Successful Retail
Why are some retail environments currently more successful than others? The traditional wisdom of real estate experts has been that the three most important factors are "Location. Location. Location."
However, a 1990 survey1 of more than 250,000 shoppers revealed that the primary reasons consumers chose their favorite stores were as follows:
| Reason | Percentage |
|---|
| Price | 22% |
| Selection | 18 |
| Quality | 17 |
| Location | 15 |
| Service | 10 |
The study shows the most important factor to retail success is not location, but price. Downtowns have traditionally offered central location and service, but as a result are losing to the discount chains that offer low price and large selection. The discount store has become America's favorite place to shop. Some studies, however, show "...it is losing its competitive edge to 'category killers' because discount stores no longer represent off-price, but represent the price."2
Even this advantage is being lost as all major retailers are getting products from the same suppliers at similar quantities and prices, and even factory outlets and category killers have similar prices. This leaves the small independent retailer in an almost untenable position. As one appliance retailer in a Michigan downtown explained, "I can't buy wholesale as cheaply as the new Wal-Mart is selling off their shelves. It would be advantageous for me to buy my small appliances from that store rather than from my distributor, but I refuse to do this on principle."3
Outlet centers are another concept that are anathema to independent downtown retailers, for the principle of outlet centers is that manufacturers want to retain more control over their product distribution. Although prices at outlet centers are typically not lower than at other discount retailers, the outlet allows manufacturers to both control their markets and trade more directly on their brand names. "Factory outlets are one modest step toward the ultimate solution to the problem of maintaining control from the factory to the customer--strategic organizational alliances."4
The new "power centers," which feature category killers, are the latest in a long line of competitors to the downtown. The new commercial types may be doing more damage to each other than to "mom-and-pop" independents, however. "What power centers affect most is the small- to mid-size strip center. TheyÕre taking both customers and tenants."5 Independent retailers are less affected. "Small retail is in the bag on a mom-and-pop basis. The conglomeration theory says the power center is where everyone wants to be, but it really doesn't make sense for the mom-and-pops to be there."6
The retail industry has undergone significant changes throughout its lifetime of almost two hundred years. The following chart, taken from the textbook, Retailing, shows the gradual shift from general stores to more and larger specialized stores.
| Institutional Type | Period of Fastest Growth | Inception to Maturity (yrs.) | Stage of Life Cycle | Representative Firms |
|---|
| General store | 1800-40 | 100 | Declining/obsolete | A local institution |
| Single-line store | 1820-40 | 100 | Mature | Hickory Farms |
| Department Store | 1860-1940 | 80 | Mature | Marshall Field's |
| Variety Store | 1870-1930 | 50 | Declining/obsolete | Morgan-Lindsay |
| Mail-order house | 1915-1950 | 50 | Mature | Spiegel |
| Corporate chain | 1920-30 | 50 | Mature | Sears |
| Discount store | 1955-75 | 20 | Mature | KMart |
| Conventional supermarket | 1935-65 | 35 | Mature/declining | Winn-Dixie |
| Shopping center | 1950-65 | 40 | Mature | Paramus |
| Cooperative | 1930-50 | 40 | Mature | Ace Hardware |
| Gasoline station | 1930-50 | 45 | Mature | Texaco |
| Convenience store | 1965-75 | 20 | Mature | 7-Eleven |
| Fast-food outlet | 1960-75 | 15 | Late growth | McDonald's |
| Home-improvement center | 1965-80 | 15 | Late growth | Lowes |
| Superspecialist | 1975-85 | 10 | Growth | Sock Shop |
| Warehouse retailing | 1970-80 | 10 | Maturity | Levitz |
| Computer store | 1980-85 | 5 | Maturity | Computerland |
| Electronics superstore | 1980- | ? | Growth | Circuit City Stores |
| Off-price retailer | 1980- | ? | Growth | Burlington Coat Factory |
| Warehouse club | 1985 | ? | Growth | Sam's Wholesale Club |
| Electronic shopping | 1990 | ? | Growth | Home Shopping Network |
Selected Changes in Retail Institutional Structure7
1 The Future of U.S. Retailing. p. 52.
2 Ibid. p. 53.
3 Interview for this project survey. July 1992.
4 The Future of U.S. Retailing. p. 54.
5 Quote from David Andrews, Vice President of Commercial Marketing, The Mitchell Co., Mobile, Alabama, in "Power centers flex their muscles." Chain Store Age Executive. February 1989. p. 3A.
6 Quote from Ed Attebury, Vice-President of Marcon Brokerage, Sacramento, in "Power centers flex their muscles." Chain Store Age Executive. February 1989. p. 3A.
7 J. Barry Mason, Marris L. Mayer, and Hazel F. Ezell. 1994. Retailing (5th Edition). Burr Ridge, Illinois: Richard D. Irwin, Inc. p. 93.
