Competition is complicated.

I've learned to back off from direct competition over the last 40 years. My first experience was the worst because I simply didn't know how to handle another store popping up when I wasn't making enough money in my own store. 

Well, I'm not the boss of others. My job is to adjust.

That first competitive situation became toxic and I'm not completely excusing myself. 

The natural impulse is to get competitive, as if it's a war. But that's a mistake. The competition has every right to try doing the same thing you are doing. 

Nowadays, I wait for a decent length of time, and then introduce myself to the competition and make it clear that I'm hoping for a cooperative relationship. And since that first time, that has mostly worked out. At worst, the competitors ignored me, and that was all right. At best, there developed a true cooperative relationship. I don't know that there has ever been a buddy/buddy relationship, but I don't tend to be buddy/buddy with anyone. 

This doesn't mean you shouldn't react to competition, however. Observe what they doing and see if you need to match them in price or variety. 

Sometimes the best thing to do is nothing. They are who they are and you who you are. They'll be the new kid in town for awhile, fresh and new and frisky, and you just have to let them be that way. In response, you need remain steady and reliable.

I've always had an underdog persona, at least to myself, so it was a surprise one day when someone pointed out that I was the old and established store. 

"I'm the old guy?" I asked.

Well, yeah. Lean into it. 

Weirdly enough, after a while you start hoping for smart competition, not dumb. Smart competition means they are playing by the same rules and have the same constraints you do. Dumb competition is a wild card that can be hard to handle and cause chaos for everyone 

So I try to delineate my strengths and weakness and adjust to the current situation. Competition doesn't usually put a store out of business. Either the economy is strong enough for all stores or weak enough that all stores feel the pressure.

The other response is to double down. Response to competition by upping your game. It might mean taking a few risks. It might mean making at least a gesture toward the customer that you're on their side. You might have to go lower on prices, or increase your inventory. 

I'm a great believer in keeping things simple, so I generally do what I'm already doing--but just more of it or less of it. 

What I learned is, competition will always be there. There is no avoiding it. There is only accommodating it.