To keep up with the big stores, small retailers get creative

By Danielle Douglas
Monday, November 29, 2010

Amy Rutherford, owner of Red Barn Mercantile in Alexandria, has a full agenda of holiday promotions and events planned at the furniture and gift store. On top of the early-bird specials on Black Friday, she is hosting a number of free workshops in the coming weeks. One such class will teach creative ways of setting the table.

Rutherford, like many independent retailers, has long realized that to compete with national retailers' door-busters and deep discounts she had to offer more than just sales.

Hosting workshops, she explained, is a "more personal way to be in touch with our customers," and keep them coming back.

"People are starting to get the fact that good customer service is starting to outweigh just the really good bargain," Rutherford said. "If we can keep our prices in a range that makes it palatable for people, they will come to our stores."

Retailers of all sizes are looking for a way to stand out this holiday season, in hopes consumers will begin to loosen their purse strings again. Several leading indicators point to a resurgence in consumer confidence, including the Thompson Reuters/University of Michigan consumer sentiment index. At 69.3 at the start of the month, the index posted the highest reading since June, thanks to early holiday discounts.

But the smaller independent retailers are likely to feel more pressure, if only because sales gains are projected to be modest. Respondents to a National Retail Federation poll, for instance, said they were looking to spend an average of $688.87 on gifts, a slight increase from $681.83 in 2009.

While smaller retailers have been lagging behind their larger counterparts in sales growth, they "can compete with continued savvy on the product selection front," said Will Boland, chief administrative officer at the research firm Sageworks.

"You see some of the larger retailers, particularly Macy's, trying to adapt their product selection to local markets," he said. "But independent retailers can react more quickly and have a much better feel for local needs and tastes heading into the holiday season."

Indeed, Frank Gunion, the owner of South Moon Under, a beachwear and casual clothing boutique, prides himself on carrying a variety of independent designers not found at department stores. At his 13 locations, five of which are in the Washington area, shoppers can expect to see jewelry by indie designer Amrita Singh as well as designer jeans by Citizens of Humanity.

"We can't depend on discounts. It's not survivable in the long term," said Gunion, who has been in business for 42 years. "We just have to do a better job of delivering what the customer wants and understanding their needs."

Gunion kept his orders to a minimum for the holidays, in response to sluggish demand last year. But he's optimistic. "It's a different year," he said. "Things have gradually been improving; the outlook is improving."

Lindsay Buscher of Urban Chic, with four boutiques in the Washington area, recalls when the market crashed in 2008, it was difficult to contend with the huge holiday markdowns at department stores. She tried to compete with deep discounts of her own, but, like Gunion, found the strategy unsustainable.

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