world out of Bentonville, [Ark.]. You've got to merchandise locally to the specific tastes endemic to the area. Wal-Mart's areas of expertise do not include a high level of service compared to smaller, more nimble retailers. A retailer's ability to recognize customers by name can help them win against the giants.
CSP: Would most companies find it difficult to implement Wal-Mart's DNA of focus, continuous improvement, constructive paranoia, a culture of thrift and a we can make it better' attitude that you describe in the book?
Marquard: Take the DNA of thrift, for example. A lot of companies have done that, from grocery stores to McDonald's to the work I did with Meijer, where we took $400 million [of cost] out of their business. It's easier to embed elements of the Wal-Mart DNA in a smaller organization than a larger one. Culture drives behaviors within an organization. It's a lot easier to change the behavior of 40 people than it is to change 1.8 million.
CSP: You have a solid point with the differentiate, emulate, dominate strategy. Is this possible for convenience retailers, who compete with Wal-Mart based solely on price of a gallon of gasoline?
Marquard: You're always going to find customers who are price-conscious, especially so with the way gas prices are now. The question is: How can you further use the things in your store to differentiate yourself? Very few consumers go to one retailer or gas station or grocery store. The average family shops for groceries over five times a week, whether it's a stock-up trip to Sam's Club or a local c-store for bread or soda. The battle now is for trips, not for loyalty.
CSP: What's the most important lesson retailers will take away from your book?
Marquard: One of the questions I hear is: Why is this book different? This is the first book of its kind that's prescriptivewhat do we do about Wal-Mart rather than recognizing that Wal-Mart is here. This book talks about the Wal-Mart economy and provides practical advice for all of us as business leaders. Retailers have to make very explicit, intentional choices in order to survive in this economy. It's choose or lose. The losers are those who don't make a specific choice. If you're standing like a deer in headlights, you're guaranteed to lose.
Wal-Smart is scheduled to hit book stores in early 2007. For more information on Marquard's book, visit www.wal-smart.com. For more on this and other books about battling Wal-Mart and the big boxes, look for the December 2006 issue of CSP Independent magazine.
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