|
Of all the many activities encompassed in the field of Marketing, of all the many things that people do as consumers, nothing is as visible or as pervasive as retailing. Retailing is the final step in the distribution of goods and services to consumers, having gotten their products from manufacturers, wholesalers, jobbers, and sales representatives. It is the retailer with whom the consumer comes into contact, often many times in a single day. Retailers include all classes of resellers who sell goods and services to end consumers, including "traditional" stores, but also mail-order, vending, door-to-door, and online ordering. It is not limited to storefronts; in fact, as business and society evolve, retailing continues to develop with it, spawning new forms of retail venues that meet consumer needs. Retailers, like all channel members, perform many vital functions in the distribution process. For example, they perform the selling function, which in some stores may be little or nothing, but in others may be very labor-intensive. It is the store that provides expertise to the customer, which may indeed be very critical to making the sale (as in a hi-fi store or computer store). Another function that retailers provide is to maintain inventory at local levels, thereby enhancing consumer quality of life. If it were not for the risk-taking behavior of retailers who are willing to stock inventory in antificipation of sales, consumers might have to wait weeks for merchandise to arrive from manufacturers, or completely do without. A third vital function that retailers perform is that of liaison between the manufacturer and the consumer. They relay information from manufacturers to consumers, and vice-versa. They handle returns, and often take care of repairs and other warranty work. In the case of clothing, retailers often do alterations. And in the case of complex products, retailers often provide installation and/or set-up as part of the sale. Finally, an increasingly important function provided by retailers is credit, making it easier for consumers to be able to make their purchases. Mountains of consumer debt notwithstanding, retailers who provide credit are enhancing sales both for themselves and for manufacturers. Retailing is a very dynamic field, for it is in a constant state of flux. For example, in just two generations, convenience stores have gone from being a novelty to a fixture on nearly every street corner. And while convenience stores were packing people into small stores, supermarkets kept getting bigger. Finally, the flight of city dwellers to the suburbs saw the decline of the central business district, and the rise of the regional shopping mall. This lecture will take in-depth looks at a variety of trends in contemporary retailing in America, and seek to provide understanding for why these trends are occurring. The Growth of Discounters Since the 1960s, the discount store format has grown continuously so that now we have two generations of Americans who have grown up with the phenomenon and have come to expect to be able to buy nearly everything at discount. What started out many years ago as the S.S. Kresge Company spawned K-Mart in northern states in the 1960s; meanwhile, in the state of Arkansas, Sam Walton was busy getting his retailing feet wet with a Ben Franklin store. The Ben Franklin folks didn't like Walton's grandiose plans for discounting, so he parted ways and launched Wal-Mart. The paths that K-Mart and Wal-Mart followed to prominence are widely different from one another. K-Mart focused on large cities, and only occasionally ventured into small towns with scaled-down stores. Wal-Mart, on the other hand, started out only in smaller cities, and then, through an "engulf and devour" strategy, began circling the larger cities, and in the 1980s started going in for "the kill." In a fast-food analogy, one could say that K-Mart used the McDonald's approach, while Wal-Mart imitated Dairy Queen. But in this instance, Dairy Queen won out over McDonald's in a big way, with Wal-Mart's sales now being more than double that of its nearest rival. The proliferation of discounters has made it critically important for small retailers (see discussion below) to find new ways to compete. Tales abound of ghost towns that resulted once Wal-Mart came to town (usually on the periphery, since several acres are needed for building and parking areas). While the merits and demerits of discounters like Wal-Mart are beyond the scope of this lecture, it should be noted that the discounters have, in many cases, replaced a number of smaller shops with one giant be-all store where the ultimate focus is price. It would be an understatement to say that the discounters have changed the face of American retailing; they have become a way of life. It would also be an overstatement to say that the discounters have put others out of business, for they have not. It's just that the discounters have, whether truthfully or not, created the impression that there's money to be saved in their stores, and customers have bought into the strategy whole-heartedly, even if it may be partially illusory. The success of the various "Marts" has caused many other retail chains to take notice, who have borrowed the concept and extended it to narrow product lines (see discussion below of "category killers"). And American consumers have become conditioned to revolt at the thought of paying full retail price. Wal-Mart's success is legendary, and will be looked back upon by business students for decades as they wonder how a chain could continue to record sales increases in the double-digits year after year after year (while the population was growing by only about one-percent or less each year). No matter what consumers think about Wal-Mart or K-Mart, stores of this type have become a huge part of the American way of life. The chains, in fact, have such power by virtue of their size and sales that they can dictate, to a large extent, what products, and even what brands, people will bring home. These large discount chains have become surrogate shoppers for the American public, and our purchases are in large part a function of what products they choose to carry. If Wal-Mart decides to carry a certain brand of 25" color television, that's what a lot of American families will have in their living rooms this Christmas. The extent of the discounter's influence in every-day American lives is found in the incidence of