- The Washington Times - Monday, June 18, 2001

Stuart Kaufman knows all about the "Wal-Marting" of America. That's because he's been getting "Safewayed" for years. Farooq Munir's getting "Starbucked" and Mark LaFramboise is doing his best to avoid getting "Barnes and Nobled."Each of these small business owners in the District has been shaken by the arrival of mega-store chains like Starbucks and Barnes and Noble into their neighborhoods. Customer loyalties have been challenged by big, shiny new stores with beautiful decor, competitive prices, and a sense of hipness that comes with the latest trend.
The big chains arrive like new kids on the block, and many small shop owners are having a tough time competing. But many also are finding that when the dust settles, loyalty can be regained with good products, good service and a lot of one-to-one attention to customers.
Americans really like to buy things they've heard a lot about. Everyone knows about Starbucks Corp., Barnes and Noble Inc., and Safeway Inc. Not everyone has heard of Jolt and Bolt, Mr. Munir's Dupont Circle coffee store, Politics and Prose, an Upper Northwest store where Mr. LaFramboise works, or Mr. Kaufman's Katz's Kosher Supermarket in Rockville.
All of these stores are fighting to stay in business as more large retailers with more money, more clients, more of everything, move onto to their turf. But it hasn't been easy.
Small businesses have been on the front lines of the sputtering U.S. economy as more consumers think twice about buying a tall Mocha Java, or a new book. Add to that the growing presence of mega-stores.
According to the Small Business Administration, the percentage of retail businesses with more than one location has gradually ticked upward, from 6.4 percent in 1992 to 6.8 percent in 1997, the latest available figures. The remaining percentage are single-shop stores.
In that same time, the percentage of retail workers employed at chain stores jumped to 67.3 percent, from 59.9 percent in 1992, according to the SBA.
But against that backdrop, the climate for small business success is getting a bit better, according to a new quarterly report from the National Federation of Independent Business.
The report notes that optimism among small business owners is on the rise, after being down for much of the year, and that more shop owners expect higher sales this year.
The key to small business survival, say industry observers, is maintaining individuality and finding ways to adapt to a society increasingly enamored with one-stop-shopping.

Wal-Marting of America

"The Wal-Marting of America is occurring," says Brian Headd, research director at the Small Business Administration. "Instead of a town having a hardware store and a five-and-dime and a clothing store, Wal-Marts are coming in, which isn't necessarily a bad thing, as long as competition is preserved."
The proliferation of mega-stores won't stop anytime soon.
"Maybe 'Joe's Diner' does good business on their corner, but Starbucks wants to be on every corner and who wouldn't?" says Sarah Scheuer, a spokesman for the National Retail Federation.
The competitive dynamics between small and large chain stores have always existed, she notes. "The big and small fish have always existed. It's just the big fish are getting bigger."
Stuart Kaufman's grocery store stands in the shadow of a Shoppers Food Warehouse in Rockville. Also nearby are three Safeway stores.
Despite the increased competition, Katz's Kosher Supermarket is a small business success story it has grown and expanded over 52 years of operation. The key to Katz's success has been finding a niche that appeals to the large Jewish population in Rockville.
Mr. Kaufman will not say exactly how his store is doing, but will say that the store did the "same as last year, maybe even better."
"We have the niche, we're a kosher food store. Jewish people in this area have to shop here or at another kosher market," he says.
Being a small operation, Katz employees can pay more attention to the customers.
"We try to bring a personal touch. We've had butchers working here for 52 years, working on grandmothers, and mothers and daughters. They can call up, and the butcher will know what they want," Mr. Kaufman says.
Mr. Katz remembers a time when there were nothing but small businesses in the area, and he's sad the era has passed.
"There were no 60,000-square-foot Safeways back then. But then they started coming in and all those little mom and pop stores started disappearing. Drug stores, hardware stores, it was the same thing," he says.
Mr. Kaufman says the big chains have a clear advantage in the marketplace.
"These stores are just able to buy the items better at the same price or lower, and put them at lower cost prices to bring in people. How can an ethnic food store compete with that? Meanwhile, a Giant can make up the cost on a thousand different items," he says. "Who is going to be big enough to gobble them up? Our free trade system's going down the tubes."
Though Mr. Kaufman acknowledges Shoppers Food Warehouse just down the street is his closest competition, he isn't worried about being run out of town.

