Big box stores challenge specialty retailers

by Jill Henry

SBJ Reporter

jhenry@sbj.net

The Kitchen Pantry is bare.

After nearly five years in business, the store at 1328 E. Battlefield in Fremont Center closed in July.

The Kitchen Pantry, which specialized in gourmet kitchen tools and bake ware, struggled as national chain stores entered the market, according to owner Jerry Warren.

Warren said his store's sales dipped following the opening of larger stores Kohl's, Bed Bath & Beyond, Wal-Mart Supercenters, TJ Maxx that also carried kitchenware.

"They're still shooting after the same customer," Warren said. "We tried to carry better products and did carry better products, and we had great customers. We just didn't have enough of them."

"It won't be long until that's the way it's going to be in every industry. It's going to be big box stores or that's it," Warren said.

Warren declined to disclose financial data for the store or his career plans.

Nationwide, the largest specialty retail chains saw 9.2 percent growth in 2003, according to a National Retail Federation study.

Best Buy topped the list with 2003 sales of $24.5 billion, a 17.2 percent increase over the previous year. Also on the list was Gap with 2003 sales of $15.85 billion, a 9.7 percent increase over 2002; Staples with 2003 sales at $13.18 billion; Office Depot at $12.36 billion; and Toys R Us at $11.57 billion.

While big box stores enjoy success, they sometimes present challenges for locally owned businesses.

Unique products

Next door to The Kitchen Pantry, at 1326 E. Battlefield, Charles "Chuck" Brown has kept the doors open at his upscale boutique for 27 years by focusing on unique merchandise and customer service. Charlie's sells women's fashions.

Brown goes to market in Dallas five times a year, hand-selecting items for his store. "If you buy something in one of the major stores, there's going to be 100 of the same out there, and they can come here and buy it and almost have an exclusive on it," he said. "We've been at it long enough now, we know our customers and we actually go to market and pick merchandise for our customers."

He has strong opinions on the art of customer service.

"You walk into Wal-Mart and they think customer service is putting a guy at the front door saying hello as you come in. That's what they call customer service there, and it's not," he said. "If you go into a specialty store, you can pretty well get one-on-one service, and there's no way a department store or chain can do that."

Larger retailers, Brown added, try to do so much volume that they don't have enough workers to take care of customers.

Buying power

Volume has affected the business plan of Electric Newsstand, which opened Aug. 2 at 414 South Ave.

Manager Drew Summers said the purchasing power of Wal-Mart leads to the mega-retailer undercutting prices on books and magazines. Wal-Mart reported total 2004 fiscal year sales of $256.3 billion, up 12 percent from 2003.

"They're the primary enemy of the small business," Summers said. "They're the ones that make it difficult for us because the bigger stores like Barnes & Noble and Borders typically offer the same prices that we do. They will have a bigger selection, but with the selection that's usually going for a different type of niche."

Price is not the priority at Electric Newsstand. "I have titles that aren't available anywhere else," said Summers, whose resume includes stints at Barnes & Noble, Borders and Heritage Bookstore, which shares its owner, Ken Giddens of Ozark News Distributors, with Electric Newsstand. "I'm trying to get more and more of those, as well as having the titles that everyone's familiar with."

Two Heritage Bookstores 1455 S. Glenstone and in Chesterfield Village closed recently, but the 3867 S. Campbell location is still in business. Heritage competes with larger stores Barnes & Noble, which sold $5.9 billion in 2003, and Borders, which recorded $3.7 billion by stocking new releases and best sellers with "a good collection of local titles," Summers said.

Foster's Appliance at 1928 S. Glenstone stays competitive by knowing its customers by name and by enjoying purchasing power that Manager Jeff Landskroner said rivals the big boys.

"What a lot of people don't know is, even though we're a small $5 million-a-year business, we compete with Lowe's, Home Depot, Best Buy, because we are part of a national buying group," he said. The buying group is called Nationwide and it has about 4,900 member stores.

Landskroner said the big box stores haven't affected Foster's business. "We've been very fortunate that we're growing at 40 percent a year the last three years in a row, as far as sales."