Is the Box Store Dead?

Before 1970 retail shopping was an experience where you would seek out a local merchant and gain benefit from the expertise of the shopkeeper in selecting products. The merchant had reviewed all of the products available and would offer what they believed to be the best available at the price. Usually, the owner and employees would be knowledgeable and could assist in making the right selection. You valued the expertise and experience of the people assisting you in the selection of a product. If they were not knowledgeable, you would go somewhere else that could assist. Knowledge was valuable.

Somewhere around 1970 the box store came into being with a massive selection of product and many times a lower price. Selection variety was unmatched. Certainly with all of the offerings readily available the customer could educate themselves and make a proper selection. If more information was needed, the store had experts on-hand to answer the really difficult question. Selection and knowledge had advanced and replaced the pre-screened selection and knowledge formula of the past. The advantage was lower price due to larger volumes.

Through the 90’s competition became fierce between competing box stores and newly formed on-line merchants that promised quick shipping entered the field. The box store still had the advantage of immediate delivery versus 2 or 3 days but, price competition was increasing. In an effort to keep profits stable, box stores began to cut expenses, primarily in staff, training and compensation. This resulted in a slow reduction in knowledge and experience but, the box store still had the advantage of huge selection. When that ran out there were reductions to in-stock items. Inventory was reduced to “just-on-time” levels which usually resulted in “out-of-stock” levels. In this effort to keep margins stable the box store gave up the advantage of knowledge and eventually, available selection.

As we moved into 2000, the battle to compete with the almost unlimited selection of on-line merchants became more difficult when delivery from on-line sources was reduced from days to next day at your doorstep for the same price or less. Website and internet speed improvements moved the on-line purchase to a position of greater knowledge then the now reduced experience and education of the box store. What once propelled the box store into front place over the traditional retail merchant was now being used to end the box stores advantage by this new competitor. What could they do to fight back?

The box stores expanded selection but, reduced available inventory. The phrase, “We are out of stock but, I can order that for you”, became an absurd comment as the customer simply thought, so can I and save the gas expense. Several box stores that were once king have closed: Circuit City, Tweeter, Crazy Eddie, Borders, and Linen and Things. How long will it be before SEARS, Target and Wal-Mart find it impossible to deliver a product/service combination that competes with an ever expanding on-line competitor?

I believe the next decade will bring about more changes in “retail” shopping then the previous ten decades. We very well may see the end of the box store. The king of retail, Wal-Mart, struggles with lower merchandise retail sales offset with expanding grocery related sales. How long will this last?

Is the box store headed for the box in the ground? If they continue on with the same current formula the answer is, in my opinion, yes.

I wonder what we will do with all of that commercial real estate and the shopping malls?

By | 2012-04-24T13:44:45+00:00 April 24th, 2012|Categories: Money Basics|Tags: , , , , , |0 Comments

About the Author:

Steven Albrecht was the President and CEO of Charter Trust Company from 2001-2016

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