How to compete with Wal-Mart

WSJ's Independant Street blog has an interesting post today about what small businesses can do to survive when Wal-Mart comes to town. The data shows that if businesses try to compete on price, they loose.  Small biz just can't beat Wal-Mart at the game that they own and have perfected over the decades.

What small business CAN do is differentiate:

1. Better service. Who gets great service at Wal-Mart, Home Depot, Best Buy or any other big box store? Small businesses can differentiate by providing exceptional customer service. By doing this, prices can be kept high and possibly even be raised. Better service will also drive customer loyalty and referred business.
   
   
2. Unique products. Wal-Mart and other big box stores only cary mainstream products. Local stores can differentiate by providing products that will never be available at the big box stores.
   
   
3. Focus. Wal-Mart excels at providing something for everyone. What they don't excel at is deep focus in single product categories. Small businesses should look to find a specific niche and become experts at servicing that niche. In this case, less is more - a very different strategy than Wal-Mart's "more is more" strategy.

I'm sure there are plenty of other ways to compete against Wal-Mart. What are yours?