Your DU Exercise for the Week: Go Downtown and Count the Shuttered Stores

This week's exercise is inspired by last week's Supreme Court decision allowing pricing floors.

A hundred years ago, the customer was being screwed by pricing floors--the practice of setting a "never go below" price on a product. Today, the small retailer is being screwed by their absence, and so is the manufacturer. Screwed by "big box" retail.

Wal-Mart dictates wholesale prices and business practices. To a certain extent, so do all the other big boxes--mainly because they saw Wal-Mart doing it first. They also have serious buying power, and enough cash in the bank they can literally turn the inventory of an entire store into a loss leader--a product you sell at a loss to draw traffic to your building.

The result is simple: Wal-Mart is able to put whole downtown merchant associations out of business. Which is where what I want you to do comes in.

Go to wherever your "downtown" is. (This exercise will be more effective if you've lived in your community for fifteen or twenty years and can remember when there used to be shoe stores and clothing stores downtown. It will be even more effective if your community doesn't have a mall.) First note how many empty storefronts there are. Then look at how many "optional" stores--quirky little gift shops, coffeehouses, used bookstores and other places that are fun rather than necessary--have popped up.

This is why I really applaud the recent USSC decision. It will force Wal-Mart to get its shit together more effectively than unionization ever could have.

There are probably 500 brands Wal-Mart carries that Wal-Mart HAS to carry. Not "items" but "brands." They must carry Kraft. They must carry Bayer pharmaceuticals. They must carry Wolverine boots, Sony electronics, Folger's coffee, Valvoline, Castrol, Pennzoil, Prestone, Charmin, Pampers, Oscar Meyer...and over in personal care and beauty aids, brand loyalty is so intense there are probably fifty must-carry lines. This bears repeating: Wal-Mart did NOT make its name by selling lipstick cheaper than anyone else. They made their name by selling REVLON lipstick cheaper than anyone else--your favorite brand names at unbeatable prices. If they were to stop selling name brands and move to a line comprised exclusively of house-branded Cheap Chinese Crap, they'd enter a new market--instead of competing against Kmart and Target for the consumer's dollar, they'd be competing against Family Dollar and Big Lots...who, by selling nothing but house-branded Cheap Chinese Crap and closeouts they picked up at 40 cents on the dollar, already sell cheaper than Wal-Mart does.

I've established that Wal-Mart CANNOT stop selling name brands. Now let's say all 500 of the must-carry brands set price floors. All of a sudden Wal-Mart's Pampers are the same price as LocalMart's Pampers...but Wal-Mart's Pampers are sold in a store in a shitty location, that has worse parking, the store looks like hell on the inside and the employees are worse than useless, but LocalMart's location is better, its store is better and its people, who get paid enough to eat and pay their bills, are actually nice to you. Those things matter to consumers, but Wal-Mart's Lower Prices Always bullshit has overridden it. Now they don't have that.

I don't think the decision will cause widespread price gouging at the manufacturer level. Every manufacturer knows there is a lower-cost producer out there who's making the same stuff they are, and those producers' products are "good enough." Castrol can't decide to start charging $4 per quart for GTX because sitting right next to the $4 quarts of GTX are three different brands of $1.49 oil--all of which meet the same industry specifications. Drugstore cosmetics brands can't raise their prices to department-store cosmetics prices...not only are there radically less expensive drugstore brands, the department stores will stand at their current prices because when drugstore makeup and department store makeup are the same price you may as well go to Macy's and get the good stuff from people who will make sure you look good in it before you plop down your cash. You'll see this in all industries; brand loyalty in consumer products only extends so far.

I like the decision. Let's hope it does good things for us.

You didn't leave room for the "evil fascist global corporatist" conspiracy theory advocates.

I'm not smart enough to know whether the good effects of this decision will outweigh the bad effects, but I am smart enough to know there are no perfect solutions to anything. If this decision ends up produces a net decline in public good, then the issue can be addressed by Congress.

good job

Nice to see a thoughtful post by him/her.