shopping at these 24-hour-a-day retail giants. Even if a consumer rejects the power of these chains, there are often few alternatives, if any, that can match the selection, convenience, and price. Thus, critics of the "Marts" wind up paying homage anyway because they have little choice but to do so. And everyone else happily brings their checkbooks and credit cards to the altars of modern retailing. Bigger Is Better If consumers think that stores have been getting larger in recent years, they are not mistaken. Each year brings a new crop of ever-larger retail establishments that dwarf their competitors. For example, supermarkets are now routinely built in the 60,000-80,000 square feet size range, and carry 30,000 different stock-keeping units. Convenience stores, once shoe-horned into tidy little cubbyholes, are now appearing in the 20,000-25,000 square feet range, ten times larger than most homes, and with a plethora of products and services. But increasing size is not limited to just food retailers. The DIY (Do It Yourself) market has seen home centers (an euphemism for "lumber yard)") being built that are 130,000-160,000 square feet. The Incredible Universe (a chain of electronic and appliance megastores developed by Radio Shack, but later sold) are a whopping 160,000 square feet, and stock virtually every known electric stereo or household appliance ever manufactured. Wal-Mart Supercenters, which were in the range of 190,000-200,000 square feet when launched in the early-1990s, have crept into the 220,000-230,000 square feet range. And the list goes on: office supply superstores at 40,000 square feet; book stores at 60,000 square feet, pet stores at 40,000 square feet. And the "big" goes on. The pressing question for this madness is "Why?" With real estate and construction prices escalating, the trend is counter-intuitive. Yet, larger and larger stores continue to appear. A partial answer can be found in the social practice of "one-upmanship," the age-old practice of meeting the challenge of your foe, and then upping the ante. The assumption is that consumers will be attracted to the ever-larger because they are flashy and new, and can carry ever larger arrays of merchandise. Today's savvy consumers fail to be impressed with a lukewarm presentation; they want to be "wowed" and entertained as they shop, and being exposed to a progressively larger amount of merchandise (depth as well as variety) is seen as the formula. Thus, we are left with the prospects of even larger stores to come. And leading the charge will be the oligopolists in their respective categories (the other competitors forced to either leave the business, or join the frenzy). CBDs, Malls, and Power Centers And interesting transformation has occurred in where Americans do their shopping. Fifty years ago, the central business district (CBD) reigned supreme. The CBD was the center of every city's commercial and professional activity. Glamorous department stores, swank restaurants, and glitzy theaters lined the urban streets, as consumers came into town to do their shopping. But this all started to change following World War II. People started moving to the suburbs, that ring of residential communities on the perimeter of most large towns. Suddenly families lived too far from the CBD, and retailers moved out to the suburbs to meet the needs of post-war America. While banks and other professional offices retained their downtown addresses, retailers, one by one, began their migration to the 'burbs. To replace the compactness of the CBD, developers began building manufactured CBDs, otherwise known as shopping centers. These centers were "anchored" by one or two branches of the leading local department stores, while the remained of the tenants were a mix of national and independent small retailers (jewelers, clothiers, etc.) In the 1960s a novel concept was introduced: the shopping mall. These everything-under-one-roof remote location CBDs brought convenience and climate-controlled shopping to suburbanites, and gave even more compelling reasons to avoid the downtown district. Growth of shopping malls continued unabated throughout the 1970s, as both the number and the size of malls continued to increase. Malls are routinely in the 750,000-1,500,000 square feet range, anchored by as many as five major department stores, and surrounded by 80-150 (or even more) smaller neighbors. But a new trend began to emerge in the 1990s. Construction of shopping malls slowed to a snail's pace, and developers became less fascinated with size (exception: Mall of America, in Minnesota). Instead, the "power center" was introduced, to the delight of Americans. A power center is a strip of 8-12 retailers, many of which are of the "big box" or "category killer" variety (see discussion below). A handful of smaller retailers may also be located between the retail behemoths. Gone are the roof and climate control, replaced by a long line of store fronts that usually parallel the highway with bright lights and garish signs. The irony is that the malls, who for a time operated without any competition by obliterating the CBD, is now faced with formidable competition from power centers. For all their time and space convenience, shopping malls are now being perceived as inconvenient because one has to often walk long distances between destination stores. With power centers, customers can park in front of their destination, conduct their business, and then drive down the way to their next destination. Furthermore, shopping malls are perceived as having too many stores that are of little or no interest to some consumers, who are forced to walk past them whenever they patronize the mall. Power centers generally only have the heavy-hitters, which tend to be well-liked and heavily shopped stores. A disadvantage that shopping mall properties have is that tenants actually pay rent toward the common areas, which provides no selling space for anyone. Power centers do not have this waste of valuable space. Finally, shopping malls have becomer social gatherings for teenagers. Adult shoppers frequently do not feel comfortable, or even safe, in such an environment. Furthermore, retailers are not enamored with the idea of teens who lack purchasing power scaring away customers who do. Although the demise of the shopping mall is certainly not imminent, the halcyon days of the 1970s and 1980s are over, and malls now are faced with a new form of competition that