SPATIIAL STRATEGIES IN RETAILING

The GeoJournal Library

Series Editor: WOLF TIETZE

Editorial Board:

John E. Bardach, Honolulu Pierre Biays, Ulle Asit Biswas, Oxford Bruce Currey, Bedford Park J. Demek, Brno YehudaGradus, Bee~Sheva Arild Holt-Jensen, Bergen Huang Ping-wei, Beijing Johannes Karte, Bonn P. M. Kelly, Norwich C. Kergomard, Lille C. Gregory Knight, University Park M. P. Lapping, Guelph

W. Lauer, Bonn Lee Shu-tan, Nanjing Richard F. Logan, Los Angeles Walther Manshard, Freiburg i. Br. German MOiler, Heidelberg Paul MOiler, SaarbrOcken Hiroshi Sasaki, Tsukuba Akira Suwa, Tokyo Jarn Thiede, Kiel H. Th. Verstappen, Enschede E. M. Yates, London M. M. Yoshino, Tsukuba Alexander Zaporozec, Madison

Spatial Strategies in Retailing

by

Risto Laulajainen Department of Human and Economic Geography, Gothenburg School of Economics and Business Administration, Gothenburg University, Sweden

D. Reidel Publishing Company

A MEMBER OF THE KLUWER ACADEMIC PUBLISHERS GROUP

Dordrecht / Boston / Lancaster / Tokyo

Library of Congress Cataloging in Publication Data

Laulajainen, Risto. Spatial strategies in retailing.

(GeoJournallibrary) Bibliography: p. 1. Store Location. 2. Retail trade. I. Title. II. Series.

HF5429.275.L38 1987 658.8'7 87-20803

ISBN- 13: 978-94-010-8267-9 e-ISBN-13: 978-94-009-3983-7 DOl: 10.1007/978-94-009-3983-7

Published by D. Reidel Publishing Company, P.O. Box 17,3300 AA Dordrecht, Holland.

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In all other countries, sold and distributed by Kluwer Academic Publishers Group, P.O. Box 322, 3300 AH Dordrecht, Holland.

All Rights Reserved © 1987 by D. Reidel Publishing Company, Dordrecht, Holland

Softcover reprint of the hardcover 1st edition 1987

No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, electronic or mechani.cal including photocopying, recording or by any information storage and retrieval system, without written permission from the copyright owner

to

TERESA and THOMAS

The Gothenburg Business School Foundation has supported this. book financially.

CONTENTS

ABSTRACT ix PREFACE xi INTRODUCTION .................................................................... 1

The Scope ......................................................................... 1 The Retailing Scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 3 The Data .......................................................................... 7 What to Expect ..................................................................... 9

THE SWEDISH PRELUDE ........................................................... 12 Meeths ......................................................................... 12 IKEA .......................................................................... 14 Hennes & Mauritz ................................................................ 16 Kapp-Ahl ....................................................................... 18 Gulin's ......................................................................... 20 Ara-Jet .................................. , , ..................................... 22 The Swedish prelude .............................................................. 24

HISTORICAL EXAMPLES ............................... " ......................... 25 A&P .......................................................................... 25 Woolworth's ... , ............ , ......................... " ........................ 28 Kresge's ....................... , ....... , ..... , ............................. , .. , , 32 Penney's ..................................................... , . , , ......... , .... 35 Gimbel's ................................................... , ................... 38 May's ... , ............. ~ ....................... , ................................ 40 General lesson ...................................... , ............................ 42

ENVIRONMENT ......................................................... , .. , ...... 43 Federal Trade Commission ........................................................ 43 Competition ................. , .............................. , .............. ,.... 43 Purchasing power ........... , .............. , ........... , ............... , , ........ 44

COMPANIES BY STATE ................................. , ........................... 56 Oil Companies ., .................... " ............................................ 57

Shell ................... , ........................ ,.............................. 57 Standard Oil (New Jersey) ......................................................... 59 Standard Oil (Indiana) ......... , ............... , ................................. , 61 Common feature .......... , ............. , , ........... , ........... , ......... , .... , 62

Food Stores .............. , .... , ....... , ............. , ............................. 63 A& P ... , .. , ................................................................... 63 Safeway ........................................................................ 66 Kroger ......................................................................... 68 Lucky ....... , .............................. , ............................ , . . . . . . 72 Albertson's. , ................. , ............................ , .......... , ......... 74 Winn-Dixie .. , ............... , ................. , ................................ 75 Grand Union .... , .......................................... , ..... , .............. 76 Southland .................. , ................................................... 78 Spatial lesson ..................................... , .............................. 79

viii CONTENTS

Restaurants ....................................................................... 82 Burger King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Wendy's ....................................................................... 85 Long John Silver ................................................................. 86 Church's ....................................................................... 87 Winchell's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Victoria Station .................................................................. 90 Fast food chains ................................................................. 93

