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Also note this: Pay attention to the "boutique" businesses that pop up to differentiate themselves. Wal-Mart does. And the moment those niches start to become widely accepted and dependably profitable, Wal-Mart will step in and take them, too.

There are some areas Wal-Mart really can't compete in because their business model doesn't allow for it. Around the DC area, we have Wal-Mart, but we also have a very succesful high-end food chain called Whole Foods. The type of people who shop at Whole Foods aren't going to go shopping at Wal-Mart for their organic food needs.

Wal-Mart can beat anyone on price, true, but price isn't everything.

Wal-Mart can beat anyone on price, true, but price isn't everything.

The crowd to whom price isn't everything is a tiny percentage. In a large metro area, sure, the ultra-specialized businesses that are run right can make it because even a small percentage of the whole still constitutes a large enough customer base. Not in small towns.

Just keep an eye on the ever-expanding Wal-Mart selection. Twenty years ago, if you wanted a nice TV, you went to a consumer electronics store. Ten years ago, you went to Circuit City as the indies were by and large fading into the sunset. Now you can buy HDTV plasma at Wal-Mart, and for the vast majority of people, those models are good enough. And that is of course just one category of merchandise. The trend applies to many others.