Big box panic: Americans have been afraid of chain stores for nearly a century, but independent outlets keep thriving

Reason, Jan, 2008 by Michael C. Moynihan

'Wal-Mart's growth formula has stopped working.'

But if legislation has done little to restrain the chains, the marketplace has regularly cut them down. Contrary to many activists' assumptions, America has not been condemned to centuries of retail uniformity. Quite the contrary: The 21St century consumer has greater choice and access to a wider assortment of products than any time in American history.

In a country of such colossal wealth, price and convenience are not the only factors affecting consumer choice. Even among Starbucks executives, who single-handedly created a market for espresso drinks in the Unites States, there exists a deep fear that it won't be an aversion to paying $5 for a cup of coffee that will inhibit the company's growth but a backlash against the chain's focus on standardization. In February 2007, Starbucks CEO Howard Schultz fretted in an internal email (later leaked to journalists) that "the automation that is helping to drive the company's expansion is sucking the romance out of the Starbucks experience." Starbucks isn't going to disappear any time soon, but as Business Week recently pointed out, the chain "is suddenly besieged by tough competitors."

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The same is true of Wal-Mart, a dominant company showing signs of wear and overextension. In 2006 it posted a mere 1.9 percent growth in same-store sales--that is, sales in outlets that have been in operation a year or more. It was the slowest rate since the company's inception. Writing in the Harvard Business Review, the retail analysts Darrell Rigby and Dan Haas suggested that the smaller chains "are managing to coexist and even thrive in the same forest with Wal-Mart." Business Week recently reported that "Wal-Mart's growth formula has stopped working," arguing that "America's largest corporation has steered itself into a slow-growth cul de sac from which there is no escape." Richard Hastings, a senior analyst at the retail rating agency Bernard Sands, agreed, telling the magazine that we were seeing "the end of the age of Wal-Mart. The glory days are over."

Maybe. But stores like Wal-Mart will always be with us, just as they were when they were called Woolworth's or A&P. If Sam Walton's creation disappears, it will doubt less be replaced by a more clever, more modern adaptation of the business model he popularized. It is likely true, as big-box critics contend, that stores like Wal-Mart will always dominate certain sectors, thus threatening the existence of many smaller competitors. But chain stores often create markets that didn't previously exist, both by forging new trends (like the $10 new release CD, quickly adopted by Newbury Comics) and by provoking a backlash against the alienating experience of big-box shopping. There will always be those that find Wal-Mart inauthentic, those that prefer the punk rock ethos of a Newbury Comics to the Deep South values of Wal-Mart, with its habit of censoring CD covers and song lyrics.

360 Newbury, graveyard of Virgin Megastore and Tower Records, recently announced that it would be renting its first two floors to the electronics and CD retailer Best Buy. After years of doing combat with big boxes, Newbury Comics' Dreese doesn't betray the slightest worry about the latest competitor. "We're the last man standing in Boston," he says. It's a safe bet that, sometime in the near future, he'll be peering down the road, watching another megastore packing a moving van.