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« A Prediction That Panned Out | Main | String Theory Online »

August 01, 2006

Retail Slaughter

Donald Pittenger writes:

Dear Blowhards --

I'll grudgingly admit that there are at least a few advantages to being a graybeard.

Most folks past age 45 or 50 have been around long enough to see trends start and end, intellectual or policy fads that come and go and then come 'round again, etc. Can give one a bit of wisdom, if one bothers to think about the pattern.

Something that has struck me over the years is how a new, "killer" concept in retail can come on the scene and seem to be in the process of utterly destroying older kinds of retail. Such destruction seldom is complete, though much damage to storeowners or stockholders (not to mention employees) is done. Then, at some point, another killer retail concept materializes to blow the previous killer into the ditch.

What's interesting (among other things) is that during the time a concept is dominant, it is hard for folks to imagine that it will wane; we tend to take it as "forever."

Here are some examples.

Once upon a time -- up to the mid-60s or thereabouts -- discounting was seen as being a bit sinful. People were supposed to pay the posted price, look for the union label, be sure the product was "Made in USA" and so forth. Then along came EJ Korvette.

Korvette was an New York area retailer specializing in soft goods that aggressively discounted. It was riding high in the mid-late 1960s when I often came up to NYC from Philadelphia where I was a student. I even bought a few things there and began to shed the idea of discounting being sinful. Then Korevette hit the wall a few years later.

Another killer was the suburban shopping mall. By the 1980s malls were being built at a furious pace: Who could stand in their way? Today malls are wounded, seeking rejuvenation by tacking on outdoor "shopping villages" to attract folks jaded or turned off by the mall experience.

Then there was Toys "R" Us. A reincarnation of the White Front discount chain, by the late 70s Toys was on a roll. My kids were young in the early-mid 80s and I spent a lot of time in Toys "R" Us. I liked the concept of huge selection and low prices; how could it ever fail? Nowadays, Wal-Mart and Target are wiping the floor with Toys. Apparently, extra-low prices on key items trumped wide selection.

Current killers include Big Box stores, village malls, and aforementioned Wal-Mart and Target. They'll last forever, surely.



posted by Donald at August 1, 2006


Perhaps a forshadowing of the rise and fall of various kinds of "killer" retail is the rise and fall of the "dime store" -- particularly Woolworth's (and various also rans, like W.T. Grant's and Kresge's). Every small town and big city in America seem to have a Woolworth's on "Main Street" -- and big cities had multiple stores all over the place.

Kresge's was, I believe, transformed into K-Mart, and Woolworth's spawned Woolco (out of business?), both of which seem to me to be essentially also rans in the Wal-Mart category. (I'm guessing, I've never been to a Woolco or a Wal-Mart.)

Also the demise of Sears and Spiegel catalogs seem somewhat analogous.

I'm not sure if Alexander's (another local NYC chain) was really in the same category as E.J. Korvettes (if I understand it correctly, E.J. Korvettes had a wider range of products, including TVs and heavy duty appliances) or as far ranging (E.J. Korvettes was both within NYC and in its suburbs), but it's concept was pretty similar, and it's heyday was pretty close to that of E.J. Korvette's.

And while big city department stores were more regional in nature and there was a large variety of stores to choose from, in their heyday who would have thought that the field would be reduced to a precious few (and that even the biggest ones would essentially become just clothing stores). (In it's heyday, you could not only buy appliances, furniture, etc. at Macy's but you could buy records, books, stamps, toys, etc. -- and even eyeglasses.)

In the chain restaurant field, there is, of course, the demise of Howard Johnson's, which in it's own way also seemed to be a category "killer."

While there are so many restaurants in NYC, even the largest chain was probably not a "killer," there have been a number of giant ubiquitous chains that have come and gone: Child's, the Brass Rail, Horn and Hardart (Automats), Schraft's, Nedick's and Chock Full o'Nuts.

