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 Some studies, however, show "...it is losing its competitive edge to 'category killers' because discount stores no longer represent off-price, but represent the price."2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.
Suggested other pages...
Competition from Malls Downtowns differ from Malls
Learning from Malls Impact of Wal-Mart
Problems of Small Retailers
Contacts:
Planning for Retail:
Kirk McClure