OTOH, I don't support and agree with those who think every decision from the USSC these days is de facto bad news. This board is full of that kind of "analysis." Ideology dulls our tools of dissection. The OPer seems open-minded to me, and I like that.

I still think that I will lose money. The big guy win. I think that we lose.

The big guy always wins.:hurts:

However, as somebody who lives in a town with lots of Wally's, KMarts, Targets, Home Depots and Loweses and not a single independent hardware store, not even an Ace Hardware, I'll be glad to see some of this come in.

I sorely miss a small storefront when I can walk in and one of the staff knows where what I want is and I don't have to walk half a mile to get it. I miss the intimacy of all sorts of small stores and I greatly miss the service.

I'll be perfectly happy to live with less junk to pay for it, too.

Or the company making shovels and hoes for that matter? These companies offer pricing discounts to larger corporations so that they can sell more of their products and get better placement on shelves.

Why do people think this ruling is going to force product manufacturers to set pricing floors? And why do they think that these manufacturers would change their entire marketing philosophy at the risk of having their product displays suffer?

Large corporations don't get "offered" pricing discounts these days so much as they tell the vendors what they are going to pay.

Someone's got the link for the Fast Company article about Wal-Mart. In it they talked about an incident in which Nabisco wanted to issue a coupon for a big bag of Life Savers, and Wal-Mart told them to just deduct the amount they were going to spend on the promotion from the wholesale price. Basically, vendors have next to no control over their destiny anymore, and I think they're sick of it.

Not every vendor will set a pricing floor at first. Only the biggest, most irreplaceable ones can, like Stanley Tools and Kraft. When they succeed in setting a floor without losing sales, others will follow.

If Stanley sets a price floor, Black & Decker will drop their price. If Kraft sets one, Borden will swoop in with discounts. This is just the way the market works in a competitive environment. The only producers benefiting from this ruling will be monopoly holders and luxury producers.

As for brands that a store MUST carry, there is no such thing. Names come and go over time as their marketing plans work or don't. Coca-Cola (the #1 brand in the world) has found this out over the years and most other producers have taken the lessen to heart. The last thing they're going to do is mess with the outlets who sell their goods in mass quantities like Wal-Mart. Your own example proves the point. If the parent company for Lifesavers (The Wrigley Company) couldn't enforce a market strategy before this ruling, then what in it will allow them to do so now? I'm afraid your desire to see something good happen from this ruling has clouded the reality of it. No producer of a product meant for mass consumption in a competitive market is going to set a price floor. It would be market suicide.

On the other hand, I'm sure Exxon-Mobil and Louis Vuitton loved this ruling.....

One that comes to mind instantly is Durock. It's a concrete board for setting ceramic tiles on which is made by USG. Home Depot does not sell it, but we have a couple other brands--Wonderboard and PermaBase--that do exactly the same thing and as well. A day does not go by that someone doesn't walk out the door because we do not have Durock.

The must-carry brands do a couple of things for you. Obviously they draw customers who are looking for those brands. They also add credibility to your store. You're not much of a hardware store if you don't have Stanley products. Flooring stores must carry Armstrong. And so it goes.

Let me interject another item in here: "Mandatory Prices" have been legal for a long time. John Deere does it, for one. If you are a John Deere dealer, you will sell the $2995 mowers for exactly $2995. The intent here is to keep people from going to a specialty store, picking the brains of the employees then going to a big-box to buy it for less. Louis Vuitton might be able to survive without specialty-store sales, but John Deere, who makes a product that must occasionally be repaired, can't--since the specialty stores are where you go for repairs. Mandatory pricing has NOT hurt the companies who do it one whit. John Deere is the most popular brand at Lowe's, one of the top two brands at Home Depot (two years ago, before we got Cub Cadet and Toro, they were the top brand at HD too--since we got those two other tractors, the top two are either Cub Cadet or Toro depending on region, and John Deere nationwide), and they still sell very well at specialty stores.

