evolution of retailers, Sears, Kmart, Walmart, Albertsons, HyVee etc Re:
From: Archimedes Plutonium (a_plutonium_at_iw.net)
Date: 12/06/04
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Date: Mon, 06 Dec 2004 02:35:54 -0600
Sat, 04 Dec 2004 03:18:30 -0600 Archimedes Plutonium wrote:
(all snipped)
Let me touch on a evolution of retailers for the past 2 centuries should give
us enough of a clue of patterns. Let me put it into a category perspective of
3 types of quality and 3 types of prices:
low quality
medium quality
high quality
cheap prices
medium prices
high prices
Retailers start out with few stores in some specific region and for whatever
reason or circumstances seem to grow.
The history of Sears and Kmart imply that they started with medium quality
goods and sold them at medium prices but as they grew and grew to be a
nationwide retailer their quality skidded to that of low quality but they
tried to maintain their medium prices. Given time and competitors where
customers could find medium quality merchandise at a medium price whereas
Sears and Kmart were mostly selling low quality merchandise at a medium price.
This is where Walmart sneeked into the picture and rapidly expanded nationwide
in that they sold the same "low quality merchandise" that Sears and Kmart were
selling only instead of at a medium price at a cheap price.
A great sign that a retailer is selling low quality stuff is that never or
seldom is anything of high quality to be found in the store. You will never
see a brand like NorthFace clothing or Hitachi or Toshiba electronics or Stihl
or Bosch or Makita tools in Walmart. And it used to be never found in Sears or
Kmart. When a retailer goes from medium or high quality stuff to that of low
quality a usual sign of that taking place is that the store sells alot of
Sears branded items or makes a deal with a manufacturer to make items of a
brand sold exclusively at Sears. Which means the manufacturer makes the low
quality stuff for Sears and the high quality to its normal distributors.
Story: last week I found a cheddar cheese corn puff sold at HyVee for $3. a
bag. It was organic corn mill and it tasted great. I forgotten the brand name
but Cheetos comes to mind, perhaps made by Fritolay but not certain. Anyway I
wanted to see what Walmart sells this organic corn Cheetos for. So I look
through the aisle of Walmart and you know what, they do not even carry it.
So I think grocery store chains like Albertsons or HyVee or those on the East
Coast really do not have much to fear from a Walmart competition because
Walmart has become that big store that sells the low quality stuff at a cheap
price.
But it is not getting cheaper, instead it is getting to the point where the
price of Walmart stuff is medium price for the low quality stuff. Just what
led to the downfall of Sears and Kmart.
I do not know the specific mechanics. Perhaps when a retailer becomes huge and
nationwide that they lose the ability to maintain "cheap prices" and that the
prices creep up to that of the medium range yet their quality factor remains
abysmally low quality.
Perhaps something in the size forces or pressures the big retailers to creep
upward into the medium range prices.
And once they hit a public perception that their prices are medium yet their
quality is absurdly low does the door open for a new competitor to eventually
oust the old one, such as Walmart ousting Kmart and Sears.
I visit Sears on occasion but seldom buy anything there and I did notice that
they do begin to carry some quality brand items, for instance a pair of black
running shoes I could not find elsewhere and some wedges that were better than
others.
I went to Kmart because I could not find Revere copper clad pots which I loved
so much because of their rapid heating of water and not those thick bottom
pots that take an hour to heat the same water to boil.
So I think what Sears + Kmart merger should strive for is a store unlike
Walmart in that it sells mostly medium to high quality at a medium to high
price and abandon those low quality junk stuff to Walmart.
Walmart thinks it is smart by having cut rate prices on select items to lure
the customer in. But people are smart to that sort of pitch. Instead what
Walmart should be doing is having some "high quality" items which will really
attract customers and keep them.
But for Walmart to get "high quality" merchandise is not easy because high
quality merchandise makers are unhappy to see their wares sold at Walmart for
fear that the public will then imagine those products are really not high
quality anymore. Just the fact that Walmart sells them is evidence that they
are not high quality.
So who will be the new retailers that outstrip Walmart and someday send
Walmart into financial trouble that happened to Sears and Kmart? One contender
is the 99Cent stores for they are low quality at a cheap price and cheaper
than even Walmart can sell. When you start seeing 99Cent stores being built
right next to Walmart stores is signs that Walmart is fading out. Another
contender is not even a retail store but the charity of Goodwill. Most cities
have some form of this charity stores where people bring their throw-aways or
unwanted items or charity items to the Goodwill which then tags a price on
them and sells it. I go to them to buy baseball bats and stainless steel and
aluminum storm doors and the odd items here and there. For 10 dollars spent at
Goodwill would cost the same at Walmart for 200 dollars. And the funny thing
is that many items sold at Goodwill, even though they are used items have more
quality than new stuff at Walmart.
It was wise for Walmart to get into the food business and they are giving
Albertsons and HyVee and other chains hard competition. But here again,
Walmart is seeing an evolutionary pattern that may in the end hurt them. In
that the food section of Walmart is increasingly becoming low quality and the
prices are moving higher. Where Albertsons and HyVee can battle and outcompete
Walmart is to let Walmart sell the cheap crap and Albertson and HyVee stock
the medium to high quality foods such as the Organic labeled foods or the
imported foods.
In the history of retailers the people that sell the high quality stuff at a
fair price are the ones that will always have a niche in retailing. But the
low quality retailers come and go. People forget the lousy tasting food at a
cheap price or the wares that lasted a few times and then broke but never
forget the great taste of high quality food and the durability of high quality
wares that keeps them coming back to the retailers of high quality.
I think it is size that spoils a retailer from having to raise the prices even
though the quality is low. And that Walmart thus has a speckled future in
retailing. But it may have to do with an "image factor" in that the makers of
high quality stuff simply never want to be associated with Walmart and ever
have Walmart sell their stuff because then they perceive the public will think
their stuff was never high quality to begin with. I know if I were the maker
of NorthFace or Descente or Stihl or Hitachi that I would not want my wares
sold in Walmart because people would then think I was low quality.
So maybe the evolutionary ruin of all big retailers over time of about 100
years is a combination of size that puts pressure on raising prices and the
growing awareness that the entire store is low quality. And when that happens,
shoppers only buy a few items and shop elsewhere for main ticket items.
Archimedes Plutonium
www.iw.net/~a_plutonium
whole entire Universe is just one big atom where dots
of the electron-dot-cloud are galaxies
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