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Bigger Is Not Better, Local Retailers Say

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YOUNGSTOWN, Ohio — Locally owned and operated businesses contend with competitors from outside the Mahoning Valley, but the form that competition takes has changed markedly in recent years, with online sales becoming as big a threat or bigger than big-box chains.

Sherry Sheely, chief operating officer of Sheely’s Furniture & Appliance in North Lima, is quick to identify her store’s chief source of competition. “Our No. 1 competition is the Internet” and online retail giant Amazon “is the No. 1 competitor of any retail business in the country,” she says.

“We’ve always been an everyday low price [store] so we’re always going to be lower than most of our brick-and-mortar competition,” Sheely adds.

Nearly 80% of Sheely’s customers have done their research online before coming in “so they know their prices, they know the product, they know the finishes, they know the dimensions, and now they’re just looking for what they want – to see it, feel it , touch it,” she continues. “That’s the one thing we do that the Internet can’t.”

Online retailers also can’t provide customer service in the same way a local store can, Sheely says. If there is an issue with a product, the customer typically has to call the online seller or the manufacturer and send the item back to the factory. “It could be out of your home for three or four months before you see it again,” she points out.

Millennials present a challenge on a couple of fronts, and the fact that they shop online is one them. Because they don’t have bad backs, feet or necks like many older shoppers, they will buy items because they like them and not because they are comfortable, Sheely says.

“We usually don’t get the first purchase but we’ll get their second purchase,” she observes.

After these young consumers purchase an item from IKEA or online and later have a problem, they realize they hadn’t considered the issue of customer service. “So when they go out the second time, they’re a little smarter and a few years older, and that’s when we get them as a customer,” Sheely says.

Another challenge with young adults is marketing, particularly those who watch entertainment content on Netflix and Hulu rather than traditional media, she notes. “We’re working on how do we get a mobile marketing campaign into the hands of those millennials,” she says.

Amazon is the biggest competition for Flutterby Books, says Kathy Abend, owner. Business at the bookstore, nestled in a tiny storefront in downtown Hubbard, is a 50-50 mix of new and used book sales, she reports. Although chain and online retailers can sell books at bigger discounts than she can offer – she still sells new books at 10% off regardless – Abend doesn’t consider large bookstores like Barnes & Noble her competitors.

“When customers come into her store, she finds out what they like to read. “It’s all very personal and people love it,” she says.

Even people who don’t want to be engaged and come in and browse “still like being in this type of atmosphere,” she notes.

Another form of electronic competition – the e-reader – is losing favor, according to Abend. “It was a novelty but people are going back to holding a book in their hand. I hear it all the time,” she remarks.

Thumm’s Bike & Clock Shop in Warren has been in business for 106 years.

“There’s only two ways that happens,” reflects Augie Thumm, owner. “You have to sell really good stuff and you have to make sure everything is done properly. Whether it’s repair and assembly or recommending the right bike for someone, experience is the key,” he says.

Thumm’s stocks more than 1,500 bicycles.

“The competition lies in the mass merchant selling a bicycle I describe as a bicycle-like object,” Thumm observes. They sell something “that looks like what we sell but lacks the choice of frame sizes, quality, expertise of assembly” and backup service after the sale, he says

“It’s like comparing a Bic razor to a handmade straight razor,” he comments. “They’ll both shave the whiskers off your face but when the Bic gets dull you buy a new one. You don’t sharpen it.”

Another locally owned story, Just Pizzelles in Cortland, offers more than 90 varieties of pizzelles in a “pretty niche market,” says owner Christina Benton. Companies compete by selling wholesale but the Cortland store, which offers a “more upscale product,” only does retail, she says.

“There are a few national companies that we compete against, more for the gifting market, for corporate gifts and everyday gifts,” Benton says. These companies typically sell more traditional cookies rather than her company’s specialty items.

“A lot of our business, we rely on shipping, through our website. So those are the ones we’re competing with, other companies that rely on shipping also,” she says.

Local grocery stores such as Rulli Brothers, which has stores in Austintown, face competition not only from retail giants like Walmart but also from regional grocery chains like Giant Eagle, says Frank Rulli, director of general operations.

The market has gotten more competitive in the past 15 years, but Rulli says the “real change” in groceries began in the 1980s with the rise of the discount chains.

“Companies like Phar-Mor and Marc’s were ahead of the curve,” he says. “They knew that people would be willing to sacrifice national brands, that people would be willing to sacrifice service, that people would be willing to sacrifice a lot of different things for the sake of the price.”

Rulli Brothers competes with the regional and national chains in different ways, most obviously through its longevity, Rulli says. The local grocer has been in business for a century and has relationships with suppliers dating back generations.

“There’s growers of produce that I buy from that my grandfather bought from their grandpas in the 1930s,” he says. Companies like Sunkist, DelMonte or Hormel that normally wouldn’t bother with a retailer Rulli’s size have been on his books for 80 or 90 years and return his calls.

Rulli concentrates on purchasing from those suppliers in heavy volumes – purchasing a whole trailer, for instance – and selling that stock at cost or below to drive traffic to the stores. “We’re quite willing to operate on extremely small percentages just to get the turns,” he says.

Now, Walmart and other competitors that didn’t traditionally carry grocery items now do.

Like Rulli Brothers, Hometown Pharmacy considers Walmart to be among its main competitors, as well as chain pharmacies such as Walgreens and Rite Aid, says Garry Mrozek, CEO. The locally based chain, which opened its first pharmacy in New Castle, Pa., has 10 retail locations and two institutional pharmacies in northeastern Ohio and western Pennsylvania.

“We really don’t want to compete with all the other independents. I want all my independent friends to do well and prosper,” Mrozek says. “We want to try to beat the guys that are filling prescriptions and the money is going out of the market.”

About 85% of the prescription market is third-party payer, a “relatively regulated piece of the business, so that price is the price is the price,” he says. “On those scripts, it’s really about customer service and filling scripts in 15 minutes, knowing your customer. That’s the advantage we have as a small, independent pharmacy.”

The remaining 15% of Hometown Pharmacy’s prescription business is on a cash basis, and “where we really differentiate ourselves,” Mrozek says. “We are the lowest cash price in the Valley and if you’re filling a cash prescription at Walgreens or Walmart you’re not getting the best price.”

Mrozek also points to Hometown Pharmacy’s community involvement as one of its strong points. Through its Healthy Kids program, the pharmacy has given away more than 70,000 bottles of vitamins to kids in its local markets.

The company also is involved with United Way locally, Youngstown State University and the YMCA,. “I don’t know that some of these big boxes can say that,” he remarks.

Pictured: Robin Lucas, a pharmacist at Hometown Pharmacy in Struthers, and Garry L. Mrozek, CEO of Hometown Pharmacy Solutions.

Published by The Business Journal, Youngstown, Ohio.