The Wrong Way to Build Market Share

Conventional wisdom suggests this is the perfect time to build market share by either buying troubled companies or picking up locations distressed retailers have made available. A report Thursday out of the World Economic Forum in Davos, Switzerland, carried that theme forward with comments from outgoing Best Buy CEO Brad Anderson that the consumer electronics retailer might take advantage of bankruptcies in the retail sector by snapping up vacant store locations.

My advice — Don’t Do It!

Perhaps Anderson was just being courteous and casually responding to the possibilities put forward by a reporter asking about Circuit City and the real estate now available because it is closing. After all, Anderson also was quoted as saying, “We are looking at some of those (stores), but our first priority is to stay cash strong. We would be more cautious than we would (be) in most environments and take advantage of less of that than we would have a year or two ago.”

The weight of history, at least in retailing, is that companies that grow on the carcasses of failed or failing retailers oftentimes wind up sharing the graveyard, or at least have one foot in it.

Some examples:

• Ames thought it would expand beyond New England regional status by purchasing Zayre and Hills. All it did was buy their respective problems. Ames shortly thereafter went out of business.

• Gottschalks expanded in the Pacific Northwest by purchasing Lamonts. Gottschalks is now in bankruptcy protection.

• May Department Stores became fodder for Federated to grow. Even after changing the names of the stores and the company to Macy’s, the business is dreary, mostly dragged down by the former May stores.

• Bon-Ton Stores grew from a regional player by buying Carson Pirie Scott from Saks. Nothing tangibly good has come from that acquisition.

• Going back 30-plus years, Kmart rapidly expanded by picking up many W.T. Grant stores. Yes, the buy helped Kmart become national faster than organic growth would have. But Kmart was saddled with many poor locations that contributed to its less than stellar reputation.

Some companies have successfully grown by acquisition. Target comes to mind. It bought Gold Circle, Richway, Gemco, Memco and other stores. And in its early years Wal-Mart bought smaller chains, such as Kuhn’s/Big K.

But mostly, successful retailers grew organically, by picking sites that matched their real estate strategies. They didn’t compromise their beliefs merely to save a few dollars on a location that was slightly off.

Location. Location. Location. If the location does not exactly match, pass it up. After all, one reason Best Buy is still standing, as is Bed Bath & Beyond vis-à-vis Linens ’n Things, is that it had better real estate than Circuit City.

Especially now, build market share from within. Don’t buy other people’s problems.

—Murray Forseter

(Don’t) Spread the Word

Much like the rumor that grows and changes as it gets whispered ear-to-ear, the Internet has the same power to tarnish the truth and make believers out of make-believe.

I received one of those “pass the word” kinds of chain e-mails. While it didn’t promise a pot of gold at the end of three days if I forwarded it to just 20 of my friends and colleagues, it did request that I do the right thing and send it to everyone I know.

The subject of the e-mail was Target. And why I, and everyone I know, shouldn’t shop at Target. The reasons were because Target had recently denied a Vietnam veteran’s fund-raising request to have Target sponsor the Vietnam Veterans Memorial Wall during a spring recognition event.

The message’s sender claims to be a Vietnam veteran and he is hopping mad at Target. So he decided to dig up some dirt. And what did he find? That Target is a French-owned corporation.

Am I missing something? Last time I checked, Target was American born and raised, with not even a store on French soil.

But this vet feels strongly, and I quote, that “if Target cannot support American Veterans, then why should my family and I support their stores by spending our hard earned American dollars! And have their profits sent to France!”

What is most scary is that the person who sent it to me, with a personal note that read “Wow, I didn’t know this!”, is uber-educated, well-to-do and shopping-savvy. If she believed the message, that tells me many others may as well.

Of course, I doubt it will do much harm. Target is big enough to brush off such nonsense. But, then again, those spending dollars are getting harder and harder to come by, and no one, not even Target, can afford to have an embittered chain e-mailer urge even one consumer to shop elsewhere.

(One final note: I did hit “reply all” and let everyone on that one e-mail list know that much of the sender’s rantings were, in fact, baseless. It was the least I could do.)

—Katherine Field

A Retail Icon Disappears. Will More Follow?

Perhaps you were pre-occupied with your own holiday activities and didn’t hear or read about it, but news broke just before Christmas that another link with retail history was about to be severed—the 807 Woolworths stores in the United Kingdom were to be shuttered by Jan. 5, ending 100 years of service to the British public.

There’s very little reason to be anything but nostalgic about this turn of events. Actually, that phrase, “turn of event,” implies a sudden reversal of fortune. That was hardly the case in the United Kingdom. The variety store chain’s departure from the retail scene just took longer than it did in the United States (1997).

“Let’s be clear about the demise of Woolworths. It was not caused by (prime minister) Gordon Brown, or the credit crunch,” Julian Finch of The Guardian wrote in mid-December. “It was caused by failing to attract enough shoppers to spend money. It was the result of being a horrible place to shop, which offered nothing that wasn’t cheaper or better elsewhere.”

In the coming weeks and months we no doubt will learn of many American retailers that no longer could keep their doors open during the current economic crisis. Some will succumb because they too were “horrible places to shop.” Others will fail because they too willingly believed that good times last forever and it was financially acceptable to leverage their future beyond reason in their pursuit of growth. Still others will find out that over-storing does in fact exist when the consumer reins in spending and that only those stores that differentiate themselves can survive such times.

We’ll all shed a tear, or at least get misty eyed, for the departed. Most, however, will not have had the flavorful history of Woolies.

—Murray Forseter