Perhaps Rexall's (now defunct?) and Whelan's were almost category killers in the drug store field, at least in NYC.

Shoes: In NYC Tom McCann (sp?) seemed to be all over the place, as well as Florsheim's (more upscale?).

Inexpensive men's clothes (like today's Men's Warehouse?): Robert Hall's (at least in NYC).

Large-sized (?) women's clothing: Lane Bryant's (still around?).

And, at least in NYC suburbs, the Good Humor ice cream man seemed to have the field to himself.

Posted by: Benjamin Hemric on August 1, 2006 7:35 PM

Blockbuster Video is an example of a nearly omnipresent company with an apparent least it was until the emergence of Netflix.

I travel often, and I remember noticing that Blockbuster was the closest thing to a store that was present EVERYWHERE. There was no Walmart in urban areas, and in terms of things ranging from grocery stores to clothing stores, there were some chains that dominated one region of the country, but not the whole country. But Blockbuster was in urban and rural and suburbs, in the north and south, east and west and central, everywhere I looked. But now it seems that Netflix will have it wiped out in a few years!

Posted by: JS on August 1, 2006 9:12 PM

Blockbuster was a company that was nearly omnipresent and seemingly invincible, but in a short amount of time it seems it will be wiped out by Netflix!

Posted by: JS on August 1, 2006 9:13 PM

I suspect that Wal-Mart will break the pattern of passing trends and stay around just about forever. It is simply so powerful, with no chinks in its armor, that it may be invulnerable to changing fashions in retail.

Posted by: Peter on August 1, 2006 11:58 PM

Malls were good in the 80's for looking at all the good looking women. The problem with them is that they were rather expensive and Walmart and the like have largely killed them off. Also, it easier to go to a big box, buy what you want, then leave and go do something else. Malls are a pain in the ass for this (like walking through an airport).

Posted by: Kurt on August 2, 2006 12:14 AM

Speaking of checking out good-looking babes at Big Boxes instead of malls -- all of the almost-college-freshmen are currently pouring into the Bed, Bath, & Beyond stores to prepare for dorm life. Even better if it's in a more well-to-do area, where the kids are more likely to be the products of trophy wives, who accompany them.

I had to pick up some shoe trees today... yowza! God I love being a 25-y.o. dirty old man.

Posted by: Agnostic on August 2, 2006 1:12 AM

Donald – I don’t think that anyone who has even read a few historical anecdotes in a business magazine seriously believes that any business is “supposed” or likely to last forever. And for some odd reason I have always been fascinated by the dynamism and mutability seen in the rise and fall of major businesses. For example, I remember as a little kid being fascinated that at one time A&P and Safeway were the number 1 and number 2 supermarket chains in America (although it was more a fascination with numbers than business that burned this little factoid into my mind). Later, looking it up in an encyclopedia, I learned that A&P had first come into prominence in the tea business, and only later transformed itself into a grocery giant.

There are surprisingly few truly old companies in America. DuPont, one of the oldest continuing companies in the US, was originally founded as a gun powder mill in 1802. But of the original twelve companies that made up the Dow Jones Industrial Average in 1896, only one company, General Electric, is still represented.

The history of Sears is fun because it has echoes of the later success of The catalog allowed people in small cities and on farms to “see” merchandise without having to travel to a large town with a well-stocked general store. And reliable delivery and a widely spread word-of-mouth reputation for high quality products (like the Kenmore line) made Sears a household name. But times change, and Sears, like the A&P, is more a part of business history than the retail present (almost as forgotten as original Sears partner and co-founder Alvah Roebuck).

Killer concepts cannot withstand changes in time and taste. Men’s clothing stores have declined in large part because middle class men don’t regularly wear suits to work or generally in public (e.g., to restaurants and ballparks), as trends toward informality in clothing continue and accelerate.

A killer concept in Southern California that is already starting to fade is the mixed retail/residential complex, a bad solution desperately looking for a problem.

