6.12. SR 10-18-1999 - Laserfiche WebLink

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Chapter 10 Page 14 of25 . overwhelmingly, "negative" and "very negative." Forty percent anticipated the results as "negative" and an additional 33% answered "very negative." Thus 73% viewed their future in a most despondent, negative manner. The respondents generally mixed pessimism with facts. Fifty-eight percent of the respondents visualized serious losses in employment were a major chain to move into the area selling similar products. Forty percent of the respondents saw their retail venture losing 5% to 35% of their employees. Eighteen percent visualized losing more than 50% oftheir employees. Only 4% saw a gain in employment. Thirty-seven percent anticipated "no effect." The author believes that the "no effect" data stemmed from a lack of hard data on the part ofthe respondents -- but in no way expressed optimism about the future. The respondents were then asked to rate the negative or positive impact on sales volume by the imminent competitIon of a mega-retail discount chain. Eighty percent of the respondents anticipated "sharp" to "drastic" reductions in sales volume; while only 14% saw "no effect." Only 6% saw a rise by virtue of a new competitive entry of a major retail discount chain. Data appeared consistent as to the expected reduction in sales volume as well as serious estimates of future profitability. Twenty-four percent of the respondents visualized profits dropping by more than SO%. In fact, 76% anticipated serious reductions in profitability as a result of the imminent competition of the mega-retail discount chains. Only 8% saw an increase in profitability, with these estimates being mostly conservative i.e., 10% or less. Sixteen percent saw "no effect." . Respondentretailers saw the reduction in the number of wholesalers, or those middlemen willing to . sell to small retailers, as aifecting their business negatively. Over 50% saw the direct selling to mega- retail discount chains by suppliers as being "negative" of "very negative." Kmart's and 'Val-Mart's recent ventures into the Super Kmarts and Supercenters' food and grocery departments are creating new competition for the small grocer and the more traditional supermarket. Small retailers see these ventures as further threatening the survival of countless small food retailers. Many of whom (lacking wholesale resources) are now buying from Sam's Clubs or other clubs. Small retailers anxious to survive do not have the relative financial ability to compete with the mega- discount chains in advertising, promotion, public relations or radio and television. They rely on the small business techniques replete with flyers, leaflets, brochures, using the yellow pages ofthe telephone book and the local newspaper. This, despite the fact that many proponents for the mega- r.~tail discount chain movement believe that small retailers can survive by employing specialization, improved marketing, utilization of information and computerized systems and other MBA driven techniques. The average "Main Street" retailer in general fails to have these resources or capabilities. Small retailers sell most of the products sold by Kmart, Wal-Mart, Target and many other major chains. Each store, however, was limited with respect to national brands, inventory and product lines; one might specialize in apparel; another in food; another in auto mechanics and supplies and so on. In his 1993 study, Kenneth E. Stone, Professor of Economics at Iowa State University, stated that "businesses that sell the same goods as Wal-Mart sells tend to experience some reduction in sales after Wal-Mart opens." The study used sales tax data to document changes in trade area size in 32 Iowa towns with populations between 5,000 and 300,000 over a five year period. . Stone described a state with a "static population, resulting in a fixed size "retail pie." He stated, "in http://www.shilsreport.org/chap 1 O.html 10/6/99