Walmart has strategically cut prices on thousands of items in its stores to help customers cope with inflation over the last few years. News like this could be tempting for Small Business Owners to copy as a pricing strategy in their own businesses; however, price matching is not always a winning strategy. It’s often a race, pun intended, to the bottom.

In a 2025 survey of Small Business Owners, 66% say that big retailers are their fiercest competitors. The real business operator question shouldn’t be, "How do I compete on price?" but "Why am I tempted to pull that lever first?" There are five plays that Business Owners can use instead of competing on price, which could prove disastrous to their bottom line.

PLAY 1: Compete On Proximity or Delivery, Not Shelf Price

One of the best aspects of being a local business is just that, your business is convenient to where people live. This is one of the biggest leverage points you can use in your marketing. Why go to the big box when you can travel a few steps away?

There is data supporting this marketing approach: 43% of consumers would pay more for greater convenience and 52% would pay more for a speedy, efficient experience. Marketing messaging as a local business is crucial, as well as developing the most efficient way to deliver your product or service to your customers. Invest in CRM systems that help you deliver more efficiently; there are hundreds on the market, including industry-specific options like Jobber for construction businesses, Mindbody for wellness businesses, and Toast for restaurants.

PLAY 2: Bundle Value Instead of Discounting

One of the main drivers of purchasing behavior is perceived value. Customers want to know that you are giving them more value than they are paying for. Flip the value perception in their eyes by bundling services or products where possible so the perceived value of your product or service makes purchasing locally irresistible.

Think in terms of the SaaS industry value ladder model. You do this by offering tiered pricing based on customer capability and costs. Essentially, you can sell a product or service and then upsell deeper integration or execution. One example is selling pet shampoo for dogs and cats, then offering the actual service of dog and cat baths in another tier. You can apply this to virtually every industry; think of it as selling a solution and selling its implementation at the same time.

PLAY 3: Make Loyalty The Moat

When it comes to low-value single transactions, big-box retailers will win the day most days; however, when it comes to relationships, smaller businesses will win the day most of the time. Learn your customer’s data, know who your big value customers are, use their names when they shop with you, give them value-added service, and be generous with your attention. It’s ultimately cheaper to have a deep bench of repeat customers who are high spenders than to consistently find new customers, and the data backs this up.

A 5% increase in customer retention can increase profits by 25% to 95%, depending on the product or service being offered. Repeat customers’ revenue drops right to the bottom line because your acquisition costs are zero. That means that since you didn’t have to spend on marketing to get that customer, you have more upside in keeping an existing customer happy and coming back.

PLAY 4: Specialize In Curated Selections

There will be times when it is just too cost-prohibitive for big-box retailers to carry certain products or offer certain services. Look for these opportunities and build your brand and brand messaging around these curated offers. Walmart’s supply chain is not built to buy niche items; however, finding a niche product or service might attract more attention to your business. This is one way to present yourself as a local expert in the niche product or service, and people look for specialists when they want to spend more money. In a survey conducted by OnDeck, 41.9% of customers cite unique products as a reason they shop local.

Look for ways to source niche products that let you be one-of-a-kind in your area. Then leverage the attention. By offering unique products to local customers, you also position yourself to benefit from earned media; the news loves stories of unique offerings being brought into the community.

Using these four plays will help you avoid simply dropping your price to stay competitive. You should find other ways to increase value, offer better products, or provide higher-level tiered service offerings to your customers. Big-box retailers compete on scale; small businesses have to be agile and compete on specialization; that is the only way to stand out in uniqueness and gain the attention of prospective buyers.

When a company like Walmart cuts prices, it’s not necessarily buying customer loyalty; it's only holding on to customers until they drop prices again, further suppressing its margins. As a Small Business owner, you want to create raving fans, ones who refer, repeat buy, and extol the greatness of your business.