SPECIAL TY STORES ............................................................... 94 Home Furnishing .................................................................. 94

Levitz .......................................................................... 94 Payless ............................ '.' ........................................... 99 Lowe's ........................................................................ 105

Toys and Books .................................................................. 110 Toys »R» Us ................................................................... 110 B. Dalton ...................................................................... 113

Promotional Apparel .............................................................. 118 Hit or Miss, T.J. Maxx .......................................................... 118 Mervyn's .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 121 Loehmann's ................................................................... 125

Fashion Apparel .................................................................. 128 Lord & Taylor .................................................................. 128 Saks Fifth Avenue .............................................................. 131 Neiman-Marcus ................................................................ 135 I. Magnin .......................................... _ ........................... 138 Fashion chains ...................................... __ . . . . . . . . . . . . . . . . . . . . . . . .. 138

Common Features ................................................................ 140 DISCOUNTERS ................................................................... 142

Korvette ....................................................................... 143 Almart ........................................................................ 145 Venture ....................................................................... 147 Gold Key etc .................................................................... 149 Target ......................................................................... 152 Caldor ........................................................................ 158 Wal-Mart ...................................................................... 162 Low-markup department stores ................................................... 168

DEPARTMENT STORES ........................................................... 169 Generalities ...................................................................... 169 Allied Stores .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 172 Associated Dry Goods ............................................................. 181 R.H. Macy & Co .................................................................. 189 Federated Department Stores ....................................................... 196 May Department Stores ............................................................ 209 Dayton Hudson .................................................................. 217 Carter Hawley Hale ............................................................... 225 Common Traits ................................................................... 234

CONCLUSION .................................................................... 238 ABBREVIATIONS ................................................................. 246 REFERENCES ..................................................................... 247 APPENDICES ..................................................................... 252

ABSTRACT

Risto Laulajainen: Spatial Strategies in Retailing.

Fifty-seven retailing organizations (companies or divisions) are studied for the purpose of finding regularities in their spatial behavior at the regional and national level. Six of the cases are from Swe­den, the remainder from the V.S. Most discuss the period 1945-1983 although the earliest ones date from the 1870s. Practically all usual retailing formats are represented.

In Sweden the behavior is easily categorized as either contagious or hierarchical diffusion. In the V.S. some organizations also fit this dichotomy. Many others, however, show traces of diffusion behavior only when a corporate space, smaller than the 48 contagious states, has been defined in advance. Still others do not fit the diffusion scheme at all. The rapid pace of change with ensuing random effects is one explanation. Another is the impact of competition which has hardly been measured at all. The third one is the availability of acquisition-ripe companies, an essentially non­spatial exponent.

Two explanatory schemes are tried for the traces of orderly spatial behavior discovered: Copeland IS

classification of goods; and the sales margin juxtaposed with the bulkiness of the merchandise and its need of backup service such as advertising. Copeland IS classification lacks explanatory value while the sales margin approach holds a limited promise. Even so, the human factor and, in broader per­spective, corporate tradition are often more influential than theoretically attractive spatial concepts.

Key words: retailing, spatial, strategy, Sweden, V.S.A.

ix

PREFACE

Locational research has long been concerned with industrial plants and the site selection of retail stores. The major determinants and decision processes now seem to be fairly well understood. Con­sequently, the research frontier in retailing has shifted to a higher spatial level, the location of stores in the regional and national context. Certainly, stores tend to be found where the population is, but beyond this obvious truth it is by no means outright clear how retailing companies with different formats and home bases perceive space and how space affects their performance, if at all.

When the question is put this way, what appears trivial at first undergoes a change and seems now complex enough to be worth a closer look. It need not be true, to cite the most obvious of examples, that regions which are attractive as places of living for high-school and college students, the custom­ary data base, are also worthwhile from the business point of view. No attempt is made here to pen­etrate the topic at analytical depth. The ambition is simply to discover, with the help of numerous descriptive examples, whether any order does exist in the high-level spatial behavior of retailing companies.

If the answer is in the affirmative, it may also be possible to suggest behavioral patterns which are either beneficial or harmful to the financial result of the company. As behavior necessarily involves a time dimension, the approach has a heavy historical tilt. And because the financial result has many other aspects than space alone, the cases to be discussed will contain a good deal of non-spatial background also.

The insight that the frontier of spatial retailing research is no longer at the local level does not come from thin air, of course. It originates from the Annual Report 1980 of the Dayton Hudson Corpora­tion, page 39 to be exact, which Dr. Kenard E. Smith, Manager, an old academic colleague from the Virginia Tech, kindly sent over. In February 1985, the insight could be initially tested against the Corporation's non-proprietary data base under the auspices of Mr. Stephen J. Morris, Director and Mr. Douglas Schmidt, Administrator. Then and later on, Ken Smith and his Colleagues offered unfailing support.

