Grocery store chains prosper in niches

The Publix supermarket chain recently celebrated its 75th birthday. The company credits its success to a distinct style with delis, bakeries and popular store brands.

"Wal-Mart's on one end with low prices, Publix with its great quality and customer service is on the other end," said Neil Stern, senior partner of McMillan and Doolittle, a Chicago-based retail consulting firm. "Being in the middle isn't the best place to be."

The company has 850 stores in 5 states.

A competitor is remaking itself to find its own niche. Kash n' Karry has become Sweetbay ... and it's targeting customers passionate about food. Selections have improved, especially in 5 signature items: herbs, tomatoes, peppers, mushrooms and tropical offerings. In the meat department, the butcher waits to cut to order. A supermarket that all about food ... what a concept!

Proffitt's - faces change, ideals remain

A heart-warming history of Proffitt's. The Golden Rule helped this chain grow, and now it's part of the Saks conglomerate.

"He was an incredible promoter,'' Piper said of the store founder. Piper recalls hearing stories about how D.W. would climb to the second story roof at the downtown Maryville Proffitt's at Thanksgiving and throw live turkeys to the crowds waiting below. There are pictures of hundreds of people crowding the street in anticipation of getting one of the holiday birds.

"That was during the Depression,'' Piper said. "That meant something to people.''

D.W. was also head of the draft board in Blount County during World War II. Piper said every Blount County solider who fought in the war received a hand-written letter from D.W. The founder also helped finance college educations for locals at Maryville College.

Piper said he was driving a delivery truck for Proffitt's back many years ago and a man stopped him and told Piper he never shopped anywhere but Proffitt's. That was because D.W. gave him a suit off the rack when the soldier came back from the war and needed one for job interviews. The man never forgot D.W.'s kindness.

"He didn't do things to get credit for them,'' Piper said. ``He did them because it was the right thing to do.''

Handmade tea bags to uniforms

Another small retailer success story from the New York Times -- Fortune Restaurant Uniform and Supplies.

Maggie Lin W. Leung, a native of Hong Kong, is a slim, dark-haired woman of 48. She got into the business by canny calculation. While selling handmade tea bags in her father-in-law's kitchenware shop in Chinatown she noticed how many restaurant owners were asking if the shop sold chef's aprons and white shirts for kitchen workers.

"They didn't have in the store," she said. "So, I think, I should make it !"

Her store, Fortune Restaurant Uniform and Supplies Inc., on Eighth Avenue at 52d Street, is a shining example of immigrant resourcefulness, the kind that spots an unfilled niche created by the influx of fellow newcomers and makes profitable hay. Most such businesses take care of the necessities - food, clothing, furniture, videos - with an ethnic twist; others carve out whole new specialties.

Tiny store has retail market niche

Science Toy Magic has won the New Mexico Small Business Development Center's Star Client award. The tiny retailer in Santa Fe demonstrates each toy to customers. Every toy in the store illustrates the principles of science. Science Toy Magic was honored because it more than quadrupled revenues with the assistance of the SBDC. The store is only 58 square feet (!), but it acquired 5 new toys at this year's International Toy Fair in New York that it will be selling before any other store in the country.

There's a niche that Wal-Mart is unlikely to enter. And another lesson -- your local SBDC can provide invaluable business assistance to your store and its free.

Retail store success: Painter's Supply

Paul Olson III opened his fourth Painter's Supply store in 2002 in Bridgeport despite critics who told him he would fail. Two years later, Olson's going through a $200,000 renovation because business is great. The investment in the 43,000-square-foot building will help him serve customers. The stores mainly serve professional painters and have expensive color-matching and mixing machines. He works to improve his service to his niche market and isn't overly concerned about a nearby Home Depot. Story from the Connecticut Post.

Dinosaurs Mating

It's common in declining industries for large companies to merge with one another. The CEOs cannot think of truly productive or creative uses for their still-considerable financial capabilities, so they "grow" by gobbling up the competition.

Of course, this isn't real growth at all. If company A's shareholders wanted to own shares of company B, they could easily do so by calling a broker. Merging companies just forces the shareholders to own both companies; nothing new is created. Don't listen to the "synergies" nonsense. CEOs always drag out "synergy" to explain how the merger will payoff. A couple years later they always have to explain that the combination of the two corporate "cultures" didn't go as smoothly as hoped and synergies were not realized.

Mergers in declining industries are like dinosaur sex. It may seem productive in the short-term, but it won't change fate.

What does this have to do with retailing? Federated Department Stores and May Department Stores Company have announced a merger. Federated operates more than 450 stores under the names of Macy's, Bloomingdale's, Bon-Macy's, Burdines-Macy's, Goldsmith's-Macy's, Lazarus-Macy's and Rich's-Macy's (all those tortured regional department store names will finally be changed to the Macy's brand effective March 6, 2005). At the end of the fiscal 2004, May operated 491 department stores under the names of Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, and The Jones Store.

All those department stores occupy the vast middle-ground of retailing ... which the American shopper has left for dead. Mass discounters on one end of the retail spectrum and high-end specialty shops on the other have effectively shrunken the market in the middle; leaving far too much capacity for the dwindling demand. The profits in retailing are at the edges. Hecht's, Macy's, Sears and Penny's can't beat the values at Wal-Mart or Target, and they can't match the exclusivity or fashion of Gucci, Prada, Dior, Hermes, Mikimoto or Jimmy Choo boutiques.

Can these dinosaurs beat their fate? Marshall Field's recent transformation of the State Street Store was promising. It became a market of brand boutiques with 350 new brands (many unavailable elsewhere in the U.S.) and lots of special events. They borrowed that formula from Selfridges in London, but there's no shame in that. Borrowing good ideas beats the heck out of quietly going broke. Will Federated keep the changes, let along spread them to the other stores in the new mega-corporation? Unlikely. The "not invented here" stigma will probably doom any innovative ideas from the May side of the merger.

Carnival of Capitalists

The new carnival of capitalists is online at Coyote blog. The "carnival" is a weekly round-up of good business and economics commentary on blogs. Check it out.

Wal-Mart, toys and Seth Godin

Seth Godin comments on Wal-Mart's impact on the toy business at his blog (he references this article from the New York Times). We've commented here on this issue many times when we featured Out of the Blue, Archie McPhee, Kuma Toy Bears and Playthings ... independent toy retailers succeeding despite Wal-Mart and Target. The point is that there are retailers providing a market outside of the big discounters and the toy industry should give itself a long-term boost by:

1. treating the independents with respect, and
2. not selling to the discounters.

Godin has it right -- small manufacturers and independent retailers can succeed together. And that's a good thing for those businesses and the entire economy. The Toy Industry Association should be encouraging growth in the number and quality of independent toy stores through instructional materials (like the American Booksellers Association's Manual on Bookselling) and training seminars. If they were really aggressive and smart, some of the manufacturers would band together to create a toy store franchise that stocks all their products.

Wal-Mart bashing is fun but pointless. There's plenty of profit potential in the toy market outside of the big discounters.