The 40-aisle boutique

Consumers who decry what they see as the rising dominance of mass retailers like Wal-Mart - and go out of their way to patronize mom-and-pop retailers instead - may be in for a reality check. Over the past few years many small, neighborhood stores have changed the way they do business.

The new reality: Mom-and-pop shops are stocking up at Wal-Mart.

Consider the business of one independent convenience-store owner in south-central Maine. The retailer, who asked that his name be withheld, goes to Wal-Mart three times a week to stock up on soft drinks, lunch meat, and cigarettes.

He recently purchased a flat-bed truck on which he plans to load large wooden crates of goods directly from the Wal-Mart's warehouse. "I'm doing it more and more," says the store owner. "You would find there are a lot of local guys who do what I'm doing."

Three years ago, the store owner used a nearby Pepsi distributor to stock his shelves with soft drinks. Over time, however, the price for a case of soda at Wal-Mart fell well below the distributor's.

Now, Pepsi charges the store owner $7.50 for a case. And Wal-Mart? It's $4.97, on sale, he says.

Because there is nothing illegal about reselling most products, the store owner does not think twice about turning to Wal-Mart. "If you're going to make money in this business, you have to hustle," he says.

Managers of specialty boutiques, mom-and-pop stores, and convenience marts across the country are increasingly buying a large percentage of their merchandise from a handful of giant retailers that, ironically, are also their top competitors, say experts. The trend is evidence of a new retail environment in which the actions of big players like Wal-Mart dictate how manufacturers and retailers do business. "We clearly are moving quickly to an era where superstores wield most of the power in retail," says Eric Johnson, a professor of business administration at Dartmouth University.

The power shift was evident at last month's International Toy Fair in New York. Traditionally, toy manufacturers have used the occasion to pitch their products to small stores and large chains. But the top 5 toy retailers now have so much influence, they did not even attend the show. Instead, they were able to hold private meetings with toymakers weeks in advance. "Toy Fair is not that important to the big toymakers anymore because so much volume is in the hands of so few companies," says Mr. Johnson.

The influence of large toymakers is directly proportional to their skyrocketing sales over the past decade.

During the 1980s, independent toy stores accounted for more than 75 percent of toys sales in the US. Now, more than 55 percent of the market is controlled by the big five merchants: KB Toys, KMart, Target, Toys 'R' Us, and Wal-Mart.

Toymakers "now sell more to Wal-Mart then they do to some Western countries," says Eugene Fram, a marketing professor at Rochester Institute of Technology.

This shift has led toymakers to define much of their business in terms of how much of their product they can get on the shelves of the giants. The narrow focus limits their interest in selling to smaller retailers. "The big guys [like Hasbro and Mattel] are less and less interested in dealing with small stores," says Johnson.

Their reluctance is primarily a question of logistics. Since big retailers demand large deliveries in a short amount of time, big manufacturers have overhauled their warehouses and delivery operations to accommodate them. Machinery and trucks are now designed to handle enormous wooden pallets. Factory personnel are paid based on a model of large deliveries. The result is a dizzyingly efficient supply chain that ships enormous volumes of goods, keeping prices low.

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