Heavier on the ‘live better’ goods

Struggling retailers out there might feel the pressure to compete in price and merchandise with Wal-Mart in like markets.

After all, Wal-Mart is the prince of retail these days. Its “Save Money. Live Better” formula works best when its customers are most strapped for cash.

But the fact that it works for Wal-Mart, which operates 4,259 units in the U.S., is exactly why the same formula could only spell disaster for smaller competitors.

This is what I read in the “Independent Street” Wall Street Journal blog, which was posted on March 20.

Titled “What you can do to fight Wal-Mart,” the article talks about a recent study by the Tuck School of Business at Dartmouth, which found:

“that after a new Wal-Mart store opened, local supermarkets in seven regions of the U.S. suffered sales declines of 17%, while mass merchandisers saw sales fall 40% and drug stores saw a 6% decline in sales. And when prices were reduced or when the assortment carried by the local store was reduced, sales dropped further, to an average of 20% to 25%.”

A more viable alternative to price-chopping, the study’s co-authors suggest, is for smaller retailers to differentiate their product assortments with a stepped-up merchandise mix of better goods and even more organic items, also representing some higher price points.

It’s true that this tactic might not stick at first. The timing is off in that shoppers are focused keenly today on promotions and value and maintaining strict budgets that offer no space for even the smallest of luxuries.

And yet there is, too, a positive aspect to the timing that should not be overlooked. While still maintaining some promotionally priced products that offer shoppers necessities at the right prices, smaller retailers should seize the day, so to speak, to also begin demonstrating their commitment –- in both good times and bad –- to being trend-right and different from their larger competitors intent on spoon-feeding the masses. This way, when the economy eventually starts its uptick down the road, shoppers will walk away from the watered down assortments at places like Wal-Mart and instead turn for fresh fashion at the smaller shops.

The result: Satisfied customers who don’t feel like just a herd of cattle grazing on the same grass as everyone else.

Let’s just hope that uptick can tic-tock faster.