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Can Local Businesses Compete?

Can Local Businesses CompeteAfter owning and operating a used bookstore for nearly 25 years, my parents have decided to close the store next month. And while it’s sad on the one hand, we knew it was coming and it opens the door for my parents to move on to another phase of their life.

The store has been a big part of our family over the years. Although my parents did not acquire the store until I was older, my children have spent time there. They learned to work the cash register. And they spent quality time with their grandparents.

But in addition to the personal impact, the closing also reflects how changing shopping habits and technology has influenced business over the years. And how those changes have created challenges when local businesses compete with national retail superstores and large online companies.

Looking over the past few decades, we have seen the changes in retail purchasing moving first from small local businesses and then to large box retailers and finally to the internet. And while this has certainly opened the door and drastically lowered the cost for those wanting to start up new businesses, for traditional bricks and mortar, mom and pop businesses, the impact has been devastating.


The Retail Book Industry Changed Not Once But Twice

The bookstore business is an interesting case study on its own as it demonstrates how quickly things can change.

For years, dominated by small retailers and a few larger chains, the retail book business wasn’t very exciting. However, with the massive expansion of large retailers like Barnes and Noble and BookStop, that all changed. But just as the big box retailers took over, the landscape changed again, this time dominated by Amazon and a few other online retailers.

In the blink of an eye, the business changed not once but twice. And at the same time, new technology – the e-book – came into the market, again disrupting what everyone knew and how they accessed books. The result was not just the closing of most of the small, independent bookstores, but even the closing of most of the giants.

My parents’ bookstore is not the first to get plowed over by new technology, big box retail stores, and the online revolution, and it won’t be the last. But just because it seems inevitable that the world will be overrun by megastores, is that really the case. Can local businesses compete against these seemingly insurmountable obstacles? And does society lose something if local businesses cannot compete?


Is an Independent Used Bookstore Feasible?

My mother is the primary one who runs the store. Before they bought the business, my mother was a stay-at-home mom like many women of her generation. She has always loved to read and owning the store has provided her with that opportunity.

Most of her customers are regulars and most are older. When they come into the store, they often bring a bag or two of books (the store gives them credit), they browse the shelves, and buy a few books. But bookstores are more than just a place to buy books. They are a place for people to gather, a place to discuss, a place to explore. For many, books represent a way to escape to an alternative reality.

And shopping in a bookstore is a different experience than shopping online. As you walk by displays and shelves of books, a flashy cover may catch your eye. Intrigued, you read the back and intrigued further, you open and begin reading the first page. This interaction with the physical world isn’t the same online. The act of physically shopping in a bookstore leads to discovering books that you might have otherwise missed. As such, as bookstores continue to disappear and people buy books online, there will be those books that you never experience.

But owning and operating a bookstore limits my parents’ flexibility. When the store is open, my mother has to be there. When she wants to go away, maybe she can find someone to cover for her, otherwise they close the store and earn no money. She could hire an employee or two, but that would eat into already slim profit margins.

Closing the store will allow my parents to focus on other areas – travel, time with their grandchildren, time for themselves.

But whether closing the store is the right move for my parents is a different question than whether or not local businesses compete effectively in the digital age. In a way, technology has opened the door to new companies around the world. But if you own an old world company and fail to adapt to the changes, you might find yourself out of touch and out of business.


Can Local Businesses Compete?

Running a business is difficult. And the task is even more difficult when operating in an industry with low margins and declining sales. Technology and buying behavior have changed in the retail book industry and to survive, you need to change how you operate. But even that might not be enough.

The following suggestions can help local businesses compete with these changing buyer behaviors and technological innovations.

  1. Don’t try to compete on price.  Most small, local businesses cannot compete on price with the chain stores. The chain stores have too much volume, and lower distribution costs. So don’t try. In addition to selling books for cash, my parents’ bookstore also used a credit system. You could bring in your already read used books and receive store credit and then use that credit to fund a portion of your purchase price for new (used) books.. This was good for building inventory without paying for it. And it allowed those frequent shoppers to purchase at a net discount.
  2. Compete with better service.  If you’re not competing on price, you need to compete on service. One of the knocks against megastores is the quality of the sales staff. Many are inexperienced and working there only as a stepping stone to something better. Knowing this, when local businesses compete effectively, they have knowledgable, skilled, and well-trained staff. Businesses also need to make it easy to buy, easy to pay, and easy to return unwanted products. Apparently, the Monday after the Super Bowl is the biggest return day of the year for large screen televisions. It drives me crazy that people would buy the TV just to watch the game, knowing they will be returning it the next day. But it happens, and large retailers are willing to accept this. Local business need to as well.
  3. Understand your target customers and their needs.  You cannot please everyone all of the time. If you try, you will fail. Instead, focus on customers who aren’t getting what they need from your big chain competitors. In the case of the bookstore, the most loyal customers tended to be older. They never embraced the e-reader technology. And they didn’t do much online shopping. This was a good niche, but it was a shrinking niche. If you find yourself competing in a shrinking market, you need to look outside your current product mix for things that can draw new customers to your business.
  4. Seek out new and unique products.  I had friends that ran a boutique specialty food store. They regularly brought in items that couldn’t be found at other stores in town including Costco and chain grocery stores. The strategy can be successful, but what happened to them is when a product became popular in their specialty store, the big chain stores started carrying it as well. And the lower prices the chain store charges pulled customers away from specialty store who were then forced to find another unique replacement product. The irony is that often the chain store would determine that there wasn’t enough volume in the product and they would drop it. But not before the specialty store had been forced to drop the product themselves.
  5. Embrace technology.  Whether your business is a mom and pop bricks and mortar store, a purely online venture, or something in between, you must utilize technology. It just doesn’t make sense to operate without an online presence, or without an inventory management system, or without a customer relationship management application. Much of the technology for small businesses is available for free and without using these tools, you are putting your business at a severe disadvantage.


