Placerville Hardware, the oldest hardware store west of the Mississippi, has been in operation for over 150 years.
During my time writing my blog and even before writing my blog, I have often struggled with businesses going under and not being able to shop or eat at these places anymore. Similar to the problem of death, but in a less serious matter. At death, we are separated from someone from the time they die until Jesus returns or when we die. But it often isn't like that in the business world. When Circuit City, Hollywood Video, Borders, Sports Authority, and Family Christian stores closed their doors, their presence as a company may have ended, but the experience of going to those stores often lives on in another company or locally owned store locations. Places such as Best Buy, Barnes and Noble, Books A Million, Dick's Sporting Goods, Big 5 Sporting Goods, independent Christian bookstores, and surprisingly in some areas, video rental stores, still provide the products and experience these stores provided. But some of these stores still living may be struggling and there is fear that some of these may go under soon. Fortunately, some of these are still doing well and are likely to remain open for the long term. I often have had anxiety about some of these places closing in the future and I often eased my mind by delving into researching these businesses to see how they are doing.
This reminds me of the Bible passage when Jesus is describing the wheat and the tares which growing together, are similar in appearance and will live together until they are separated at the end of the age. This is how I feel when I research businesses. I often try to distinguish with a few strategies in determining which ones are the locations that are doing well and are essential to the retail store’s success, the wheat of the retail world, versus the ones which are struggling and are likely to close, the tares of the retail world. Here are the few I am listing in this article:
- Store Remodels: See if the store has been renovated recently or if they are outdated. This can be a good indicator that a store location is a high performer among a retail chain. Retailers are willing to invest money in store remodels at locations that are making the most money and have the best outlook for their future. But I have heard many examples of retailers remodeling stores only to turn around and close them. For example, Sports Authority and Toys R Us had remodeled several of their stores only to close them down when both companies went under. But these are companies which went out of business, so all their stores whether old or new, closed. But there are also examples in which the same company still has stores with the old look even if they closed stores. For example, when the FYE (For Your Entertainment) Record Store bought out Sam Goody in 2006, they later decided in 2008, to convert all the Sam Goody stores into the FYE brand. But there were still a few which kept the Sam Goody name, with the reason that they couldn’t afford to get new signage for the FYE name. This is an interesting example because during the recession, many of the stores they remodeled into FYE from the Sam Goody name closed a couple of years after they were remodeled. Interestingly, there are still two stores FYE owns that still operate with the Sam Goody signage 14 years later. One in Medford, Oregon, and the other in St. Clairsville, Ohio. If they kept the Sam Goody name because they couldn't afford new signage, that would usually be a sign they would be gone in a year or two. But they still operate in 2022 with the same name, surviving the Great Recession, the iPod, and so far, through COVID, music streaming, and online shopping, as a brick-and-mortar music store similar to how it was 20 years ago. True, some of the things have changed at the stores, as they have adapted by adding more memorabilia and reducing the CD selection to remain viable and they may have become more popular as people are nostalgic about the past. Still, it is interesting how places manage to stay open without a remodel for several years, while some places close soon after their remodel.
2. 2. Seeing how many people an area has in order to support different businesses. I believe this one is the best method in determining if a retail store can be successful in a place or not. For example, there often tends to be one Walmart per 45,000, one Target per 75,000, one Office Depot or Staples per 168,000, one Best Buy per 250,000, one Barnes and Noble per 400,000, one Apple store per 1,000,000, and one IKEA per 2,000,000, to name a few. This is usually an accurate and useful formula to determine what places can support different stores.
There are a few outliers. For example, there are two Staples and an Office Depot in Bozeman, Montana, an area that is rapidly growing but only has 144,000 people in a 60-mile radius. Most areas that size only have one Office Depot or Staples. How are they able to support three? Best Buy being absent from the area, tourism, lower cost of operating a business to California standards (but not national standards as the cost of living is 21% higher than the U.S.), and the strong business environment may provide clues to this question. But even with these factors, it still seems odd.
Another example is a retail deficiency. Stockton, California lost its only Bed Bath and Beyond store in 2020, even though its 10-mile radius has 360,000 people and San Joaquin County has 762,948 people and growing. Most areas that size still have one or even two Bed Bath and Beyond stores. Even Quincy, Illinois, and Carson City, Nevada, areas with only 130,000 people both still have a Bed Bath and Beyond store. Why is this the case? There may be several reasons, having 5 department stores which are Macy's, JCPenney, Kohl's, McCaulou's, the only Dillard's in Northern California, and one of the few remaining full-line Sears in existence. This is the strongest argument on why Bed Bath and Beyond may have closed this store. Some arguments I had thought of when figuring this out are the high cost of operating business in California (I don't know if this is as important on Bed Bath and Beyond since they operate stores in much more expensive parts of California: San Francisco, and Oakland to name a couple and Stockton is one of the more affordable places in the state to operate businesses), the poverty and crime in the area (Stockton isn't necessarily that much poorer than the rest of the state and in fact, the dollar made there could have more purchasing power from a lower cost of living and higher wages and the store was in a nicer area of town), and Modesto being a stronger retail center (may be the strongest of the three, but Modesto having the only Bed Bath and Beyond in the three-county area: San Joaquin, Stanislaus, and Merced is somewhat odd. It makes sense for the Apple Store which commands a greater population. But Bed Bath and Beyond usually have a store per 400,000 to 500,000 people, San Joaquin is well above that threshold.
