business news in context, analysis with attitude

Two topics continue to generate a lot of email from members of the MNB community -- the discussion of Wal-Mart’s role in the retailing world, and our piece about Stew Leonard’s that appeared last Friday.

Let’s start with Wal-Mart…

For those who haven’t been keeping up (and we encourage you to go back and read some of the “Your Views” comments from last week…just click on the Archive” button at the top of the page), the discussion really centers on Wal-Mart’s killer instinct, and whether the company puts stores in areas that cannot support them, knowing that they will drive smaller retailers out of business.

For example, MNB user Kurt Rodhe wrote:

“Yes, Wal-Mart does put supercenters in towns with less than 10,000 pop., as I'm now competing with one in our village of Millersburg, Ohio pop 3,800.

“We're a rural county with pop. of about 40,000 and a very distinct demographic of being the largest settlement of Amish people (roughly one third of total county). I'm third generation operator in a family owned IGA supermarket who has been in business since 1934, and always have been very community minded. Our county is not depressed, as we have a nice mixture of agriculture, tourism (The Amish) and vibrant smaller family owned businesses. We have had one of the lowest unemployment rates in Ohio the last several years, so we do not need WM for jobs.

“So why are they here?? Because they can be...They just opened the expanded SC Oct 23rd, so the jury is still out on business impact, but rest assured it will have some if not a drastic effect. The business thinkers in town can't understand how they can do the numbers in this locale, but I'm not sure it matters. If they underperform in this location, will they close? I don't think so. Meanwhile, other business will come and go based on their economics which substantially change with WM. The point I'm trying to make is, if they want to, WM will come into a market whether or not it makes logical sense to most of us. (They spent over $2M just on site prep filling in a wetland) They have two SC's within 25 miles of our town (both in larger markets) so I don't expect they will pull from larger markets outside of ours. Do they want to put others out of business? You bet, they internally point at their competitors and tell their associates others won't survive once they're in the market. Will we and others?? We all hope so, but all of us realize the landscape is forever changed and the largest retailer in the county is not locally owned or locally committed.

“Just don't believe they always go into a market where it is vastly underserved and consumers have no choices. It's just not true!!”

However, another member of the MNB community, who happens to be a Wal-Mart employee, has a different perspective, in part responding to emails sent last week that were similar to Kurt’s comments above:

“First to respond to the "building in towns under 10,000" population slam.

“In and by itself Mike and Ken are correct. But who in the world would think, or advance an argument, about building in towns under 10,000 population solely on the size of the municipality it sits in by itself. Wal-Mart will draw from, maybe, a 20-30 mile radius...until it build another store within that radius. Charlotte, MI, population 8389, is 15 miles from Lansing. Isn't there a large university with somewhere like 20-30,000 students there?

“Ken gives me four towns to work with.

“Prairie du Chien, a small town of 6018, in Crawford County with 17,243 citizens and the store has been there forever. It's store #882 which dates back to, maybe, the 70's. About time it was upgraded to a SC on March 20, 2002.

“Hayward is new SC #3245 in a town of 2129 sitting in a county of 16,036, citizens who must have been happy to have it open on Feb. 20, 2002. Hayward is, I believe, the home of the National Fresh Water Fishing Hall of Fame. Must get lots of visitors there during the summer. Wonder if they park their campers in Wal-Mart's parking lot?

“Richlands Center, another fairly old location, store #1007, so it too was an upgrade, not a move into virgin territory. Population 5114 with 17,924 in the county.

“Now the Virogua store is old too. Store #971 in Vernon County inhabited by 28,056 folks. It was a SC prior to this year.

“Wisconsin Dells, store #3505 is fairly new; opened on May 15, 2002 and has 55,225 people living around it.

So, all in all, yes, Wally World is in small towns but in every case there is a market big enough to support them being there. That's there is enough to support them and the previous retailers is open for question and your answer depends on how you view Wal-Mart.

“That's also the way you could be in looking for a "Killer Instinct" in Wal-Mart. I guess most everyone in business has some sort of "killer instinct" when it comes to making a success of your business. I recall many instances being told to offer another choice or even something completely different rather than letting a customer walk without buying anything as a 17-18 year-old in a locally owned department store back in the 50s .Another lesson was asking a negative question..."We don't have such and such, do we?"

“Quoting Sam Walton from a book written some ten or more years ago might not be the best reference book to use. I don't know if Sam could have foreseen the way Wal-Mart performed and grew during the latter part of the 90's. I don't know if even the people that were running it on a day-to-day basis saw what was coming or the future before them today.

“It won't be for a lack of trying to figure it out, believe me.

“I'll say one thing. As long as Wal-Mart has people like the lady who spoke at the conference Kevin reported on earlier in the week coming on-board, we're in good hands.

“Finally, the 180 day employment requirement prior to being able to sign up for benefits is new, effective 1/1/2002. Prior to that date it was a 90 day employment requirement.”

The floor remains open…

Last Friday, we wrote a piece that commented on a Fortune Small Business article that addressed Stew Leonard the man, who was convicted of tax fraud, and Stew Leonard’s the three-store chain, which continues to generate $300 million a year in sales. We noted that while we and many other people were disappointed in the former, the latter continues to be one of the great shopping experiences.

