Beyond Retailing and Costco Tomorrow

A short preview's of my new book--

Did you ever wonder the chain of events that brought the "big box stores" to the fore front of retailing today?  Well, let me take you back to the early 80's, at a time when there were no Costco's, Sam's,  Fed Mart's, Price Clubs or Pace membership stores.

In the 60's and 70's you had many different chains of supermarkets, like Safeway, Ralph's, Albertson's, Winn-Dixie and Fed Mart and many more.  They carried a basic line of groceries, meat and dairy products, along with a few stables in their stores.  Sol Price (founder of Fed Mart and Price Club) started us on the way to mass merchandising and big box stores that carried many, many products, warehouse style, in 79,000 to 100,000 sq foot stores, utilizing what was called cantiveler steel, to store the merchandise, right above the floor, in other words, no more, backrooms, or storage for the goods.

The philosophy was to "stack it high and watch it fly", buy in huge quantities and offer the consumer the lowest price possible.  You can make money in retailing by either, having a high marked up price, and selling a little, or have a very low price and sell a ton at low margins.

Sol Price, was very successful, in establishing his 19 stores throughout Califonira and Arizona in the 70's.  Long, long,  before, there was even a Home Depot.

Clear across the World, there was a new concept  developing , called the hypermart, introduced by the Hugo Mann, of the Mann Mobila Group, across Germany.  These were 200,000 sq. foot stores that carried everything, foods, clothing, automotive, household goods, clothing and much more under one roof.  Hugo, actually was a mass merchant.  At one of his hypermart locations in Germany, he had a shuttle bus, that wouldl carry customers from the hypermart in his parking lot over to his furniture store.  America, at this time had nothing like it.  His furniture store , was 3 stories tall, with the first flooor devoted, to k-d knock down assembly type furniture, the second floor consisted of contemporary furniture, and the third floor, expensive antique furniture.  To top it off, it has a restaurant on the top of the roof, overlooking the entire Mann Mobilia Shopping Centers. Truly, one stop shopping under one large roof, that appealed to the masses.

So, in the late 70"s, one of his partners, Heinz Gunlach, was sent to New York, to find a company to invest his millions of German marks that he had accumulated for years. After, a diligent search for the right company, they decided upon Fed Mart, being run by Sol Price at the time.  Little by little, they quietly bought up outstanding shares of Fed Mart, until they had a 51% interest int the company.  As soon as they acquired controlling interest, Sol Price was fired and lost complete control of his company.

For years Sol Price, with a dearth of lawyers, tried to get the control back, but to no avail, just boxes and boxes of pleadings, court papers, that would fill a  garage in his backyard.  Sol, finally gave up on the lawsuit and eventually opened up Price Club numbe 1, in San Diego, California, followed by Price Club, number 2 in Phoenix, Arizona.

On another note, Bernie Marcus and Arthur Blank, who were fired from the chain of Handy Dan, before they started Home Depot, actually met with Sol Price and were considering  filing litigation against their former company. One look into the stacks of legal documents in Sol Price's garage convinced them otherwise, and they formed Home Depot in the early 80's.

At the time of the split, several former Fed Mart associates, joined Sol Price in his new adventure.  Meantime, the shrewd Hugo Mann, continued to expand the former Fed Mart, and purchased valuable land throughout California, and Arizona to expand his company.  They purchased the old White Front Stores of California along with the old Treasury stores, of JC Penney's during the early 80's. He was ready to "hypermart" the locations, to make them similar to his German operation.

An aggressive expansion was launched, taking the chain of 19 stores, to a company with over 100 stores in less than 3 years.  When a chain grows that rapidly, it can have a devastating effect on the management, due to such rapid growth.  They opend a new store almost every month somewhere.

Eventually, it became too much for Hugo Mann who was then in his late 60's and wanted to liquidate out his retail holdings and form a holding company, and lease the land to other retailers, and he did just that.  He liquidated out the entire chain in less than one year, and re leased the sites that he owned to companies such as Ralph's super markets, and Target's.

In the meantime, Sol Price continued to expand his Price Clubs.  Eventually, many of his executives, left Price and went to Seattle to form a new company called Costco, and eventually some of them, left Costco, to form another company called Pace in Denver, Colorado.  Thus, the membership, large box retail stores were in full swing.  Finally, a deal was struck in the 90's for Costco to buy out Price Club, and that is exactly what happenned.

Costco has a World  wide reputation of having the lowest prices on their merchandise, along with great special buys, you will not find in any other retailer. (they are called one time buys)  When you enter one of their stores, its like a "hunt" to find their special one time buys and take it home with you.  They operate the most efficient warehouse "big box" stores int he World, clean, well merchandised and priced lower than any other mass merchant retailer.

One of the reason for their continued success and expansion, is the fact, they have never parted from their philosphy of the 6 rights,  know as the right merchandise, right location, right quantities, at the right price, at the right time, along with hiring the right people and paying them the best in the industry.

Jim Sinegal, their President and CEO fo many years, is without a doubt, the best merchant across the Globe, who knows how to find the best buy at the right price and display it so the millions of customers, that go through the doors of Costco, on any given day will buy. They continue to offer the merchandise to the consumers at the lowest price possible, high volume, low mark up.

This is a company, that will whether any storm, any recession and will always come out on top of their competition.

Have you ever shopped at Costco? , please add your comments.

To be continued all coypwrite laws apply. 2009   Ray Lanfear