Hiawatha ? Francis Duncan operates a farm and home store and Don Koontz runs the downtown hardware store. Like other local merchants, their biggest competitor is Wal-Mart.

“We don’t try to compete with them; there’s no way. We let them do their thing and we do ours,” Duncan said. “If they get something we have, we just close it out.”

Some economists say local businesses should find a niche to survive the large-scale discounters. For Duncan, that means selling agricultural items such as salt blocks and bailing twine, along with lumber and fencing.

Wal-Mart officials are seeking to build a second Lawrence store. The project, slated for the northwest corner of Sixth Street and Wakarusa Drive, temporarily has been stopped by city commissioners who imposed a building moratorium at the site. The moratorium is the subject of lawsuit in Douglas County District Court.

Since 1985, Duncan has been co-owner of Hiawatha Farm and Home across from where Wal-Mart built four years earlier on the outskirts of this rural northeast Kansas town of 3,400.

“I would rather be here than downtown or across town. Wal-Mart draws traffic. A lot of guys drop their wives off there and then come over here,” he said.

Duncan said Wal-Mart has made retailing more competitive in town.

“They control everybody’s prices,” he said. “If you’ve got a like item, you have to be somewhere within reason or it will just sit on the shelf.”

Koontz knows perhaps better than most what he’s up against. He managed the local Wal-Mart store for five years before going into the hardware business in 1997.

Francis Duncan stands in the fastener section of his farm and home store located across the street from a Wal-Mart store in Hiawatha. Duncan has found the key to competing with Wal-Mart is finding a niche, like farm supplies or stocking a greater variety of select items like fasteners, which he sells by the pound.

“I can’t buy as cheap as Wal-Mart, that’s a fact, but I can provide better customer service and that’s a fact,” he said. “I focus on things they don’t have.”

Making changes

As he talks, Gus, a German shepherd-husky mix, lies on the floor watching customers come and go.

“He’s my people greeter,” Koontz said with a chuckle.

When Koontz took over the hardware store, he shifted emphasis from items like motor oil and car filters to more plumbing items and paint. He also puts a premium on special-order items like a grill for an outdoor cooker.

“You come in and tell me what your problem is and I’ll figure out what you need,” Koontz said. “If you are happy with my service, how many people are you going to talk to? They say ‘Go to Don’s, he’ll fix you up’.”

Like other local merchants, Koontz knows most customers by their first name and prides himself on personal touches. For contractors, he runs an open charge account and settles up at the end of the month without interest.

Survival possible

A customer exits the Wal-Mart store in Hiawatha with a cart full of goods. Merchants in the small northeast Kansas community have found ways to compete with the retail giant by carrying specialty items and finding niches in the market.

The experience of Hiawatha merchants demonstrates that a large discount store doesn’t always mean an end for local businesses, says Kenneth Stone, an Iowa State University economics professor.

“People say it’s running small businesses out of town, but the good ones find ways to survive,” said Stone, who has studied Wal-Mart’s affect on towns for 20 years.

“You have to be prepared to make changes and unfortunately a lot of them aren’t willing to make changes,” Stone said. “If the merchants in town don’t do anything about it, they can get hurt.”

There’s no guarantees. Stone said competition has gotten so intense over the years that many smaller stores simply can’t survive a corporate colossus.

“It’s primarily the big box stores that have caused a lot of this, not just Wal-Mart. This is the epitome of the capitalistic system,” he said. “The people who figure out a better mousetrap are going to survive.”

Helping communities

Wal-Mart spokeswoman Sharon Weber said the nation’s largest retailer doesn’t set out to force local merchants out of business.

“Our only strategy is to bring everyday low prices to our customers,” Weber said. “We never want to see any business go under. That isn’t our goal.”

Weber said the Bentonville, Ark.-based company helps local economies by providing jobs, bringing in customers and purchasing from local suppliers. It has nearly 2,900 stores of various sizes and names in the United States, including at least 47 Kansas cities and towns.

“We very much want to contribute to the local community,” she said.

Steve Smith, a pharmacist for 34 years, built a corner drug store in 1984, about the time Wal-Mart opened its pharmacy.

“Wal-Mart made me a better businessman. You look at ways to compete,” Smith said.

Asked what would have happened if he hadn’t changed, Smith said, “I wouldn’t be in business today. You have to adapt.”

For example, Smith prepares customized prescription medications to help meet unique patients needs. He visits customers at home to make sure they take their medications correctly and delivers or stays open late to take care of a customer.

He also offers an array of specialty equipment such as walkers, crutches and chairs for the disabled. He has a room where he can talk privately with customers.

At Just for You Jewelry and Gifts, co-owner Debbie Phillips decided to expand her customer base for collectibles and fine jewelry by starting a Web site four years ago.

“It’s not the majority of sales, but enough to make it worthwhile,” she said.

Sometimes, it seems, Wal-Mart invites competition. WOW Only 1 Dollar, specializing in various low-cost items, opened its downtown store in late June.

“We looked for a county seat with a Wal-Mart because we get a lot of the same customers,” said manager Heather Hoffman. “I don’t know if we can out Wal-Mart them, but we do try to give them a little bit of a run.”