Market saturation

Many small businesses are finding it hard staying in business once their turf is saturated with a big chain operation.
Jolt and Bolt, an eight-year old coffee shop in the Dupont Circle area, is having a tough time keeping customers with a Starbucks just a couple of blocks away.
The store's only location is tucked away on 18th Street and Florida Avenue NW, close to Dupont Circle, but far away from its bustle. The coffee shop stands in a row of other mom and pop businesses, including a consignment store.
The shop has been part of the neighborhood for about eight years, says Farooq Munir, owner of Jolt and Bolt. It was the only coffee shop in the neighborhood at that time, he says.
Now, Dupont Circle is home to two Xando's Coffee Bar, three Starbucks, and countless other coffee shops.
"I don't think [at that time] it was a trendy thing then to have coffee shops in the neighborhood," he says.
Mr. Munir says since Starbucks came to the neighborhood, he's had to take out numerous loans to survive.
"We only get about 120 to 150 customers per day," Mr. Munir says. In fact, in the middle of this warm weekday afternoon, the shop is fairly empty. "Before Starbucks, we might have had 400 or 500. Our sales during the weekend help keep our heads above water."
Mr. Munir says his store is losing money.
"We save not a cent. Everything goes to bills," he says. Mr. Munir says he has enough to pay himself $35,000 per year, and his employees, who all work on a part-time basis, make between $12,000 and $14,000 per year.
Shannon Jones, the regional marketing manager for Starbucks, says people have the wrong conception that Starbucks is taking over neighborhoods.
"If you walk around Dupont, Xando has places, there's really enough coffee places to go around," she says. In the District area alone, Starbucks has 115 stores.
"It may sound like a lot, but that includes D.C., Maryland, and Virginia," Miss Jones is quick to point out. She also says stores open because of customers' requests, and they try to tie themselves into the community.
"We're not about just coming in and opening a store, and leaving," she says.
Starbucks has 3,300 locations worldwide, and last year posted net earnings of $32.4 million on revenues of $2.2 billion.
Mr. Munir, who says his shop is "more down-to-earth and in line with the All-American cup-of-joe tradition," has his own theory as to why Starbucks is so popular.
"We as a nation are very interested in new trends and we tend to go to places that the masses go, not because of quality, but because we want to know what the hell is going on."

Digging in

Like Katz's Kosher Supermarket, Politics and Prose has found a way to become profitable: by becoming a fixture within the community it serves.
"I'd say sales have gone up in the past two years," says John Teague, general manager of the bookstore. Mr. Teague says he can't give exact numbers, but "we've been very satisfied."
Mr. Teague says the store uses a number of methods to attract customers away from the larger chains, from a newsletter and a membership package, to a calendar of community events.
"We have tied ourselves really tightly into the community," he says. "They really can't tailor things as well as a local independent bookstore can. Our buying reflects that, and our staff is more knowledgeable. I've worked in chains, so I know what I'm talking about," he says.
Mr. Teague spent about four years working at Barnes and Noble in their retail, publishing and mail order divisions before coming to Politics and Prose.
The atmosphere of Politics and Prose is, at times, hectic. The bookstore sponsors bake sales that benefit local schools. Jazz music floats up from the cafe downstairs and a horde of customers mill about the store as others sit and listen intently to an author as she reads from her latest book.
Mr. Teague says that in terms of buying books wholesale, the playing field is level, as both Politics and Prose and Barnes and Noble pay the same price.
"There's really not much else you can do, but be faster, leaner, and smarter."
Unlike Mr. Munir, Mark LaFramboise, a floor manager at Politics and Prose, accepts the large-scale competition.
"Our goal is not to reach America, which is a little how Barnes and Noble is," Mr. LaFramboise says. "They're famous for being large. We can't possibly carry everything," he says of the one-story store, located in Chevy Chase.
Barnes and Noble has 569 stores nationwide, with an average area of 25,000 square feet, according to Debra Williams, director of corporate communications for Barnes and Noble.
Another national franchise, Borders Books and Music, is close by geographically but far enough away, Mr. LaFramboise says, to coexist peacefully. The Borders store is located on Wisconsin Avenue in Friendship Heights, in the same vicinity as Neiman-Marcus, Eddie Bauer and Pottery Barn.
"It was a little harder for us when they first moved in, but now I think the novelty's worn off. They are there and they are what they are," he says. "They're in a high-end neighborhood, and we're more low-key."
Like Jolt and Bolt, Politics and Prose depends on its neighborhood to remain profitable.
"We have to. Can you imagine trying to attract a new base year after year?" Mr. LaFramboise says. "We won't pick up our stakes and relocate to where it'll serve us best."

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