Austin Independent Business Alliance strategy to - American Independent Business Alliance AMIBA

STRATEGY
Beat the Beast: Enlisting Allies
Here's how five small retailers are competing against firms many times their size.
By Maggie Overfelt
Fortune Small Business

Waterloo Records & Video
In the mid-1980s, when John Kunz heard that a huge Wherehouse Records was opening across town, he restocked the inventory and increased the marketing budget at Waterloo Records & Video, the small store he owns in downtown Austin. He took the same steps in 1990 when Tower Records moved in a mile away. But two years ago, when he found out that the city was going to pay $2.1 million to help build a Borders right across the street, he decided to enlist the help of other local businesses. "It was time to galvanize the community into stopping the malling of America," says Kunz, 53.

Building alliances with like-minded independent businesses has enabled Waterloo not only to survive but to grow, despite the rising challenge of well-run and well-financed national rivals—such as Barnes & Noble and FYE, which are both nearby. In a hypercompetitive market where some big music retail chains have gone bankrupt—Austin's Tower Records outlet closed in mid-June—Waterloo has been growing revenues at an average of 8.5% a year, to more than $6 million in 2003.

Kunz likes to think that is partly because of the business group's "Keep Austin Weird" campaign, an outgrowth of the earlier fight against Borders. Once the giant became a threat, Kunz's was the second company to join the city's oldest and most eclectic stores in forming the 150-store Austin Independent Business Alliance. The idea was to promote one another's stores, buy supplies from one another, and launch a bumper-sticker marketing campaign illustrating the benefits of buying locally: According to an economic report that Kunz helped commission in late 2002, only $13 of every $100 spent at Borders would circulate back into the local economy—compared with $45 at Waterloo. (Borders, which has two other stores nearby, did not return our calls.) That report was e-mailed to customers, members of the city council, and local reporters. In April 2003, before breaking ground, Borders canceled construction of its Austin store. A spokesperson for the company blamed the decision on a weakening economy.

Kunz counts on another alliance to help him run Waterloo's daily operations. In 1995 he helped found the Coalition of Independent Music Stores, a national network of 70 small, locally owned stores that helps them buy, stock, and promote new music. Waterloo lures customers by hosting 115 free shows a year. "We give music lovers something the chains have lost sight of," says Kunz. "And that's putting music first."

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