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2 Small Businesses That Thrive In A Big Box World

David and Goliath tales illustrate how family businesses can succeed against the Wal-Marts and Best Buys of the world.

By Jessica Seid, CNNMoney.com staff writer
September 14 2006: 4:33 PM EDT

NEW YORK (CNNMoney.com) -- Brian Rosen's grandfather, Sam, started Sam's Saloon in the 40s and it has since become Sam's Wines & Spirits, the single leading beverage retailer in the world.

Today, Rosen and his brothers run the well-known wine and liquor store in Chicago, which has evolved into a 33,000 square-foot superstore sandwiched between Costco (Charts), Cost Plus (Charts), Trader Joe's and Whole Foods (Charts).

"We're right in the battleground," said Rosen.

But despite the stiff competition, Sam's has not only survived but thrived. It currently generates $70 million in sales a year.

With employees trained in viniculture, Rosen says customers come back to Sam's because the service is better.

Of course, Rosen admits, "we won't win the price battle" against big box stores but "we are successful because we have the best staff in the industry and good customer service."

To underscore that advantage, Sam's offers adult education classes, tastings and rewards programs to repeat customers. "It's about creating an emotional attachment to the consumer." Rosen says the educational component, Sam's academy, has been wildly successful.

"(Wine) is a knowledge driven subject and people want to be educated."

At the time of the interview, Rosen was driving over four hours with a sommelier to do an in-home wine tasting for a high-end customer.

"Ask me how I compete with Costco? At the level that I can win: with better service and selection."

What Sam's has achieved with beverages, Abt Electronics has done with plasma TVs and computers.

Since starting in 1936 as a radio retailer in Chicago a lot of things have changed, but co-owner Mike Abt says one thing remains the same: "we stuck with our one-store philosophy."

Now Abt and his brothers run the 360,000 square-foot store started by their grandfather and employ over 1000 people.

With $300 million a year in sales, the Abt family has held their own against competitors Best Buy (Charts), Circuit City (Charts), and Tweeter.

All of Abt's installers and servicemen are in-house which Abt says means better quality control across the board. Electronics are fixed on the premises and employees are well trained and experienced.

Abt admits that while it's a more expensive way to operate, customers keep coming back because of the high-quality service.

Even when the big box stores moved into the neighborhood, Abt didn't flinch. The company used tools like price matching to keep sales constant.

"When you are a successful business, your traffic is based on what you do, not what other people do," Abt said.

And with over a million and a half costumers, he knows he is doing something right.

"They might offer longer financing or stay open until midnight but we're the steady, sure thing."

The company recently purchased 10 more acres of land around the store and has plans to put in more parking spaces and expand the warehouse.

But will they build another store? Definitely not.

"Family businesses have a uniqueness that can't be sold, can't be exploited," explained Barry Cain, managing director of Blackman Kallick Family Business Center, a consulting firm in Chicago.

"There is that psychological quality that is the gold standard," Cain said.

Consumers respond to small businesses and relate to the familial atmosphere, which translates into sales. And that is one area within which big box retailers really cannot compete.

"If you do it right, like Abt and Sam's, you can do it very effectively and successfully for the long term," Cain said.

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