You don’t see too many David vs. Goliath stories these days with a happy ending for David–especially when Home Depot is Goliath.

But I just read a great article in the Los Angles Times about a hardware store owner who did just that. Everyone in retail who’s worried about big-box competition should read it for inspiration (free account registration may be required).

What a story: 101-year-old mom-and-pop hardware store is threatened when Home Depot moves in nearby. It’s a rude awakening for the owner, a real estate guy who helped craft the deal that brought the Depot to town.

But he took stock of the situation and now focuses on carrying items local customers can’t get at HD, insists on attentive customer service and doesn’t worry about price matching on large orders. The store itself was made more appealing to female customers, and inventory and checkout computerized.

The result? Sales are back in the black and a loyal customer base helps the store thrive despite the encroaching Home Depot and Lowe’s.

Articles like this give me great hope that small retailers will be around for a long time. Once again, studying the competition, giving your customers what they really want and adding the personal touch seem to be the keys to success. Remember that the next time your Goliath decides to move in down the street.