Target carries a slightly higher quality of merchandise although most is same old - same old. A can of beans from green giant is a can of green beans, and a CD is a CD, etc. The only differences IMHO are in cloths, jewelry and furniture, and I don't shop for that at Target or Wal-Mart. So while I agree, Wal Mart is still the better deal for me in most instances when shopping for the generic staple foods, motor oil, etc.
Many of the mom and pop shops went under because they didn't adapt. Where they can compete is by offering specialized products and services a large generic store like Wal Mart can't effectively do. Offer service (i.e. sales people that know something, are available, and plentiful) which the pure budget low balling Wal Mart can't provide.
If I'm a bicycle shop, fitness/grocery store, pharmacy, or sell glasses, I can survive with a Wal Mart in town, “IF” I try to offer something in the form of a product and service outside the realm of where I have to compete with a generic substitutable product on a pure cost comparative aspect. Wal Marts’ business model/marketing is one that makes them the low cost answer in nearly anything, but they are generic (Can be found anywhere), low quality (lowest bidder, low end models, etc), poor service (sales people know nothing and not enough, can't do any repairs or real service), made in China...........
The mom and pop bicycle shop that repairs bikes, modifies them, sells specialized and high end bikes, has sales personnel that know their stuff, they survived.......but those trying to sell the Huffy at $150 when the same bike can be bought in a Wal Mart for $89, they went out of business.
Sir, I must say that this is a brilliant analysis of the economic effects of a Wal Mart on its surrounding competitors.
There is exactly such a bicycle store in my area that survived using methods that you described. They had a small selection of the most basic bikes, but the majority of its selection was hi-end, incredibly expensive mountain bikes. The price range of some of these bikes, which were the kind that you race down steep mountain trails with, was from 6,000 to 10,000 dollars. Never have I seen such fine bikes. Surely, such a bike could not be purchased from the local Wal Mart, thus this business survived, and it thrives this very day.