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Forty-five years ago, Wal-Mart was a single store. By radically changing the rules of retail, it evolved into the world’s largest company. Many businesses have learned to adapt quickly to the new game—from $4 generic drugs to energy-saving light bulbs. Now it’s Wal-Mart’s turn to struggle with the industry’s more prosaic problems related to slow growth.

Wal-Mart’s challenge is how to be a big brand without being a mass brand, where one-note consistency leads to the perception of mediocrity. Forty-five years later, brand loyalty is less prevalent—some say a thing of the past. Shoppers need to be courted continually with great experiences or exciting product innovations. After all, the revival of small specialty shop retailing came about because people don’t always want standardized goods at the lowest possible prices.

Best Buy proves a big brand can be creative and dexterous enough to transform itself. The consumer electronics giant has been moving from a sales-driven to a people-helping organization. Its latest format in a long line of customer-centric store experiments includes lower lighting, soft music and low-key associates trained to encourage customer questions. Early results show that women, the deciders in 90% of electronics purchases, are feeling better and buying more.

Now that the low-price bar has been set, an emotional connection is the strongest bond a brand can have today. In an industry where sameness is slow death, differentiation remains paramount. Being one-of-a-kind provides its own barrier to exit, making it hard for shoppers to go elsewhere. Private labels help. INC apparel keeps shoppers returning to Macy’s. Kobalt tools encourage home-improvement customers to stick with Lowe’s. Differentiation will always be the greatest challenge in retail, since at its heart it requires ongoing, unflagging passion and great imagination.

Make Sure It’s Fabulous

Ian Schrager, designer of boutique hotels and co-founder of the famed Studio 54, believes there could be no underground scene today. Social networking makes it impossible to maintain exclusivity. Things once hidden behind a velvet rope are discovered and mainstreamed too quickly.

Fear of the “banalization” of the Champs-Élysées drove the Paris city government to ban H&M from opening a megastore among the ranks of other multinationals such as Gap, Nike, Disney, Virgin, McDonald’s, Toyota and Benneton. The French are concerned that “the most beautiful avenue on earth” is losing its historically diverse character of glamorous small shops, belle-epoque cafes and louche jazz clubs.

But retail can’t stand still. In fact, there’s no stopping it. As one astute Parisian put it, “Sure, the Champs-Élysées can be cheap, but it’s not a museum. The battle shouldn’t be to keep H&M out. It should be to make sure it’s fabulous.”

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