Then again, many retail businesses operate stores in small towns or in less popular malls, while bypassing bigger towns and malls. The last Blockbuster Video store is in Bend, Oregon, and not in New York's Times Square. The FYE (For Your Entertainment) Music store doesn't operate at the Mall of America, King of Prussia Mall, The Galleria Houston, South Coast Plaza, or even at the local Galleria at Roseville or Arden Fair Malls, even though they do operate at large malls. But they do operate at small town malls such as the Bayshore Mall in Eureka, California, the Rio West Mall in Gallup, New Mexico, the Yuba Sutter Mall in Yuba City, California, and the Hanford Mall in Hanford, California to name a few. Cost Plus World Market has a store in small Park City, Utah, but none in the Utah Valley (Provo/Orem area) and only operate one in Salt Lake County in Cottonwood Heights. Whole Foods has no stores in the Utah Valley in Utah or in the Inland Empire of Southern California, but do operate in small towns as Sonoma, California, Park City, Utah, Sebastopol, California, and just opened a store in South Lake Tahoe, California. Many small businesses have their only location in a small town and many business sectors are more prevalent in small towns than in big cities- antique stores are an example. Services aren't just needed in big towns; small towns are just as important in several business sectors and not everyone is positioned to operate in a big city market.
3. Looking at the competition in each area.
I would say this is a good indicator to see if they are successful or not. Areas that have much competition may fight each other and take some out, and areas, where one or two stores have a monopoly on sales of a product, can boost sales at these stores because of no other choices. But Kmart has tricked me in this area. When Kmart has made several rounds of store closures or when I go across the country or the state of California, I expect them to close in areas where Walmart and Target have come in and stole their business and expect them to stay open where the competitors haven't come to. I expect the stores they keep open to be bustling with customers as many of these have been in towns where they were the only game in town for the discount department store world. Maybe even expanding their stores and refreshing them to cater to changing demands. Towns in California such as Bishop, Grass Valley, Big Bear Lake, Coalinga, Taft, South Lake Tahoe, and Blythe, where Kmart has been the only game in town. I would call them the wheat of Kmart's empire. But surprisingly, all these locations have closed and only 3 Kmarts remain on the mainland United States (Westwood, New Jersey, Bridgehampton, New York, and Miami, Florida) and 6 operate in the US Territories (Guam, Puerto Rico, and the Virgin Islands). Why?? I understand why they closed in the town I live in because it is near a Walmart and has been struggling for years, but these towns don't have that problem. Albertson's left our local area several years ago and the company who bought the local stores, Save Mart, has closed several stores. But both Albertson's and Save Mart have stayed open and even expanded the stores they currently operate to keep up with the times. Save Mart closed in Folsom, California, and became a Dick's Sporting Goods, but Save Mart remains open in Placerville with 2 locations which both received a remodel. Ray's Food Place in Northwestern California and Southern Oregon has managed to stay open in the towns as many of these towns have one grocery store or one of two options. But why couldn't Kmart do the same with these stores? Why couldn't they operate like they were Walmart or Target in these towns? How is it that both Folsom and Roseville, California can have Walmart, Target, Kohl's, Costco, Sam's Club, and several other stores, and all of them still manage to succeed, but many of these towns that resisted Walmart and still had Kmart still lost their Kmart? Can a place live forever just because they are the only game in town, or do they often succumb to the newer competition that comes along regardless of their status? Overall, this method is a mixed bag. Even though Kmart has tripped me in this area, this method can be true. There are examples in which grocery stores and department stores perform much better when there isn't as much cannibalism between businesses. Kmart in Grass Valley was one of Kmart's most profitable stores because of the lack of competition and they closed not because of the location's underperformance, but because they proved to Target that they could still do well regardless of how bad Sears and Kmart are doing as a whole. Target is now working on opening a store in their place. But I notice that having competition can also provide pressure to help make these stores better and more efficient in their operations. It can help them become more resilient to outside forces and more relevant in their selection to the customer.
From researching these methods, I have grown in my understanding of how the business world works and where different stores are likely to succeed. But I have also understood that it is much more than just remodels, location, population radiuses, or even how prevalent competition is to determine the health of retail locations. It is also about relevancy, usefulness, customer service, quality, and the experience the business provides that helps businesses succeed. Most of all, it is important for them to be making a profit and have more equity than debt. Maybe having no debt, as Dave Ramsey emphasizes on his radio show about personal finances, can help a business succeed. But there is some use to these formulas in the business world and that this is a framework to understanding where businesses are most likely to succeed. Do you think these methods I listed are accurate and useful tools in understanding the business world?
3. Here's a bible verse I believe fits with the retail world:
The kingdom of heaven may be compared to a man who sows good seed in his field (building a successful retail empire), but while his men were sleeping the enemy came and sowed weeds among the wheat (overbuilding store locations and cannibalizing sales from existing locations) and went away...Let both grow together until the harvest, and at harvest time I will tell the reapers, Gather the weeds first and bind them in bundles to be burned (closing of unprofitable/underperforming store locations), but gather the wheat into my barn (focusing on the most profitable store locations)."
Matthew 13:24-25; 30.
B