For a bit of fun, watch Kubrick’s “2001: A Space Odyssey,” and note the companies which have merged, disappeared or dropped in prominence since the time the movie was made.

Kurt – The Grove shopping mall in Los Angeles is an outrageously fun place to watch hot looking women (supplanting the Beverly Center and the Century City Mall). In fact, it is clear that some of the women deliberately dress up (or barely dress at all) in order to be seen, not necessarily to shop.

Posted by: Alec on August 2, 2006 6:45 AM

Thanks for a trip down Memory Lane. Korvette's!!! In central NJ, back in the day when strictly record stores were all in NYC or Philly, Korvette's provided a cultural stop for that longer-haired, pimpled, under-nourished, cheap t-shirted crowd of young men that I was a car-carrying member of. A singular emmory comes back now. It's Christmas time and the parents are trying to bridge that chasm between themselves and myself that seems to widen in the 14-18 year time span.
"So, what would you want for Christmas?"
"(Garble, Garble, Gobble, Gobble) How about Grateful Dead's "Workingman's Dead"?, I say, while slinking off, trying to maintain my affected distance.
My mother goes to Korvette's and successfully scores on the request. It wasn't until a few months later that I found out from a friend who worked in the records section that he had seen her in the store, looking for the Holy Grail I'd requested of her. At one point, exasperated with the bizarrely named artists, she must have had it. She went to a clerk and asked for music of the Grating Dead People. She explained that her son had the "teenage complexes" and this music was part of the "things you go through" to get to adulthood. Having a fairly heavy Slavic accent probably only added to the entertainment value for the clerk. My friend said my mother was involved with the selection/search for at least a good hour.
She finally was able to leave with the album clutched under her arm. I still have the album; it's one of my most cherished gifts, knowing my mother was more than willing to embarass herself to grant my request.
GratinG Dead and Korvette's. Permanently burned in the skull.

Posted by: DarkoV on August 2, 2006 7:48 AM

"A killer concept in Southern California that is already starting to fade is the mixed retail/residential complex..."

Otherwise known as -- the traditional city.

Posted by: ricpic on August 2, 2006 10:37 AM

Ricpic – Oddly enough, there are few things that are traditional in Southern California. But even here, one of the problems with the retail/residential mania is that developers are taking perfectly serviceable neighborhoods and attempting to make them ultra-gentrified and upscale, but against not only the wishes of the residents, but also the area demographics. A couple of quick examples: The Hollywood/Highland complex was designed in part to attempt to draw upscale tourists and locals from Beverly Hills and Santa Monica. But no one cared or noticed that the people who typically come to this area are middle class, and spend a considerable amount of money. But their money wasn’t sexy enough. So the developers and politicians filled the complex with expensive upscale shops and restaurants, and made local parking hideously expensive. The result: the upscale hipsters stayed away in droves ‘cause they didn’t care, and the middle-class tourists who still regularly come to the area simply refuse to spend money for overpriced commodities, and the food court with the cheapest and most familiar eateries do much better than the high-end places. So the upscale shops are closing up, but the leases are too high to attract more suitable replacements.

Similar problems occurred with mixed retail/residential complexes in the San Gabriel Valley. The people who live in the complexes still go elsewhere to shop, and the locals cannot afford to shop there, and the upscale shops initially courted for these places move out, often leaving empty hard-to-fill holes. And yet developers and politicians press on, convinced that this totally artificial kind of gentrification is the wave of the future.

Posted by: Alec on August 2, 2006 2:29 PM

The continuous thread which runs through the evolution of retail formats over time is less personal service. This has been driven quite simply by trends in the relative cost of employing people versus real estate, inventory and computer information systems.

As our society gets richer, people (especially including their health care costs) have become and will continue to become more expensive relative to everything else.

Posted by: ZF on August 2, 2006 10:01 PM

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