To be honest, several people wrote in questioning our ethics and priorities, asking whether it was proper to turn convicted felons into heroes. That certainly wasn’t our intent; in fact, we thought we’d gone out of our way to make sure that wasn’t what we were doing.

But a couple of emails caught our attention…

One MNB user wrote:

“Like you, my family and I have been customers of Stew Leonard's for nearly 20 years. I never felt betrayed by the store, because of the store's simple philosophy - - :Rule #1. The Customer is Always Right. :Rule #2. If you ever doubt the customer, re-read rule #1 - - has always remained intact.

“Even before I moved to Connecticut and we started shopping there, I was asked by Stew Leonard, Jr., who I had only just met, to sit in on and critique one of the monthly focus groups he conducted, usually with 8 to 10 shoppers represented. I think I got the better end of the deal that night because Stew, Jr. ran what I still view as a model session that genuinely connected with consumer.

“A couple of weeks before each session, he personally hand picked shoppers with over $200 of goods in their carts and 'screened' them by asking what the store might do differently or better. If they had a point-of-view, and were articulate, he invited these "creative', 'heavy buyers' to the session. He was very clear that he would be running the group and that his plan was to "walk" the attendees through the store, department by department, with an eye on making each section of the store better.

“One of the attendees at the group that I attended came with 20 or more pages of notes. She had conducted her own "pre-session" among friends and neighbors who also shopped at the store, so she could offer "a more rounded perspective". I was told by Stew, Jr. that this was not that unusual.

“Every time one of the panelists raised a serious concern, or offered an idea that required a major change in the section's product, pricing or shelving strategy, the relevant department head (who all was sitting in an outer circle, but not behind a one way mirror) engaged the panel to openly discuss the pros, cons and trade-offs of the change from a shopper's perspective so they could really appreciate the choice at hand.

“Stew, Jr. only made one promise at the session. Right at the beginning, he told the consumer panel that he and his managers would definitely take ONE of their ideas, TBD, and implement it. He asked them to watch for it and support it. Today, what major company doesn't claim to do all sorts of consumer directed research. But precious few come close to connecting with their customers to truly understand their needs and need gaps as well as Stew Leonard does.”

And MNB user John Russo chimed in:

“Couldn't agree with you any more about Stew Leonard's. Having grown up in Stamford, our weekly trip to Stew Leonard's was interesting and exciting. I still remember getting a free ice cream cone for having our picture taken with a Stew Leonard bag in Williamsburg, VA, and was amazed at the time that someone could get a photo with that bag taken in Moscow (this during the cold war). Watching the cartons of milk and juice being filled in the store was amazing at the time (still don't see that at any grocery store I shop in). I didn't realize what a truly unique experience it was shopping at Stew's until I got out of college and went into the retail IT business. My wife has gotten used to my habit of wanting to tour the businesses that our company works with when we see one on vacation, but I think Stew's was the only one she actually got a kick out of (not a client of ours, but still a must visit).

“To this day, I still use a Stew Leonard's Playmate cooler that I bought before going to college…”

Onto other subjects…

Responding to our story last week about KB Toys partnering with CVS to provide toys to its drug stores, and Office Depot creating a strategic alliance with Stop & Shop, MNB user Charles Young wrote:

“Many years ago department stores (you remember them) sold/leased space to various shoe companies to set up and control floor space and merchandising on their floor. It was more efficient, lowering the risk to the retailer (inventory, style, etc) while satisfying the consumer demand.

“CVS is a place consumers look... or expect to find... toys and similar general merchandise. CVS carries a line of products, usually low-end impulse items. Now with the right research and a strong partner (KB) the drug chain can certainly improve that aisle.

“I think it gets more difficult in the supermarket. It is not intuitive for consumers to look to Stop & Shop for school and office needs. With already crowded aisles, the line will certainly be limited. The Office Depot experience is one of great diversity and choice. How many types of writing implements or printer cartridges can be found there? How often will the shopper in Stop & Shop be disappointed?

“As with the department stores long ago, if these experiments are to have any chance the retailers need to provide the shelf and let the vendor take care of selection, inventory, pricing and promotion.”

And, when we noted that we personally aren’t turned on by shopping dollar stores, MNB user Gail Ginther wrote:

“I think you just don't have the heart of a shopper. The lure of the dollar store format will probably live on just because there is always that serendipitous chance that you will run into something really nifty. It's the Filene's Basement (the original clearance concept in Boston, not the chain), the Big Lots, the prowling through a thrift store or goodwill. The thrill of the hunt, the scoring a deal. We hunter/gatherers just have to indulge our primal instincts somewhere.

“Or maybe it's just the economy.”

Or some combination thereof…

Also, in our piece, we apparently left out one strong performer, as noted by MNB user Bob Vereen:

“There's a fourth one--99c Stores, which is getting close to a billion in sales, but the point I want to mention is its per-store volume--about $5 million. Can you imagine checking in, stocking and checking out 5 million pieces per year per store???

No, we can’t.

Then again, we can't even conceive of writing between three thousand and four thousand words a day, which works out to close to a million words a year.

You gotta do what you gotta do. Or something like that…
KC's View: