The arrival of a big box retailer has long been considered the death of the small mom and pop stores but that may not always be true. Local coffee shops can actually benefit when a Starbucks establishes a store in their neighborhood, according to Temple University history professor Bryant Simon who states, “The popularly-held belief that Starbucks kills mom-and-pop shops is a fallacy”. Herb Hyman the owner of Los Angeles Coffee Bean and Tea Leaf confirms this sentiment. Sales actually increased at store location where Starbucks set-up shop, Mr. Hyman stated in a1991 interview.

Large retailers have what small companies do not—large advertising budgets and with that the money to convert non-users to users. Herb Hyman further explained in the article that the amount of traffic increased due to the buzz created around the new store opening. With the increase in customerflow those unhappy standing in line, and now hooked on their new favorite latte, soon noticed the “other” coffee shop across the street. With this Coffee Bean and Tea Leaf had access to a new customer and a chance to gain customer loyalty. 

Most would agree that the larger stores often lack the personal touch and customer service that was the cornerstone of the small local merchant. In fact, many speak fondly of days when your banker, grocer, doctor and local pharmacist knew you by your first name, not to mention your family history. Personalized service is an inherent human desire as we all want to feel like we belong. So why do customers flock to the larger stores abandoning the local favorite? It is often due to a belief they regarding better prices and/or selections as a result of the larger distribution capabilities. However, if the difference is within a small gap those customers would gladly accept a limited offering in exchange for some personalized service.

Small companies are better aligned than ever before to gain back those lost customers and attract new ones. Although the recession has affected all companies, larger retailers with their hefty infrastructure cost have been really hard hit. In response they used layoffs as a way to reduce overhead and the customers are experiencing the affects with longer lines and less attention to service.

Moreover in an effort to close the negative earnings gap they have tried to slowly increase prices and include add-on cost. While it is true that many retailers have engaged in heavy discounting pratices to attract the budget conscious customers, they cannot embrace this strategy long-term. Eventually they will need to bring prices back in alignment with overhead cost and the sticker shock will cause the customer to look for alternative choices, which could be to return to the neighborhood store that offered reasonable prices with the personalized service they once enjoyed.