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Retail's Little Guys Come Back

By Amy Tsao

GRANOLA GUERRILLAS. Even within the most competitive merchandise categories -- like food and toys -- it's often the smaller-scale retailers that have found ways around the big-box approach. Some 30% of all dollars spent on toys go to Wal-Mart, but smaller toy stores continue to attract customers. At the Little House toy store in Baton Rouge, La., young girls can dress up and throw tea parties like proper ladies. This kind of distinction sets it apart from Wal-Mart and helps Little House get its tiny slice of the $220 billion-a-year toy-retailing business. Year-to-date sales at Little House in 2004 come to $350,000.

Food retailing is arguably an even tougher category than toys. But winners have emerged here as well. Trader Joe's, a chain that sells earthy-crunchy groceries and wine, is rapidly expanding with its small, folksy store format and Trader Joe-brand items ranging from curry sauces to gourmet cookies. Whole Foods Market (WFMI ) is a hugely successful part of the same phenomenon -- alternatives to traditional supermarkets and giant superstores. Its strength: organic produce and appealing prepared foods.

Others have made personalization and customization an integral part of their business models. Dollmaker and retailer American Girl and custom-teddy-bear purveyor Build-a-Bear Workshop have emerged in recent years as two of the country's fastest-growing toy outfits. They're giving new meaning to classic toys by outfitting them to a child's particular tastes. Customization is a niche that even Target is trying out. It recently began a Web-based custom-clothing s

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