Whether someone walks out or not, you're proving my point with your example. But since it doesn't matter what I say or how many times I explain the nature of big box operations, I'll just have to let you believe what you'd like to believe.

Sorry we couldn't come to more of an agreement.

but don't forget, they've LOST business as all the indie retailers were driven out of business and the small orders dried up.

Whether or not they'll put a minimum retail price in place remains to be seen. The truth is that most of these companies don't really have much competition any more for what they make. It won't hurt them to give breaks to little guys who aren't there any more in the hope that some of them reappear.

They've actually increased business with the mega-marts because they're the ones who have the funds to create aggressive marketing campaigns that push consumers to purchase more than they need (2 for 1 sales, in-store rebates, quantity discounts, "family size" packaging, TV blitzes). There's a reason all these corporations are posting record profits year after year, and a good deal of it is due to increased sales for both producer and retailer. The little shops just didn't have that kind of savvy or money to push products like the big guys and producers are going to favor those who buy more. That's just the way the economy works.

As for competition, there's plenty in the producing world. It's the retail and banking industries that are becoming monopolies.

in addition to the big outlets. Every time a small retail store goes under, producers who supplied that store lost a customer, sales, and revenue.

When a grocery store goes under, as Farmer Jack's in my area just did, the people who bought food there don't stop eating, they just move their shopping to another store. The same goes for just about any product other than perhaps the coffee shops and other small impulse stores the OP was bemoaning. In fact, consumers are likely to purchase even more because of the marking ploys the big box retailers employ. Therefore, sales for the producer go up, not down, giving the producer very little incentive to create pricing floors to help the small or independent retailer who does not have the same ability to move product. It's the same concept as volume purchasing, really.

How many items are stocked at a Walmart?

How many of those used to be stocked in the hardware store?

How many hardware stores did Walmart replace?

Any way you do the arithmetic, they lost business. Remember, one Walmart is going to carry less inventory than even two hardware stores, and in a lot of areas, Walmart replaced more than two.

Those two stores, therefore, bought more from the producer than Walmart did.

Walmart just UNDERSOLD THEM by underpricing the merchandise, thus putting them out of business.

The truth is that Wal-Mart and other big box retailers are creating a surplus of goods and using advanced marketing tactics to create an artificial demand for them. I will agree that two local hardware stores would stock more goods than one Wal-Mart, but you forget the relatively new retail tactic of supply on demand. While a regular local shop would purchase a good deal of stock and wait for it to be sold down before ordering more of the same product, big box retailers use advanced methods of stock tracking to know when something has been sold so that they can allocate stock without over or under supplying any particular store. This doesn't mean that less product is being sold, only that the big boxes are keeping a closer tab on what sells and in in what quantity so that they can keep a constant supply in every store.

There's no way to show that Wal-Mart or any other big box retailer is actually creating fewer sales for manufacturers, Warpy, as they use several techniques to ensure the opposite occurs. That was how they became the big boxes they are today, by creating artificial demand and supplying goods at a marginally reduced cost. It's not good but it's the reality of American consumerism. Big boxes understand the greed and insecurity that lies at the heart of the average citizen and use that to their advantage. Local shops never stood a chance against that.

because it has driven other stores whose combined inventory offered a much wider selection out of business.

However, that wasn't the point. The point was that with fewer retail outlets to supply, the producer is the one who has seen a net decline in business.

Production is way up, just as retail sales have increased. Of course most of that increase in production has gone overseas to China and other countries with criminally low worker wages and rights, but the net result is still a massive boon for producers and retailers alike. I would say that the mega-marts have reduced regional selections and pushed low cost crap from foreign producers and that has led to quite a few US producers either shipping production overseas or going under. However, products are still being purchased in record amounts....they're just coming from other places.

