Seth Godin wrote a post entitled should small business wine. I personally say heck no.
Growing up in small town America where the nearest McDonalds was almost 70 miles away, nearly all the businesses that I frequented and worked at were small businesses. Nearly every one of these businesses complained constantly that they couldn't compete with the big hardware stores, the chain grocery stores, or whatever store their competition was at the time.
Additionally there were those select people who complained that everyone would go shopping at Wal-mart and didn't spend money locally. As a high school student I thought this was true and that people who went down the road to spend money were kind of traitors to the community. Then I went to college and took an economics class.
It amazes me now when I look back, how these small local businesses felt entitled the the local person's dollar. They had high prices, were open for business when it was convenient for them, had a poor selection, and their service was by no means outstanding. In fact other than the fact they were close by, not one of these businesses were deserving of the local dollar.
Now this is not to say that all small local business were poorly run, in fact some of them did quite well, and were frequented by almost everyone. They competed at some other level other than price, usually it was convience, selection, or service. But to this day I still remember coming back from college, and discussing this with some local people. They would look at me like I was crazy for telling them they should be trying to compete with Wal-Mart. They were defeated before they opened their doors, yet they had by far one of the biggest advantages of any business. They didn't have to pay a dime for market research, they just walked down the local diner and could find out what nearly everyone in town wanted.
The hardware store should have been open 24 hours a day during the spring and fall planting and harvest seasons, the restauraunt or bar should have delveried meals to the workers in the field, and the grocery store just needed to stick with the basic necessities, and take special orders on occasion. Simple, a little inconvenient for the business owner, but if you can't compete on price do something else better.