the Roper Starch report

Home Channel News, April 17, 2000 by Murray Forseter

An Age of choice

For the last century and a half retailing has been a force of social change. Ever since the first chain store sprouted on American soil with the 1859 opening of a Great American Tea Co. grocery (the forerunner of the Great Atlantic & Pacific Tea Co.) on Lower Manhattan's Vesey Street, it has been the mission of multi-unit retailers and food service operators to make access to consumer goods and fare a democratic endeavor.

It was all about choice. Frank W. Woolworth dazzled city dwellers with an assortment of trinkets and knickknacks all priced at five and 10 cents. The catalogs of Aaron Montgomery Ward and Richard Sears brought the wonders of Main Street to the farmer, eliminating his need to take time away from the [and. Itinerant, immigrant peddlers such as the Sanger brothers, Isaac, Lehman and Philip, and the Younkers brothers, Lipman, Samuel and Marcus, planted stores in Dallas and Des Moines, Iowa, respectively, and in other market towns of the South, Midwest and Far West. They brought not only dry goods and services but also culture to their newly adopted communities. Their department stores became focal points for concerts, fashion shows and community events.

In the self-service store of the 20th century it didn't matter if you were prince or pauper, you carried or pushed your own basket, stuffing it with more products than any other society ever made available to its masses. And all for lower prices--and generally higher quality--than in any foreign land.

If there was equality of purchasing opportunity in retailing, there also was equality of employment opportunity. Retailing devours manpower. Self service or personal service, cafeteria-style or white tablecloth-restaurant, retailing and food service demand an ever-increasing pool of Labor.

Once inside, a worker could write his own ticket. Until recently it was de rigueur to find on a chief executive officer's resume an entry that his first job was in the stockroom or flipping hamburgers on a grill.

During the Last 100 years America developed the most efficient production and distribution system for food, general merchandise and other consumer goods. Americans spend just 10.7 percent of their disposable income on food, according to the American Farm Bureau. Compare that to the second-lowest country, the United Kingdom, at 11.5 percent, Germany's 17.7 percent and Japan's 17.8 percent. Citizens of our neighbor to the south, Mexico, allocate 33.2 percent of their disposable income to food.

Competition contributed greatly to lower prices and the drive for greater efficiency. One of Sam Walton's enduring legacies was his dedication to wringing out of the supply chain as much fat as possible so that he could provide his customers goods at low prices every day. Walton understood that high margins would not win the battle for customer loyalty, nor would they sustain profits in the long run. Rather, keeping gross margins as low as possible while trimming administrative and selling expenses would produce the low prices that people would come back to day after day. The resulting inventory turns would generate more than acceptable gross margin dollars.

Walton, his disciples within Wal-Mart and their competitors have kept prices in check by forcing suppliers to reassess their operations. By refusing to accept hikes in the cost of goods, retailers have kept the buying power of the average American high.

Retail stores and food service operators are ubiquitous. Drive to any hamlet and the sign of civilization no longer is a stoplight but rather a McDonald's. Perhaps in a few more years the cultural icon will morph into a Starbucks, or at the very least a Ben & Jerry's.

Obviously retailing has not existed in a vacuum. Retail sales did not blossom to more than $3 trillion last year simply because stores were erected and the doors flung open. The Buckle, based in Kearney, Neb., does not sell Tommy Hilfiger in Grand Forks, N.D., simply by putting outerwear on the racks. Retailing has benefited from the multi-media explosion of the 20th century. It is sobering to reflect and realize that radio, or wireless as it was first known, did not exist at the turn of the last century. Coast-to-coast radio broadcasts, and with them the beginning of national branding, courtesy of commercials, did not begin until two decades later. Though television was first demonstrated in 1925, it wasn't until the GIs returned home from World War II that it started to become a staple in each home. Even then access was Limited in many areas. Cable television bridged the access gap and began splintering the mass audience. Magazines as well have brought thought-diversity to metropolitan and rural communities . But the monolithic, communal approach of a Time or Saturday Evening Post no longer commands the same allegiance as in the past. Specialty magazines slice and dice the public.

Americans crave information before they make a purchase, and in an unspoken quid pro quo arrangement they give up information to retailers and suppliers each time their credit card is swiped or their check accepted. Each transaction resides in mainframe databases that can reassemble profiles of similar customers hundreds if not thousands of miles apart. The savvy retailer of today and tomorrow can target market and appeal to these customers. It's no longer marketing by ZIP code; it's marketing by individual street address. Amazon.com showed the way community can be assembled. Though some claim an invasion of privacy, others welcome being part of a shared experience in what they see as an impersonal world.