And the fact that most production has gone overseas to reduce costs also shows why this ruling by the corporatists on the USSC is a bad one. Corporations that make their money by being able to supply the cheapest goods (a majority of the products you'll find on shelves today) cannot establish pricing floors because once they do, the competition will reduce prices in an attempt to take market share. While producers couldn't create pricing floors before this decision they could establish a recommended retail price. It's very rare that a retailer will sell a product above that price and that gives the producer some control over the actual sale price of their product and establishes the gross profit margin, the difference in the wholesale price and the suggested retail price. For groceries the profit margin can be as little as a couple of percentage points and for luxury goods as much as twice the wholesale cost or even more. This is why you can often negotiate price on larger ticket purchases but not the price of potatoes. This is another why pricing floors won't work for daily purchases, their isn't enough room in the gross profit margin to demand that Kraft cheese have a floor. However, it would be quite likely that an auto company wishing to create a cachet for their newest luxury vehicle would demand that dealers sell for nothing less than full MSRP. It's even more likely that the oil companies would set a pricing floor on gasoline and revoke the franchise of any station that didn't capitulate. Once the floor is set the oil companies can then raise pricing invisibly for a month or two before creating a new higher pricing floor.

Someone commented that it's a knee-jerk reaction to automatically dismiss anything this court does as bad and that we should look at the individual rulings. I agree with that sentiment completely, but after looking at the intended and likely results of this decision I can only suggest that it was not good for consumers or local retailers in any way.



Edited to say that Inventory does not equal Sales. While two local retailers may hold more inventory than a single big box, the big box is more likely to sell the product and replace it whereas the local retailer will hold onto stock for weeks or even months or years in some cases. Producers much prefer high volume sales over sitting stock on a retailers shelves.

but I'm old enough to remember what it was like before big box stores.

I didn't mean to piss you off, but I did want to introduce some facts to counter the erroneous beliefs of the OP. It doesn't do any good to try to make lemonade out of rotten lemons. This court ruling will not benefit the vast majority of Americans.

There are two ways in which a big box retailer screws up the supply of goods:

The first is by restricting the number of brands they carry to, normally, what sells the best.

The other is by only stocking the fastest-selling items within each brand.

We've discussed this when talking about the demise of the independent record store--Wal-Mart sells 10,000 titles across all genres and a "real" record store sells 50,000 titles of whatever the owner likes to listen to and 5000 of those false musical categories.

I could name products in every category...but unless you're selling a product that comes in very small containers and you provide them with a prebuilt display that has every variety you make on it (sewing thread, for instance), Wal-Mart will cherry-pick your line.

"SKU" is retail slang for "item." It's actually a little more detailed than that (example: Titebond II glue comes in four sizes, and each size is its own SKU) but you get the idea.

Your average full-line hardware store carries 25,000 SKUs, and all of them are hardware items. A big hardware store is a lot like a hardware museum--they'll have all this weird stuff they sell three of a year because it doesn't cost anything to keep a box of 3/4" Cat bolts sitting on the shelf just in case someone needs one. Or they'll keep ONE hand-cranked ice cream freezer because a local church has a camp every summer at which the kids take turns cranking the ice cream freezer, and Mrs. Jones the choir director throws the ice cream freezer away every December.

Your average Home Depot has 44,000 SKUs, and every one of them is performance tracked with an eye toward deletion if sales don't justify keeping it on the shelf...and those 44,000 SKUs are spread across eleven different categories. I've got 275 lumber SKUs, which means in a lot of cases I've got one kind of something and none of a lot of things. (Big-box runs on a version of Pareto's Law: 20 percent of all the products in the marketplace will fulfill 80 percent of customer needs, so we big-boxers only stock 20 percent of the things that are available.) We don't have a huge selection of any but the most ordinary of things.

If brands like Kraft, Folger's, Castrol, and the rest of the necessities that you've mentioned were to fix pricing floors on their products, then yes, companies like Wal-Mart could be affected and we could see a resurgence of small downtown shops selling more than luxury goods and resale items. But this will not be the case.

