Earlier articles on department stores [Dec.2013] and on Sears [April 2017] have covered most aspects of retail merchandising. This article updates the subject.

Earlier articles on department stores [Dec.2013] and on Sears [April 2017] have covered most aspects of retail merchandising. This article updates the subject.

The internet and omnichannel retailing [advertising via mobile devices, distribution, etc.] utilizing the internet along with demographic trends have continued the creative destruction of big box department stores covered in the earlier articles. Catalog sales by Montgomery Ward’s and Sears that brought the store to the customer have been replaced by on-line shopping through the internet that has done the same thing more efficiently.

The information revolution [computers, internet, IT, iPhones, Facebook and related] have not only brought extreme income and wealth inequality, it has brought a demographic and commercial bifurcation reflected in retail merchandising.

Downtown OKC was throughout the mid-twentieth century the hub of retailing in central Oklahoma. The I.M. Pei plan [1965] bulldozed over 500 buildings, emptying 220 acres downtown. A proposed new mall and development never materialized and by 1988 the plan and hope for downtown ended by 1988 with downtown essentially an empty parking. By then shopping had moved north to suburban stores in Shepherd Mall and Penn Square. As the agricultural era in America ended in the first half of the century by centripetal demographic movements, the industrial era that followed brought centrifugal movement to the suburbs.

Now, the information and hi-tech revolution has brought both high-income workers and young, educated workers in a centripetal movement back downtown emptying some suburban malls. The economy has brought extreme income inequality and a geographic shift with people moving to demographic cocoons of people like themselves in a “Big Sort.” Retailing is now mirroring this shift in lifestyle and socioeconomic characteristics. This is well illustrated by Dollar General, [DG], a store for Everyman, contrasted with stores for the more affluent,[1]

Dollar General

The Great Recession of 2008 left many unemployed and underemployed struggling financially whose main goal when shopping is price. With jobs in urban centers, rural American was depopulated leaving few or no retail stores. Former Lt. General Robert E. Wood, President of Sears 1928-1954, reasoned that “the best place to put a major store was away from congested areas where there was plenty of free parking e.g., instead of bringing the cars into town, take stores to the cars—the making of the American shopping store.” [2]

Founders of Dollar General [DG] must have read his book. DG is now the choice of low-income Americans with 14,000 outlets—similar to McDonald’s—after opening a new store every 4-1/2 hours over the last five years until now 75% of Americans live within five miles of a DG. As Sears, Neiman-Marcus, Land’s End, and J. Crew struggle to avoid bankruptcy, DG thrives by offering smaller amounts, most priced at $1 and three-quarters less than $5. Around 70% of their customers live in rural places and are financially stretched e.g., 43% with household incomes of $29,000 or less.

The key to their success is picking good sites. They venture into places where the last grocery shop often closed years ago and are expanding into “food deserts” in troubled urban neighborhoods. They locate stores “in urban areas which are ‘mostly black or brown. As rural areas depopulate DG has moved into urban areas where 23% of its customers live—many earning more than $70,000. [3]

Trends in Retailing

Now, experts in the field recommend that Millennials, utilize ‘omnichannels’ basically based on mobile devices to advertise, customize products to appeal to their unique personal traits and tastes, and create stores that provide a unique in-store experience e.g., I think meaning similar to outdoor outfitters Bass Pro and Cabela’s with their stuffed animals, restaurants, etc.

Buddenbrook Effect

Sears Centennial book ends with management’s, “willingness to close the unprofitable and pioneer the opening of stores catering to the changing lifestyle and tastes of Americans in what they saw themselves as being the store of the future.” Today Sears laid off 220 employees in its corporate headquarters. As Sears followed farmers to town destroying general stores, the internet revolution and Amazon’s merchandising innovations are destroying Sears. Ironically, DG is enjoying explosive growth moving back into the areas abandoned by Sears!

Sears is a corporate example of “shirtsleeves to shirtsleeves in three generations” portrayed by Thomas Mann in ‘Buddenbrooks,’ his 1901 Pulitzer prize novel about the rise and fall of a German merchant family. The first generation comes from nothing and by deferred gratification, sacrifice, hard work, saving and re-investment in the firm rather than personal consumption, build a firm and fortune. Their children enjoy a much better, easier lifestyle, and having a memory of their parent’s struggles, continue to build the firm and family fortune. The third generation inherits the family fortune but not their grandparents’ history or experience and consuming more wealth than they are contributing, dissipating the family fortune. This family narrative has national implications recommending ‘remembering ,’e.g., history.

“Remember the days of old; consider the generations long past. Ask your father and he will tell you, your elders, and they will explain to you.” [Deut.32:7]

[1] Bishop, Bill, “The Big Sort,” Houghton-Mifflin, 2008. [2] Sears Roebuck and Co., 100th Anniversary 1886-1986, p.53. [3] The Economist, Jan.27, 2018, 24-5.