Despite attrition, discounting rolls ahead - Buyers & Sellers - editorial

Discount Store News, July 22, 1991 by Don Longo

Despite Attrition, Discounting Rolls Ahead

One of the most often used, and most misleading, statements about discount retailing concerns the number of former chains that no longer exist. At numerous conventions and seminars, you've heard the statement, uttered with solemnity so as to strike fear into the heart of even the most level-headed executive: "Of the Top 10 discounters of 19-- (fill in the year), only - (fill in appropriate number: 2-to-6) are still in business today!"

Their figures may be accurate. What's misleading is the hypothesis they try to support: discount retailers belong on the endangered species list.

It is true that only five of the Top 10 discounters of 1980 still exist today. But, the Top 10 discounters of 1990 (excluding Sears and Montgomery Ward) each generated more sales than the $2.8 billion reported by Woolco a decade ago.

Ten years ago, the warehouse club industry didn't even exist. Other forms of discounting weren't even a twinkle in the eye of some retail innovator. Today, four warehouse clubs are among the Top 15 discount retailers in the nation. New concepts like hypermarket/supercenters, office supply superstores and sporting goods megastores are rapidly gaining market share. Warehouse auto supply stores are currently in their infancy and the success of chains like Best Buy and BrandsMart with bulked-out consumer electronics concepts is sure to spawn imitators.

The point is this. In any industry there's going to be a certain amount of attrition. Companies go out of business for many reasons. Usually they stray from their original successful concept, or they fail to anticipate the changing needs of their customer base. Rather than mourn the failure of a few, I applaud the long-term success of the many:

* Like Wal-Mart, which became the nation's leading discounter in 1990, with a 21.5% sales gain; * Kmart, the company that dominated discount retailing like no other for nearly two decades, plans to have 60 net additional stores by the end of the year. Those new units, plus the conversion of smaller stores to Kmart's new better-performing prototype, is sure to keep Wal-Mart from getting complacent about its new title; * Target's sales leaped 8.8% last year, and the chain plans to add 43 net new units this year. The opening of Target's Greatland unit, the largest general merchandise discount store in the country, capped a terrific year for the chain; * Sam's Club was a key to Wal-Mart's rise to total corporate sales leadership among retailers. Wal-Mart's membership club division is now intent on carving out its own identity from the discount store arm and shows no signs of letting up; * Price Club still generates the highest per-club sales in the industry, and an accelerated expansion program will keep the warehouse club industry's grandfather on Sam's heels for many years to come; * Toys |R' Us, Costco, Meijer, Fred Meyer, Circuit City, Pace, Marshalls, T.J. Maxx, Caldor, ShopKo, Payless N.W. and Venture all stood out for impressive sales gains among the Top 25 discount retail chains.

However, 10 years from now, the accomplishments of the top chains of the year 2000 will dwarf today's top retailers.