Thursday, June 3, 2010

The Barebones Store

Seven years ago, I stopped at a convenience store that was owned and operated by an Indian family here in Mississippi. The clerk was a Hindu woman dressed in traditional Indian garments. As I approached the register I was surprised to see her husband stretched out and sleeping on the floor behind her. It occurred to me that I was standing in what must have been the most primitive environment for a convenience store I had ever seen.

Walking through the aisles, I couldn't help but notice the contrast between, say a Pantry location, and this bare-bones establishment. Instead of aisles jammed together tightly as to prevent the passing of two patrons and the shelves overflowing with every kind of convenience item you can imagine, I found spacious aisles containing only the basic items a consumer might want. One look convinced me the owner of this store paid meticulous attention to each and every item placed on his shelves.

'How can this guy make a profit,' I marveled. But, after seven years, the store is still there. And it appears to continue to enjoy a steady stream of patrons, buying gas and shopping inside the store. I have no doubt that I will never see this store in the list of bankrupt locations that seem to appear in trade publications with alarming frequency.

Then I thought of other operators I have known, driving the latest model of new cars, playing golf on the weekends, opening new locations to beat the band, stocking six kinds of everything, and still not making enough profit to keep their doors open.

Something's wrong with this picture.

I grew up in an era where local department stores were all but destroyed by the likes of Sears and Montgomery Ward. Then in the sixties and seventies we saw an invasion of new department stores like Globe, Shopper's World, and K-Mart. They began popping up everywhere, competing for market share in a world where we already had too many choices.

Then, one company emerged that all but laid waste to its competitors. I decided it was an interesting study to determine how all of this happened. What I decided was it all boils down to two simple principles. WalMart was successful because they went back to basics and employed technology to become the world's largest retailer.

The Indian fellow I mentioned at the beginning of this story is surviving by employing basic strategies in his store, but he cannot grow without embracing technology - the right kind of technology. Staying small is better than growth without the proper employment of technology. We only have to look at K-Mart to see the proof.

The one-store operator that sleeps on the floor of his establishment will never be rich, but he will survive. If he tries to open the second or the third store, he will fail. Why? Mainly, because he can't sleep in all the stores; but, more importantly, he is a poor candidate to embrace new technology.

Convenience stores remain stuck in a time warp. Very little has changed since the seventies. Business is conducted the same way it was in the fifties, when 7-11's began cropping up in neighborhoods all across the American landscape.

At some point, operators gave up accountability for maintaining their own inventories and left the decisions to their suppliers. In the beginning it was for convenience. As they grew, it became a problem; one they cannot see because they aren't looking. Retail is detail, and 'detail' means items . . . not categories.

At some point we will have to go back to basics and rebuild the industry the way WalMart did. Walmart is not the enemy here. They are the light at the end of the tunnel. Whether we recognize that light as the light of knowledge or an on-coming train depends on how quickly we open our eyes.

 

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