What is the Future of Regional Chains?

Sears was once King. Where are The Good Guys, Circuit City, Incredible Universe, Electric Avenue (Montgomery Ward), Platt Music (operated inside of several regional department store chains) and so many others? Many of them were in fast and furious expansion modes and used lowest price on mass market brands to lure customers in. What caused their demise? Some say greed, some say focusing on using price to capture market share and a variety of other reasons. Some of you reading this were insiders at those companies and can offer perspectives.

Who survived the onslaught?  More importantly, how and why?  Will Best Buy, Regional Chains such as HH Gregg or even individual stores survive the current market conditions? Only Madame Zu Zu and her Crystal Ball know!

To venture some guesses, Best Buy survived impending doom in the 90’s, a rare feet! I would think they will survive and rebound in profitability. HH Gregg reminds me of all those electronics outfits which focused on Hi Fi Stereo and TV on the 70’s.   In some markets, they would fill the Sunday newspaper advertizing sections. They were in the, expand or die business.  The Grim Reapers was their best customer! Circuit City moved into many of those markets and did well for many years; their entry into the used car business was a major stumble.

HH Gregg is expanding in a down market, and in some areas such as Chicago and the Midwest in general they are probably going to feed off other regional chains which have older stores in older marginalized neighborhoods; not any longer noted as destination shopping. Grant’s in Chicago will suffer for HH Gregg’s arrival. I don’t think independent giants like ABT or the national chains will get hurt other than more pressure to reduce margins. The regional chains that mostly focus on the well known mass market brands from Whirlpool, GE and the upstart Korean Brands, will get hurt on margin.

The regional chains and independents who have lean headquarters staff, who decentralize delivery/install operations (which reduced overhead and improve flexibility), keep core items always in stock , have the free delivery & disposal of old appliances , who diversify brands to some not in the national chains (sadly not American produced product in most instances, Kobe Hoods is a good example) and who train and keep sales associates who  really can problem solve and honestly address customer needs without trying to force a sale.

Price is an issue, but customers still appreciate knowledgeable sales folks. One downfall of chains, regional or national is customers often feel they have walked into a used car lot or a field of vultures waiting to pounce.  Like the 70’s and in the late 90’s some of the chains got into the price guarantee and “Shop Us Last” advertizing programs. It back fired by giving the consumer a reason to shop everywhere. Creating a”Chinese Auction”  condition. Consumers often perceived these chains were not competitive in the first place, and look how many survived those advertizing programs when they started chasing price as a featured element in their advertizing and in store sales approach/marketing.

Most of the National chains do not do service and depend on the independents to do service.  Lack of product availability, competent delivery and service departments are the main reasons outside of price loose business.  Independents and regional chains are following the National chains in not connecting service with the same name as the retail operation.

Some chains are bundling with other product such as plumbing, electrical, cabinetry, furniture to some degree of success or doing partnerships with retailers who sell such product. Ferguson comes to mind. Pacific Sales offers a different retail experience and brand selection than its parent, Best Buy in select markets, with plans to expand. Some create showrooms which are mock up kitchens, have private areas where the customer is removed form rows of "white goods", the customer feels more special than at the stand up kiosks manned with sales people in a standard uniform polo shirt, vest or even the old fashioned dress shirt and tie which serves as a barrier of sorts to personal connection.

Let’s face it, consumers will equate product problems to the outlet that sells the product no matter what issues the manufactures have on the product or how service is handled now days.  By taking the retail name off the service operations, the consumer is not going to blame the retailer for the service issues. That is how National chains avoid customer issues. Same for delivery, many operations use third party delivery, some of which is pretty bad, it may be cost effective in one way versus in house delivery install service. But, it can cost you sales from bad word of mouth if in house or third party delivery is poor. If it’s good and effective, there will be little damage to product  or to customers homes and all the resulting issues with redelivery and damage claims. Those independents and regional chains who do these things well will survive.

HH Gregg will survive in my view, because they are going National and will have the buying power to go head to head with the Best Buy’s and Lowes of this market. Smaller regional chains will survive too, if they can deliver the replacement product which consumers are still buying when the refrigerator, wash machine and dishwasher has failed .Delivery that takes more than three working days results in the completion getting the sale.  Margins, bad everywhere and it does not a bit of good for all concerned to chase market share with lower price.  In the long run the consumer does not benefit.

What are your predictions and thoughts?