You might say my parents’ bookstore is a casualty of the new economy. But rather than regret the situation, I prefer to see the positive. The bookstore served its purpose for many years and now my parents are ready to part with the business and move on to something else.


Can local businesses compete effectively in the new world? Do small, mom and pop businesses have any advantages over large chain companies? What other strategies can small businesses use to compete?


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  1. ambertreeleaves

    The 5 points that you mention for small business make a lot of sense to me. In Belgium, there is an add running for a service that hooks up local fast food chains to commence with SMS notifications. That looks to be one way to survive to me. Add to that high quality fast food (does that exist)?
    Another example: In our town, some book stores combine with a bar/cafe….

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    1. Financial Slacker

      Good thoughts. Another strategy that I have seen is tying the local community into the small business. Local restaurants are sometimes good at this. They host events. They show and sell artwork from locals.

      The size of the business may not matter as much as the quality of the product, the quality of the service, and the promotion efforts. You need to be continually improving or someone else will.

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  2. Allan Liwanag @ The Practical Saver

    I think that small businesses can compete if they put customer service and adapt to the technology in their bucket list. Technology is always changing and it is necessary for small business to keep up or they run the risk of getting behind. But of course, customer service never gets old. Great customer service almost always trump great products and technology, I think.

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    1. Financial Slacker

      I agree. It really doesn’t matter whether a company is large or small, it must provide great customer service.

      There’s a small restaurant business in town that sells simple Mexican food mostly to go – breakfast burritos, posole, green chile stew. I went there the other morning and they had four drive up lanes with at least 10 cars in each going through. But it only took about five minutes to gets served. The food is outstanding. The service is super fast. And the staff is friendly. And it shows in the popularity of their business.

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  3. Stefan - The Millennial Budget

    We did extensive research on this during my MBA and small business can thrive solely on their customer service. They do not have the capital to keep up with technology most of the times but if customers enjoy interacting with the staff they are more likely to return to the store. While many of these bigger stores have their benefits customer service is normally better at smaller stores, at least in my experience.

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    1. Financial Slacker

      It really does come down to service. Where I see smaller businesses struggle is when the owner isn’t there. The smaller businesses don’t typically have the resources to hire high quality managers, and they can handle the responsibilities themselves. But when they can’t be there for some reason, often the quality suffers.

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  4. Dividendsdownunder

    Of all the bricks and mortar, your parents were unlucky to choose one that became so affected. Local business can definitely compete, it just requires local people to buy their services. It doesn’t matter if it’s the year 2100, if people buy the services then the business will survive.

    I think you’re totally right on the service/differentiator either product has to be unique (such as antiques) or the service has to be worth paying for. Business owners have the most to gain from treating customers well, plus have a lifetime of knowledge of their products.

    It’s a shame it didn’t work out for your parents, but I’d hope they would have stopped working at some point anyway. I feel a little sad when I’m traveling down the road, pass an old bookstore, and see a 70+ person in there. It just makes me think “Are their sales even covering the rent? Are they just working in there for free?” 🙁

    I hope they can fully enjoy their retirement now.


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    1. Financial Slacker

      I would say the book business has been hit harder than other retail businesses.

      However, in this particular case, my parents’ bookstore has been good to them over the years. But after 25 years, they are ready to move on to the next chapter in their life. As such, I’m really looking at this as a positive for them and I don’t think they have any regrets.

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  5. millennialmoneyguide

    I just stumbled upon your blog Financial Slacker. You have posted some great articles on it. Look forward to reading more. Keep up the good work.

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    1. Financial Slacker

      Thank you for the compliment. I’m pleased to have you as a reader.

      I look forward to interacting.

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  6. millennialmoneyguide


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