In U.S. cities, inexpensive, convenient storefronts have long been a fixture. Local residents, often without easy access to conventional grocery stores located outside the urban center, relied on these stores and bodegas to purchase household goods and select food items. The small stores in turn promised convenient options at reasonable prices, often functioning in a way similar to the value offering of dollar stores.
But these long-standing neighborhood stores are finding their turf being challenged by actual dollar stores—the national chains that continue to grow and expand their operations from the suburbs into other locations. For example, Dollar General has opened its first stores in New York City, as part of its more than 30 percent increase in the number of stores it has nationwide.
For the local shop owners, this competition is a massive challenge. They are hard pressed to compete with the national chains when it comes to the range of products available and on price, considering their less efficient supply chain. They also lack the same negotiating power that a national chain might impose, such that their rents are likely to be higher, and their employees might be easily drawn away by a larger competitor that can offer more benefits, longer hours, or higher wages.
The answer for some owners is to increase the personalization of their offerings. Some stores emphasize their local origins, reminding shoppers that they have always been there, selling their local favorites and employing members of the neighborhood. The small retailers have long sought to stock exactly what their customers want, but they are increasing this effort even further. The owners’ close interactions with shoppers facilitates this process, such that the 99¢ Super Star Discount store in the Bronx offers Jarritos mango drinks, guava-flavored snack foods, and agua de coco to appeal to its mostly Hispanic clientele. In gentrifying neighborhoods, some stores have expanded their organic options too, to bring in the newly arriving population of residents.
Others sense that they have no choice but to raise prices to be able to increase their revenues. As long as it can offer precisely what they want, a store might be able to charge a bit more, so that consumers come to trust its product range. That trust also can go both ways; some neighborhood shops support an informal type of layaway, holding on to desired items until the customers can pay for them.
Yet even with these efforts, small stores continue to struggle to remain afloat. In urban neighborhoods, wages are often low and stagnant, so consumers constantly seek the best deal on packaged goods. When it comes to commodities such as cleaning supplies, shoppers cannot afford the higher price associated with buying at a local store, compared with the standard dollar deal that the national chains can promise.
Discussion Question:
- How can small family-owned retailers compete with national chains?
Source: Winnie Hu and Emily Palmer, The New York Times, July 13, 2017