Saturday, October 22, 2011

What goes around comes around.

Read another article on the demise of "category killer" stores. These stores were so overwhelming in their inventory of a single category that they wiped out most small independent stores.

ToyrUs, Barnes and Noble, Best Buy....stores like that. It mentioned that it was believed that sales at Best Buy would go up when Circuit City went out, but that it didn't happen. (The same could probably be said for Barnes and Noble versus Borders.)

Whereas I saw a completely different dynamic. I saw Circuit City as Belgium falling before the Blitzkrieg, but that just makes Best Buy -- France.

Thinking you'll do better when all your competitors are failing seems illogical to me. If you saw all your farming neighbors failing because of bad weather, would you assume it would make your farm do better? Or would the same factors also be affecting you?

In essence, the article maintained that most of these stores are no longer working because they are too big in space, that when entire sections of the store become obsolete, it drags down the rest of the store. They have 3/4th a store in a 1 space.

Then I look at my store, and I have, more or less, 3 stores in the space of 1.

The article also suggested that these "category killers" would have to find product to replace the ineffective product, but that it would have to "fit" what they have. No easy task.

Then I look at my store, and after much experimentation and trying and failing and trying again, I have a mix of product that "fits."

The article suggested that each store will have to come up with a "unique" mix of inventory, which runs counter to what a big box store does.

Then I look at my store, and almost by definition, my store is made up of a "unique" mix of inventory.

Category Killers will need to come up with reasons to have people want to browse their stores, and be something other than 'destination stores' for one type of product.

My store is in a busy downtown core where I more or less depend on the people off the street, many of them tourists, finding it worthwhile to come in browse.

Finally, the article suggested that these stores will have to get smaller.

Which as I keep pointing out, just makes them regular stores -- which loses all the advantages they once had. Good luck with that.

Not just Category Killers, which are a specific type of Big Box store, the article goes on to say that it will also eventually drag down the more general type -- like Walmart.

The ponzi scheme of building more and more and bigger and bigger stores will come to an end -- because the INTERNET is the BIGGEST store of all. You'll have to use a tool other than "bigger" and "more product" or, indeed, "price" to attract customers. All the usual tricks won't work.

In other words, I think the irony is that smaller independent stores may well survive the advent of the internet better than the big box stores.

Which is a strange kind of justice.


H. Bruce Miller said...

Bricks-and-mortar stores will always be around because there are some products you need to look at and handle before buying them. I still shop Best Buy for electronics and camera stuff because, although the prices are higher, I can see and touch the merchandise and they have a (mostly) well-informed sales staff that can answer my questions. I will buy from Amazon or some other Internet retailer if (a) I can't find the product elsewhere or (b) I am already familiar with the products available and know what I want to buy.

Duncan McGeary said...

I left that part of the article out -- the informational, because I tend to think people don't value it that much.

But yeah. It's a matter of percentages. If "expertise" can make up for 20% of the losses, and "unique" can make up for 10% of the losses, and you lose 40% you're still not there.

It's kind of hard to see how big box stores can put together that scenario, when smaller stores pretty much can.

Many people will use Best Buy exactly how you do -- and then go buy online.

Duncan McGeary said...

Buying reliable and sustainable expertise at minimum wage pay is probably going to get more and more difficult.

Meanwhile, a small specialty store is almost certainly owned by a guy who is really knowledgeable in his specialty.

H. Bruce Miller said...

"Many people will use Best Buy exactly how you do -- and then go buy online."

That's cheating!

But seriously: Best Buy's prices are a bit higher, but on big-ticket items they typically offer interest-free credit for six months or a year, which I often take advantage of. That more or less erases the price difference. Plus there are no shipping charges. Plus I think it's fair to pay a little for the expertise of the staff. Plus there's an excellent guarantee policy.

"Buying reliable and sustainable expertise at minimum wage pay is probably going to get more and more difficult."

I'm not sure, but I think Best Buy pays a bit better than minimum wage.

"Meanwhile, a small specialty store is almost certainly owned by a guy who is really knowledgeable in his specialty."

True, but on the downside there's usually a limited inventory. Not the case in your store, but that's because you stock product that doesn't take up much shelf space. If you had an electronics store of the same square footage you wouldn't be able to pack very many big-screen TVs, stereo systems and refrigerators into it.

Anonymous said...

Obession with shopping is probably the ugliest action of the parasite.