Plucky Little Competitors

ANDREW GARN FOR TIME
MUD TRUCK: A New York City coffee cart thrives near two Starbucks

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Sullivan owes part of his success to the advice he gets from the co-op to which he belongs, Do It Best, which has 4,128 members nationwide and provides consolidated buying power. (Other co-ops, such as Ace Hardware and TruServ, offer the same service to their members.) And the co-ops have become more savvy in advising members on ways to beat the chains.

In the book business, the indies are also banding together. Their American Booksellers Association established national gift certificates so that customers or their friends and family could redeem them at any member shop (of which there are 1,200, about half the nation's indies). The independents have an e-commerce site called BookSense.com to go up against Amazon.com. They display best-seller lists compiled from indie shops nationwide and benefit from a $600,000 ad budget, used for promotions in such publications as the New Yorker and the Atlantic Monthly.

Collette Morgan, owner of the children's bookstore Wild Rumpus Books in Minneapolis, Minn., says the website helped increase her sales 10% last year. But she generates plenty of her own buzz. When she opened a decade ago, she was fresh from a general-interest indie that died after a Barnes & Noble moved in across the street. Morgan decided to make her store "something a corporate mind would never dream up and that a large company could never sustain."

Her idea was to open a store that would sell children a good time along with their reading material. Wild Rumpus is part zoo, with a couple of chickens named Dalai and Elvis (which kids chase around), along with cats, tarantulas, fish and birds. Boys play poker in the store's Haunted Shack, which sits atop a Plexiglas surface that exposes a gray rat colony below. Saturday afternoons feature offbeat activities like sheep shearing. Customer Carrie Watson's toddler Isabel loves the Monday story readings and the animals. "I would much rather visit an independent than a large store anyway," says Watson.

Morgan charges the cover price for her books, while the big boxes often discount, but she carries hundreds of titles they don't stock. Being nimble and able to respond rapidly to local trends also fattens her bottom line. After noticing that Minneapolis' Somali-American community was booming, she started purchasing books written in Somali with English translations. When she discovered that local schools were ramping up French classes, she stocked more French-English titles.

Despite all the stores they displaced, the big boxes have also indirectly helped such shops as Beverly's Pet Center thrive. Outlays of billions of dollars for advertising and marketing have bolstered not only the chain brands but also demand for everything from gourmet coffee to home-improvement projects.

In the pet-shop business, firms like Petco helped spark a boom in part by changing people's conception of smelly, helter-skelter pet stores, according to Marshall Meyers, executive vice president of the Pet Industry Joint Advisory Council. After folks found that they adored their new cockatiel, they started going to local shops for accessories unavailable at the chains, he says. The hostility between the independents and the chains has abated somewhat, replaced by a realization that David and Goliath can help each other. Want a hedgehog? You'll have to visit a local pet shop the big chains haven't a clue how to care for them. For hedgehog food, Petco also accommodates.

The complementary effect may be even more robust in the coffee trade. After Starbucks proved that plenty of customers will pay $4 for a soy-caramel machiatto, many local shops profited from selling equally fancy fare. Michael Thomas, co-owner of the Unicorn Cafe in Evanston, Ill., says that after a Starbucks opened across the street from his place in 1992, the increased customer traffic in the neighborhood helped him post his best year ever; his yearly revenues are up 40% since then. "We always felt guilty about raising prices," he says, "but Starbucks helps us do that from time to time."

Many indies have also exploited the Starbucks backlash. Mike Sheldrake, owner of Polly's Gourmet Coffee in Long Beach, Calif., was losing money before he reformatted with an anti-corporate feel, highlighting his giant antique coffee roaster and telling baristas to remember regular customers' names. He has been profitable ever since. "It's as close to a hometown watering hole as you can get," says client Howard Homan, a retired civil servant.

The indies' success hasn't escaped the chains' notice. Both Home Depot and Borders Books & Music are experimenting with smaller-format stores. Home Depots are supposed to become more user friendly, especially for women, who perform a growing proportion of home-improvement jobs and have been instrumental in Lowe's rapid growth. But the best-run indies should continue to stay ahead of the competition if they're mindful of the old bear joke: Two guys are backpacking and notice a bear approaching. One guy drops his backpack and starts running, while his buddy stays put, frozen in fear. "You can't outrun a bear," shouts the guy standing still. "I know," replies the sprinter. "I just have to outrun you."