A new breed of business owners is taking the retail world by storm -- in ways that would have astonished their five-and-dime-store predecessors.
Fifteen years ago, Grand Avenue, in St. Paul, Minn., was a two-mile strip of automobile showrooms and repair garages, the kind of street St. Paulites visited only when they had to. Retail shopping in St. Paul was mostly accomplished not on streets like Grand Avenue, but in the self-contained, climate-controlled environments of the surrounding malls. Like cities and towns all over America, St. Paul had watched its bustling downtown retail centers dwindle and decay, their commerce following the fleeting middle class out into the suburbs.
Today, Grand Avenue presents a strikingly different picture. Close to 500 small stores, mostly owner-operated, line the street, selling everything from eyeglasses to ice cream. Brick minimalls dot the adjacent buildings, their walkways harboring cookware shops, clothing stores, and walkup restaurants. Pedestrians by the thousands shop and window-shop, stroll, eat and drink, and watch the crowds.
This too, of course, is a scene that has been replicated all ovr the United States. Ask anyone to name at least one district that has been revived or transformed by a proliferation of small new stores, and suggestions pour forth. Waterfront areas of Boston, Baltimore, New York City. Downtown sections of Chicago; Oakland, Calif.; Portland, Ore.; Pittsburgh. Smaller cities and suburbs as well. Listen to the answers closely, and the refrain you are likely to hear is, That's what's happening right here, in my town.
It is tempting to pigeonhole this flourishing of the specialty store as no more than the boutiquing of America, retailing's answer to the Rise of the Yuppie. In fact, however, the revival of small-store retailing typified by such places as Grand Avenue looks both more durable and more far-reaching in its impact than its evident trendiness would suggest. Not only are the new shops beginning to transform Main Street and its environs, they are indicative of some major shifts in the retailing industry itself.
The numbers are a good starting point in measuring the phenomenon. Departmentand variety-store sales, for example, grew only 37% (uncorrected for inflation) from 1977 to 1982. Specialty-store sales grew 56%, or roughly half again as much. Some specialty categories positively exploded: Bookstore sales grew 82%, sales of children's and infants' wear rose 92%, and toy-and-game-store sales rose a startling 112%. Projections by the Marketing Science Institute, in Cambridge, Mass., indicate that the trend away from general merchandising will continue. Even now, says Joseph Carideo, a partner with the New York City-based executive search firm of Thorndike Deland Associates, "general merchandisers are getting their heads kicked in by specialty stores." Thorndike Deland, Carideo adds, has seen a growing number of executives with MBAs in big retail organizations leave their jobs to work in smaller specialty shops (see "Retail Refugees," page 76).
Behind the rise of the specialty stores are some powerful demographic trends. For much of the postwar era, shoppers -- mainly women -- flocked to big stores, looking for standardized goods at the lowest possible prices. Today, despite the past decade's alternating bouts of recession and inflation, per-capita income is up, and households with two working adults account for a growing fraction of the population. "Two-income households value convenience," points out Mark Albion, a professor of marketing at Harvard Business School. "They want good store hours, close locations, quick entry and exit, excellent service, and in-depth selection of a particular product." They also seem to want products and ambience quite different from the standardized fare with which they grew up. "Consumers want to move away from the prepackaged, great shiny glass environments of the past," says Scott Ditch, a vice-president with The Rouse Co., which has developed some of the best-known urban shopping areas. "They want to walk into small shops and see merchants they know."
Without a doubt, large retailers as well as small ones can carve out niches based on today's shifting demographics and styles of life. The Gap Stores Inc., a successful chain of youth-oriented clothing stores; Crabtree & Evelyn, a chain of toiletries and accessories stores; Steve's Ice Cream Inc., once a tiny operation that now is planning to have some 300 outlets by 1988 -- all have helped build the specialty market. Leslie Wexner evidently had the right idea when he broke from his father's general clothing store some 20 years ago to start a more specialized retail shop. Indeed, the name of his now-famous $1.3-billion chain captures the trend that is sweeping American retailing: The Limited Inc.
But while large and small retailers alike can effectively play the specialty game, smaller companies continue to dominate specialty market share. For the retail industry as a whole, according to the government's latest figures, companies with four or fewer stores hold a 55% market share, and the figure is significantly lower in general merchandising and grocery. In most specialty areas, the share held by smaller companies is considerable higher: 70% in sporting goods and bicycles, 60% in eating and drinking establishments, 78% in children's and infants' wear, to name a few. Only in rare cases -- toys and games, for instance -- is aggregate market share in specialty retailing lower for smaller companies than for big ones.
When a major industry like retailing finds itself in the throes of a change like this, it is rather startling news. Big companies, after all, are supposed to muscle smaller ones out of the marketplace, not the other way around. And when rundown or declining areas all over America experience an economic transformation that draws consumers and taxpayers back from their suburban hideaways, maybe it counts as a front-page story.
