At least once a week, my husband laments the loss of a mom & pop record store we had near our home. They carried mostly used albums and rock and roll memorabilia and a visit there was like hunting for treasure on the beach. If we go to eBay, we can find all those same albums and more but it simply isn’t the same as flipping through stacks of worn cardboard and finding a gem you didn’t even know existed.

It’s a sad fact that the small business is rapidly becoming a thing of the past. comScore is reporting that small business is down 5.6% over last year with those dollars going to the big box retailers we drive by every day. Usually we blame it on the economy, but the big boys are seeing a rise in profits, so why aren’t the mom and pop stores seeing it, too?

The National Federation of Small Businesses (NFIB) says that a poor economy forces prices down and small retailers simply can’t afford to take the same cuts as a Walmart or Target. The Gap can put a 50% off deal on Groupon but what’s a pet shop owner in Sheboygan to do?

Since small businesses can’t compete on price point, they need to compete in other ways such as service and community. Cake companies that create one of a kind masterpieces stand head and shoulders over anything you can buy at Costco. I have a clothing store that I return to again and again because the staff there takes the time to help me put together a look and they’re honest about what works and doesn’t. Try getting that kind of service at Walmart.

Creating a sense of community is also important for the small business. Sponsoring a local sports team, donating to local charities, participating in community fairs and events all help sway customers your way. We have a small chocolate shop that offers free candy making classes for kids once a month. The kids may burn through a few dollars in supplies but while they wait, moms consume coffee and snacks at full price.

When it comes to advertising, social media is the great leveler. Twitter and Facebook are virtually free to use and small companies don’t have to worry about jumping through legal hoops before making a statement online. Now that everyone is going “local” with Foursquare and Facebook Places, it’s the perfect time for small businesses to step up and get customers.

Do you have a favorite small business that is no more? Tell us about it.