“If you have a problem, the best thing you can do is look around the world and see what other people who had the same problem did to resolve that problem, and adopt these measures…”
Malcolm X “Message to the Grassroots”
Prior to the ’70s, the retail environment was dominated by a fragmented market primarily consisting of large department stores catering to a variety of household needs, like Sears and Roebuck, JC Penney, Macy’s, A&S, Korvettes, Woolworths, etc. At first, there were waves of mergers and consolidations to broaden their market share and take advantage of the economies of scale and symbiosis which usually results when similar business enterprises pool their resources. The next move, largely responding to the increased mobility of the American consumer and their willingness to travel long distances to get that” good deal”, was a series of “locational shifts”.
The modern-day mall became extremely popular, anchored by stores like Sears and Penney’s. Prior to this, most consumers shopped on a convenience basis and this shift to destination shopping broke through in the late ’70s as retailers discovered that they could increase the number of shopping days because of the ability to offer enclosed environments circumventing the natural fall off in sales on inclement days. When that became inadequate, they embarked on a series of various “format” changes. The first being the rise of “warehouse clubs”, (Costco and Sam’s Club) designed to capture customer allegiance by offering a sense of exclusivity and lower prices due to a no frills format. As of 2009, Sam’s Club claimed 46 million members and 602 stores across the country. This was followed by “factory outlet centers” where manufacturers sell their goods directly to the public. Today, there are an estimated 216 outlet centers in the U.S. where some 316 different brands operate 13,000 stores. This usually involved factory overruns and blemished products that are heavily discounted. The “dirty secret” here is that due to manufacturer’s ability to project demand more accurately, therefore, few overruns, experts estimate that 82% of products at these outlets was produced for the outlet, often with inferior products. This was followed by supercenters (K-Mart/Target), where it involves a supermarket and a department store where food is generally sold at a discount to get customers to go to the establishment. The final strategy was the “category killers”(Home Depot/Office Depot), where a retailer took one category and provided a broad array of goods, deeply discounted due to their volume purchases of these items, with stores averaging 150,000 to 200,000 square feet.
These changes had a devastating impact on the local merchant on Main Street who did respond, in a myriad of ways, many of which we will discuss in our next article as we return to hardware stores.
Bob Bridgers, with Atchudta Bakr, owns Sisters Community Hardware, 900 Fulton Street, between Washington and Clinton Avenues in Brooklyn, New York.
“Sisters Hardware takes the ‘hard’ out of hardware.”