Invaluable as this first overview was, it opened more gaps than it closed. The subsequent fillup was initiated at Kent State University where the Doyen of U.S. retailing geography, Professor Bart J. Epstein took charge of the lost European. The voyage continued to Management Horizons, Inc., Columbus, OH where the President, Dr. William Davidson, granted entry to the superb data files on a complimentary basis. The Director, Mr. Jon L. Leffler, then took care of the practical details in Columbus, from Columbus, from the U.S ....

xi

xii PREFACE

The fillup was continued at the Department of Geography and Regional Planning, Indiana Univer­sity of Pennsylvania where the Chair, Professor Ruth 1. Shirey and Associate Professor John D. Ste­phens, also a one-time member of the Virginia Tech faculty, provided the indispensable logistical backup and the University Library the equally indispensable journals and interlibrary loans. It was primarily from this base that the retailing companies and various government agencies were con­tacted.

The overall response was good, even cheerful, and when it was reserved there were usually sound business reasons for being tight-mouthed. Most of the information so received would also have been available elsewhere - at a cost. Now, corporate responsiveness pressed costs and permitted the inclu­sion of more cases and consequently widened the scope for generalization. Some information, how­ever, such as that contained in Corporate Fact Books, might have been difficult to come by from other sources, not to speak of interviews, when such were granted, and when the respondent had been involved in the planning and execution of corporate strategy.

The final fillup, and particularly of older material, was effected with the help of some prominent business libraries. Baker Library at Harvard University, Mr. Mark Blumberg; Lehman Library at Columbia University, Ms. Susan Shiroma; Purdue University Libraries, Ms. Ruth G. Rothenberg, Head; Powell Library at UCLA, Ms. Irene V. Roggia and the Library of the Stockholm School of Economics and Business Administration, Ms. Kerstin af Sandeberg, Head; should be mentioned in this context, together with Dr. Neil Smith, Assistant Professor, Columbia University who was help­ful in practical arrangements. This impressive listing must not conceal the basic fact, however, that the start, before a single U.S. library had been contacted, was made at the Gothenburg Business Library headed by Ms. Kerstin Wiman. Nor should it be forgotten that Mr. William M. Kernitz, Manager, The May Department Stores Company supplied a complete set of Annual Reports 1945-1965, a most unusual favor. Mr. Donald D. Williams at Dayton Hudson Corporation, Mr. William F. Sofsak at Kent State University and Ms. Roxana Sanjines at Indiana University of Penn­sylvania cooperated as Research Assistants and carried much of the thankless burden of routine work.

The relevant pages of the manuscript were submitted for review in November 1986 to all the Com­panies and their divisions which had provided more than the most rudimentary data, one Annual Report for example, and which were still in existence. It could be assumed that these organizations might be interested in seeing in advance how their operations were perceived from the outside. Another purpose, of course, was to have possibly erroneous facts corrected. Forty-two sets of the text and figures were sent and comments were received from twenty-three organizations up to the end of February 1987. Some errors were corrected and suggestions received about aspects which should be emphasized. The suggestions were implemented when possible, i.e. without changing the general approach of the report.

There is a feeling that whatever errors and inaccuracies may remain they hardly affect the rather broad conclusions drawn. In any case, although reasonable care has been exercised when collecting and preparing the data, the volume should not be used as a reference but the original sources con­sulted instead. For this purpose, they have been given in rather great detail when at all practicable.

As to the scientific control, I am indebted to Bart Epstein, who patiently waded through all the details and, nevertheless, preserved a comprehensive view. His work and opinion are very much appreciated. Associate Professor Lage Wahlstrom and Dr. Ragnar Olsson of my own department kindly agreed to be consulted on cartographic matters.

PREFACE xiii

As so often before, the practical details have been taken care of, with skill and patience, by Ms. Diana Mattsson- Werner at the cartographer I s desk, Ms. Gillian Thylander in the linguistic supervi­sor I s role, Mr. Claes Gau//in, M.Sc. (Eng.) on the technical aspects of text processing and Mr. Mar­tin Harrebek in the photographic laboratory.

The research has been generously supported by the Gothenburg Business School Foundation and my own department, the Department of Human and Economic Geography.

The gratitude for support and comments is one thing, the responsibility for the end product another. Whatever the amount and quality of information delivered or withheld, the frankness or sublety of opinion offered, once the text and figures come from the printer, the author is responsible, solely and completely.

Gothenburg (Goteborg) March 1987 Risto Laulajainen

»We started our Fortnights 13 or 14 years ago. It was a result of something I saw in Sweden, an exhibition of French merchandise at one of the great department stores in Stockholm.» Stanley Marcus, President of Neiman-Marcus Company (Broadway-Hale Stores, Annual Report 1969, p. 15).