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Who's Afraid of the Big Bad Box Store?

When my friend Jim first told me that he and a partner were going to open a hardware store about two miles from a Home Depot, I waited for the punch line. Jim's family had sold a successful biotech company, and his business partner, Matt, had an Ivy League MBA and Fortune 500 resume. The two of them couldn't possibly be that clueless and crazy, could they?

Well, the punch line came when I visited Beyond Hardware and found that 18 months into it, Jim and Matt are doing just great: overall sales up double digits, sales per square foot above forecast and industry averages, and plans in the works for four to six new stores. Crazy indeed... like foxes.

It's old news that big-box retailing has killed off many main street businesses. I do think it's sad in terms of our social and physical landscape, but as a dyed-in-the-wool capitalist, I'd be a hypocrite if I said that it was "unfair." On the contrary, anyone has the opportunity to start the next big thing. Farm boy Sam Walton did pretty well for himself.

But even if you don't start the next mega-chain, it doesn't mean you can't compete with them. I'm not going to pretend your odds are good; they're not. But it absolutely can be done with the right plan and execution, and a big set of, um... guts. Jim, Matt, and others have proven it.

Beyond Hardware is based on a methodical plan that uses the big box guys' strength -- their size -- against them. The model revolves around assumptions and approaches that can be modified to apply to a variety of industries:

1. Most people in a hardware store are doing small projects, not building houses. This is the core premise around which Jim and Matt planned the business. The typical Home Depot or Lowes store is around 150,000 square feet. Beyond Hardware is 18,000. Its purpose is not to sell everything anyone could ever need, but to be "narrow and deep" -- fewer categories, but more choices within them. Beyond Hardware doesn't sell major building materials, but it offers a wider variety of fasteners and cabinet hardware than Home Depot, since do-it-yourselfers are more likely to regularly need -- and return for -- nails, screws and knobs than, say, sheds.

2. Making special trips and walking miles of aisles can be a hassle. Driving to a big box, parking, and walking football fields just to get toggle bolts is a pain. So Jim and Matt put their store in a "destination" plaza, adjacent to the area's biggest supermarket and other must-stops. Drive once, park once, get what you need easily.

3. Women are doing more projects, and they shop differently. Walk in a Home Depot or Lowes and odds are that the vast majority of aisle-walkers are men (grunt, grunt). But when I toured Jim and Matt's store, at least half the people shopping were women. Matt tells me they appreciate the smaller, brighter, quieter, very un-warehousy, user-friendly nature and organization of the store. That, along with its convenient location, makes it a much more appealing experience for anyone who doesn't want or need to wander through three-story racks of roof sheathing.

4. As big as they are, the big guys don't do everything. Beyond Hardware doesn't sell tractors, but it does have things that Big Orange and Big Blue don't, like comprehensive departments of top-of-the-line work clothing and pet supplies. Jim and Matt keep a keen eye on what really sells and turns. They know the local market, they can react instantly, and they zig when the big stores zag.

5. Convenience is worth something. Jim and Matt knew they still had to be competitive, so they joined the True Value co-op to take advantage of that organization's massive buying power (that's the only place "massive" enters their vocabulary). But they don't focus on price competition -- they know that customers will allow them to make a fair profit in exchange for convenience and personal service.

Despite the way it reads, this is not an ad for Beyond Hardware*. Again, much of the general thinking and strategizing that Jim and Matt used to successfully take on the giants translates to other David/Goliath industries. I know people who are succeeding with independent photo stores, computer shops, and sporting goods stores. It's a matter of understanding the market, exploiting the giants' weaknesses, finding unique angles and opportunities, and of course, building loyalty by taking extraordinary care of everyone involved, inside and outside the company.

Do you know other against-all-odds businesses, or have one of your own? Do you think anyone who takes on a megabiz is mega-nuts no matter what good ideas they may have? Please share.

*I have no financial or other business interest in Beyond Hardware, I just love small business success stories. And tools.
(Flickr photo by Kevin McShane)