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<br />Chapter 10 <br /> <br />Page 6 of 25 <br /> <br />. <br /> <br />The future of the small retailer is growing desperate, despite recommendations about personalized <br />service, unique product differentiation, and a move from the destroyed "Main Street" of America to <br />more appropriate locations. How can those small retailers, with less than a million in sales, finance a <br />lease termination and the expense of a move to a more desirable location? <br /> <br />The proof of the pudding that the major discounters will sooner or later eliminate most ofthe small <br />retailers is the fact that even the medium size firms are in trouble. <br /> <br />In their study, Kresge and Wright state that medium size firms with sales from $20 to $50 million <br />annually could suffer the most (in the next century.) "They neither have the buying power oflarge <br />firms nor the personalized approach of the small firms. "Q <br /> <br />The bankruptcy of Bradlees and Caldor are perfect illustrations of which way the wind is blowing. <br />Someday a Wal-Mart may possibly have the entire retail market. As Mr. Loeb says, "ifWal-Mart <br />grows at 20% a year and the economy only at 3%, somebody's giving up business." <br /> <br />If we examine the "Main Street" malls and the strip centers we can note the devastation of former <br />prosperous retailers. There's only so much demand in a community and hence there may be only one <br />or two powerful survivors left. Where will the jobs come from to provide the purchasing power to <br />keep the "Big Boxes" viable? Soon they will leave for another town or county, and the same cycle <br />begins once again. <br /> <br />. <br /> <br />Susan Dentzer in a May 1995 article in US News & World Report, entitled "Death of the . <br />Middleman?" points out the growing centralization of power between manufacturers, suppliers and <br />discount retailers. As was stated many times in this study, small retailers have lost the wholesalers <br />that sold to them. Many now buy from Sam's Clubs and other club stores. Dintzer states:Z <br /> <br />"The rising-competition has prompted consolidation among the largest wholesale and <br />distribution firms; creating giants like Fleming Coso an Oklahoma City based grocery <br />wholesaler with sales of $16 billion." <br /> <br />Further, after tax profit margins (for some wholesalers) now average 0.5% to 2% and a survey by the <br />National Association of Wholesale Distributors shows that most players think that these razor-thin <br />margins will fall further.~ <br /> <br />In addition to the problems of obtaining wholesale resources, small retailers have been hit by the <br />information revolution. This has not only affected small retailers but also substantial companies like <br />supermarkets. <br /> <br />Just collecting data is only part of the new power equation, though. Supermarkets have been <br />capturing scanner data for years. But it has been mass-merchandising chains that figured out how to <br />use such data most effectively. Between 1985 and 1992, notes J. Mark Harran, a senior vice president <br />at Kraft General Foods Inc., outlets such as club stores, mass merchandisers and deep-discount drug <br />chains took seven to eight points of food sales away from traditional supermarket -- a massive shift in <br />such a slow-growth business.2. <br /> <br />. <br /> <br />A major edge was information with Wal-Mart Stores, Inc. being the trend setter, using computers to <br />take the guess work out of wholesale buying, to slash inventory cycles and to keep popular items in <br /> <br />http://www.shilsreport.org/chaplO.html <br /> <br />10/6/99 <br />