no one predicted would occur. To be able to survive this threat, shopping malls will have to develop more destinations at the mall, such as theme restaurants (see below), entertainment, etc., and discourage youths from loitering. Furthermore, developers may have to challenge notions of what is an "appropriate" tenant at a mall, and perhaps find ways to incorporate category killers into the mall format. Theme Retailing An interesting counter-trend has been occurring in America at the same time that the homogenized, faceless mass merchandising giants have been proliferating. That counter-trend is the popularity of "theme" retailers which focus on a particularly narrow product or concept, and then wrap it up in atmopshere and mystique. It is selling like hotcakes. The theme concept has been played most successfully in the restaurant and hospitality industries, but has also been exploited by other categories of retailers. While the theme format is probably at its peak of popularity in the late-1990s, it has been brewing for many years, and had its start back in the 1960s (although the initiators probably didn't know it at the time). For example, TGI Fridays was started over 30 years ago. What started as an off-the-cuff reference to our passion for the weekend has become a memorial to folks who live for Friday. As their current ads say, it's always Friday at Friday's. The theme has been successfully been exported across the world, including Russia (there are now over 400 TGIFs). With humble beginings, the theme restaurant industry has been working virtually around the clock to produce even more themes. Rainforest Cafe is busy building a theme around the jungle; Motown Cafe is hoping to bank on the popularity of black-oriented music, ranging from Michael Jackson to Smokey Robinson. Truth be known, these theme schemes are more museum than restaurant. In some cases, they glamorize and memorialize an industry or way of life; in other cases, they advertise a particular product. In either regard, they provide entertainment value for a population starved for something interesting to do (and willing to accept so-so food in the process). The photos below showcase some of the better known theme restaurants that attract (as well as attracted--past tense) customers in droves every day of the week.
The All-Star cafe had sports as its theme, with particular attention paid to Andre Agassi, Wayne Gretzky, The Shaq, Monica Seles, Tiger Woods, and a few others. All manner of sports equipment, collectibles, and trivia are displayed throughout the establishment, and sports heroes make scheduled guest appearances. It tried to capitalze on the theme restaurant craze, but eventually closed operations on the Las Vegas Strip.
Country Star ws a relatively new chain, focusing on "American music," which is an euphemism for country and western music. Dozens of TVs broadcasted country music videos throughout the building, including the restrooms (no kidding). Food leaned toward the tastes of the heartland, with a little of California tossed in for good measure. Vince Gill and Reba McEntire were involved in this new chain.
The Harley-Davidson Cafe, with locations in New York City and Las Vegas, has raised the ante in theme restaurants. The exterior features a bigger-than-life Harley jutting from the front of the building, and the interior (see second photo below) is filled with Harley parts (all signed by celebrities), photos of celebrities with their Harleys, and Harleys traveling through the building by overhead conveyor. Oh, and the food isn't half bad, either. 
Harleys make the tour of the restaurant by means of an elaborate overhead conveyor. The American flag behind the bike is made of chain links hanging from the roof. The chains weigh a hefty 10 tons. Two retail stores (for Harley merchandise) share space with the bar and dining facilities.
Planet Hollywood has grown so quickly through the 1990s that it has almost become a joke to speak of some foreign outpost town getting its very own Planet Hollywood. With the backing of numerous movie stars, the chain is well poised to expand. This site is located within the Forum Shops Mall at Caesar's Palace in Las Vegas.
But the theme concept is not just limited to restaurants. Entire stores based on just one product or activity are popping up across the country.
The World of Coke (with locations in Las Vegas and Atlanta) features a museum of Coca Cola memorabilia and advertising, as well as two entire floors of nothing but Coke merchandise and collectibles. Admission to the store is free, but it costs $2 to see the rest of the building (which includes and elevator ride inside the world's tallest Coke bottle, at 100 feet).
The M&M Store features nothing but two floors of M&M clothing, paraphernalia, and (no surprise) M&Ms, including all of the hard-to-find colors (about three dozen). The hospitality and gaming industries have also gotten into the swing of things with their theme-based sites. Gone are the nondescript hotels and casino of the past with no centralized theme or concept, replaced by desert palaces that entice visitors with their bright lights and snazzy architecture. 
New York, New York is the most recent entrant to the scene, with an entire city block dedicated to the most significant of US cities. The exterior has numerous facades that approximate the New York skyline, while the interior is laid out like the streets of New York, along with a Coney Island amusement area. 
Although no longer brand new, Caesar's Palace is still the gold standard among Vegas theme hotels. Its sprawling location sends visitors back to ancient Greece, both in the hotel/casino, and in the adjacent Forum Shops Mall.
The Luxor stands along the southern end of The Strip with its unique pyramid structure, and sphinx standing guard out front. The success and abundance of these theme-based establishments illustrates how badly American consumers wish to be entertained, whether it is in a restaurant, in a retail store, or in a hotel. Consumers feel comfortable enough to stay longer and spend more. But while these types of establishments are certainly doing well today, one must realize that there is an upper limit. How much longer will it be before consumers yearn for a restaurant whose "theme" is no theme at all? Sooner or later, our love affair with these thematic stores will fade. For now, though, it's full steam ahead as investors search for the next hot theme to exploit. |