The only companies that seek to establish pricing floors are those that use a higher price as a marketing device. Gucci doesn't want their purses selling for less than retail because their products would then lose their cachet as exclusive. The corporations you mentioned do not have the same marketing plans. In fact, they pay good money to offer coupons so that people can get their products even cheaper.

The only real effect this ruling will have for the vast majority of Americans is that now the oil companies and the insurance companies will be able to fix costs legally by calling it a pricing floor.

This was not a good decision.

again...

Not only that, it strengthens the hands of the big manufacturers by allowing them to carve-up the market and pricing between them on their OWN whim (not the free market).

Very bad decision for people... great for corporations.

"…a scheme of devices to arrive at low prices… by treating retailers as if they were all vegetables…"

The Nightmare Song, Iolanthe, Gilbert and Sullivan 1882.

out of a lemon when Walmart set up shot right across the river from it in New Hampshire. The town had a little bit of a shake-up, to be sure, but now it's blossomed with an interesting assortment of art galleries, antique shops, restaurants, wine bars, thrift shops, music shops, an artisan bakery, gift shops, small book shops, etc. I bet there aren't more than 2 or 3 empty shops in the downtown area. It's probably the exception to the rule because of the tourist trade from nearby ski resorts, leaf peepers and average vacationers, but the town has worked hard to cultivate an artsy/interesting atmosphere that Walmart couldn't have if it tried. Even the local museum gets big name exhibits - Andy Warhol and Wolf Kahn to name a couple. A great place to visit if you're in the area. Down side: the only place to buy underwear is at Walmart.

My husband's Grandparents used to live in Newfane, VT.

Local loans, titles for cash, and a check place.
Everything else has gone belly up.

there are a few empty storefronts, but not many. i still live in the town in which i grew up and downtown has always been bars/restaurants/coffee shops/quirky shops, etc.

the locally-owned drug store has been there for almost 100 years, the locally-owned hardware store has been there for as long as i can remember. many of the businesses downtown have been there for 15 years or more. i have a hard time believing wal-mart had anything to do with the closure of the upscale men's clothing store that went out of business a few years ago.

sure, there are a few starbucks and a couple of other chains, but if you want to shop local in my city, downtown is the place to go.

monstrosities. Buy local, buy American, are part of the nature of this great state and we're better off for it.

:argh: :wtf:

I used to own one, and as a resident I think they are essential almost as much as libraries.

can be one of the best friends any community can have. I remember the "Malkin Books" used book store in Oneonta, NY as being one of the best sources of material for my library.

It is possible to survive without ever going into a used bookstore. Granted, life wouldn't be as fulfilling without them, but you can survive.

A store that sells food or basic clothing is a different story. You HAVE to go in there, unless you're multitalented and own 50 acres.

other ways than 50 acres, but I would hope we would agree that they are uncivilized. A lack of bookstores, in today's society, is a step towards an uncivil society, as well.

Walmart took out a grocery market, an electronics place and another shop that I think sold party supplies and novelties. Right in a row on one street (well okay there's a funeral home and a cross street between them, to me that makes it worse looking).

I don't know that any ruling can stop this, but here's to hoping you're right.

I live in rural, upstate New York. In the small communities in this area, the main street/down town areas are a shadow of what they were in my youth. A number of factors are involved, of course, but one of the results is that people travel (often about 20 miles) to hop at Wal-Mart.

I can remember that, when I was a kid, every little hamlet had both a corner gas station, and a Mom-n-Pops grocery store. By the late 1960s, these were closing up, and by the mid-70s, had pretty much disappeared. But a decade later, the combination corner gas/mini-grocery stores were popping up everywhere.

Your OP is really interesting. It's the kind of thing that makes DU a lot of fun for me, and I really want to thank you for this.

