Owners of small businesses can compete with mass discount marketers. The key to success?

“Service, service, service,” says Steve Deller, University of Wisconsin-Madison/Extension community economic development specialist. “That”s the plan for the new millennium: stop selling and start serving.”

Deller has conducted research with Ken Stone, professor of economics at Iowa State University to explore the effects of the retail environment created by discount department stores.

Deller and Stone suggest small business owners develop services superior to those offered by discount department stores. “A superior range of services can become an important competitive advantage for many smaller businesses,” Deller says.

“Larger stores usually do not have the flexibility to offer an expanded line of services,” he adds.

Smaller business owners can offer expert technical advice, on- site repair of certain items and deliveries where appropriate. They also can offer to make special orders for customers.

Small businesses can get the competitive edge by managing inventory better. “Analyze the items offered for sale in the small business,” explains Deller. “Compare your range of goods and prices to those of the mass discount marketer,” he adds.

“Try not to handle the exact same merchandise as the discounter. If you do, make sure you are competitively priced,” Deller says. “Try to keep your price within 10 percent of the discount store.”

Deller also offers these tips to help small businesses compete with bigger discount stores:

– Offer goods not sold at the discount department store. It is impossible for bigger stores to carry every possible item. Find complementary merchandise or try to find a special niche you can fill.

— Extend the hours when your store is open. With the growing number of two-wage earner families, the traditional 8 a.m. to 5 p.m. hours may not be sufficient.

— Look for ways to improve your return policy. To compete, smaller retailers must work with customers to satisfy their demands.

— Sharpen your pricing skills. For example, lower prices on items people buy more frequently. A few items priced higher than the competition may give customers the impression that all items in the store are priced higher.

— Focus your advertising by stressing your competitive advantage.

— Make sure your customers are greeted when they enter the store. Studies suggest that customers are offended if they are forced to search for a store employee when they need help.

— Offer customers a smile rather than a frown. Offering good customer service can make all the difference to many customers.

— Solicit complaints. Without feedback from your customers, it is nearly impossible to uncover potential problems.

“Many communities that have had a large discount merchandiser, oftentimes referred to as ”box stores,” find that the drawing power of these stores brings new customers into the community,” Deller adds. “That represents an opportunity to local merchants.”