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Good piece in the Harvard Business Review about how certain retailers – it cites HEB, Publix, Best Buy and Walgreens – are able to co-exist with Wal-Mart in certain markets, even though they carry some of the same categories.

Recommended steps include:

  • First, build local market share preemptively.

  • Cater to targeted customer segments, “customizing local assortments and raising loyalty benefits.”

  • Develop rigorous pricing strategies, identifying both opportunities and vulnerabilities.

  • Eliminate every wasted dollar from the supply chain.

KC's View:
Wow. Those Harvard folks just run rings around us more pedestrian thinkers, don’t they?

Okay, maybe that’s a little snippy.

We actually think that this is sort of an over-generalization. The stores that compete best with Wal-Mart generally do so, we think, when they offer a compelling shopping experience that is clearly differentiated in some way. It’s rarely price, though it is important to not be way out of whack.

But one of the reasons that stores operated by HEB, Publix, and Best Buy are competitive is that they have a depth of product and expertise generally not offered by Wal-Mart. That’s attractive to a lot of consumers, but not to others. That’s what makes a horserace.

It would be our perception – and we could be wrong on this – that Walgreen might be a little more vulnerable in the long run. It just seems to us that Walgreens (and CVS, for that matter) might have to work a little harder to prove that it has a differential advantage.