With small town businesses. And you know what? Over half the time the small businesses didn't have what I wanted. Or the prices were outrageous. So I had to end up driving 50 miles one way to find what I wanted at a big box retailer. And when you can drive 100 miles and STILL save money by figuring in the gas prices, then the local prices are too fucking high. And that is one of the reasons why Walmart has been such a success.

Not nearly as many of them as you might think actually pay the higher price, or put up with the restricted choice. If you want to assess a progressive's cred, observe them when it comes to parting with their own $$ instead of someone else's.

"What you do speaks so loud that I cannot hear what you say."
- Ralph Waldo Emerson

/microrant <on>
Meanwhile, many here are quick to badmouth domestic car makers abusing their workers (at $70/hour when you figure in bennies), and decry the heartlessness of closing plants and laying off workers - but would these critics actually buy a US-made car, specifically to help keep union workers in their jobs? Hell no. They trash the brands, spread the poison meme, and withhold their dollars so they can hand them instead to Asians and Europeans. Then they get all righteous and furious that the jobs are disappearing. Seriously, who wants to be caught dead driving to Whole Foods in corporo-fascist-exploitomobile? Sorry, UAW, about that collateral damage, but it can't be helped.
/microrant <off>

Good post, qdemn7.

I work in the downtown section of a small city that houses the second Wal-Mart ever built. Might interest you to know that the downtown is still there. Changed, yes, but still there and still vital. The Master Gardeners look after the mini gardens on each corner of the square; there is a Third Friday Art Walk every month, a Farmer's Market on Wednesday and Saturday. The town got together and restored the oldest storefront on the square this last year. There are festivals on the square a couple of times a year. Oh, and Wal-Mart built a big box store at the edge of town, and people aren't really frequenting it any more--it is always the store of last resort.

Anyway, a virtual trip around the square: North side: Restaurant (upscale), jewelry store, newspaper office, theater (live theater and vintage movies and one stage live musical performances), Arts Council office, formal wear store, restaurant (home cooking type), barbershop, museum.

West side: Lawyer's office, toddler's resale shop, insurance office, health food store (another lawyer's office on second floor of this building), new antique store, furniture store, family clothing store, upscale consignment shop, shoe store, empty, empty, insurance store.

South side: Old bank building refurbished to house a non-profit foundation helping other non-profits and locals needing loans, etc, drug store, used clothing store, crafts/antiques, home mortgage office, photographer, consignment shop, empty, antique store (second floor of this building houses a reality office and an auctioneer office), craft shop

East side: Dress store, empty, empty lot(used to be pool hall until it burned), gymnastics, flower shop, antique store, shoe store, empty, flower shop/catering, formal wear, and another pharmacy.


Yes, there are a few empty buildings. But they have not been empty long, and seem to always get renters back after a month or two. The buildings are all kept up, and there are rustic street lights every few feet with banners on them touting this as the "historical district". One of the dress shops has been there since the 1800s, and the shoe stores and pharmacies have been there for decades. One pharmacist actually lives over his shop, and has done a spectacular job making the fire escape in the back into a lovely garden area complete with fountain.

What I'm trying to say is, this town has lived with the bane of Wal-Mart longer than any other place except Springdale Arkansas. The merchants of downtown have fought back and have made the downtown an area people want to be. Besides the square, there are businesses radiating down the side streets and they include more restaurants, a coffee shop, a Dollar General, an office supply, a tile company, sporting goods stores, a music store, a beauty shop, and more. One way these folks have made it is by providing better service than Wal-Mart. They are friendlier, their products just as good and usually better, and, believe it or not, often less expensive.

are being screwed by the BB stores by choice.

Pricing floors are always bad for the consumers and the economy. There is no law compelling and producer to sell her/his product to Walmart or any other BB. Many of the most profitable (and highest quality) manufacturers are just that because they refuse to deal with the large chain-retailers.

This is another major blow to the average citizen, and will of course, be felt most intensely by the lower classes.

:mad: