In an intriguing article comparing the rise of Sears and Amazon, Derek Thompson explains how Sears expanded from a mail-order business to physical stores:
In the early 1920s, Sears found itself in an economy that was coming off a harsh post-World War recession, according to Daniel M. G. Graff and Peter Temin’s essay “Sears, Roebuck in the Twentieth Century.” The company was also dealing with a more lasting challenge: the rise of chain stores. To guide their corporate makeover, the company tapped a retired World War I general named Robert Wood, who turned to the U.S. Census and Statistical Abstract of the United States as a fount of marketing wisdom. In federally tabulated figures, he saw the country moving from farm to city, and then from city to suburb. His plan: Follow them with stores.
The first Sears stores opened in the company’s existing mail-order warehouses, for convenience’s sake. But soon they were popping up in new locations. Not satisfied with merely competing with urban department stores like Macy’s, Wood distinguished new Sears locations by plopping them into suburbs where land was cheap and parking space was plentiful….
The company’s brick-and-mortar transformation was astonishing. At the start of 1925, there were no Sears stores in the United States. By 1929, there were 300. While Montgomery Ward built 90 percent of its stores in rural areas or small cities, and Woolworth focused on rich urban areas, Sears bet on everything—rural and urban, rich and poor, farmers and manufacturers. Geographically, it disproportionately built where the Statistical Abstract showed growth: in southern, southwestern, and western cities.
So what is the equivalent today of the burgeoning suburbs of the 1920s in terms of locations? The end of the article hints at one option:
Amazon, too, will thrive as long as it uses American demographics as a roadmap and takes advantage of new personal technology, like mobile phones for shopping and AI assistants for the home. In the last six months, Amazon has spent $13 billion to buy Whole Foods and its upscale urban locations. At the same time, it has offered discounts for low-income shoppers to become Prime subscribers.
Locating in wealthy communities is an interesting strategy. Other major popular retailers today are following such a model: think of Apple stores (perhaps another reason they cannot truly be town squares if they are primarily in wealthy areas) and Starbucks locations (less exclusive than Apple but still located within reach of wealthier customers or along well-trafficked roadways – see all 11 locations in the wealthy suburb of Naperville). Could we end up with a bifurcated retailing model where the wealthy (and those who can travel to these locations) can shop at a bricks and mortar store while the majority of Americans primarily shop online? This might be an overlooked edge for Walmart at this point: Amazon may rule online but Walmart stores, like Sears, are where many more typical Americans are and it may take some time to switch loyalty.
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