THE DEMISE OF MOM AND POP?
Like Harry W. Schwartz Bookshops, mom-and-pop businesses throughout the economy are struggling to transform themselves in the face of invading big competitors. Here's a look at five industries where the battle has already taken a toll
Toy Stores
Market share of top 5 retailers: 51.7% in 1993; 42.3% in 1990.
Status of mom-and-pops: Still players.
Massive growth by massive merchants like Toys "R" Us and general retailers like Wal-Mart has all but obliterated the middle-tier player. "Our industry has been polarized -- there's Toys 'R' Us and there's the mom-and-pops. Everyone else has been decimated," laments Christopher Wass, founder of the American Specialty Toy Retailers Association and owner of three independent Alphabet Soup toy stores in Iowa. "The people who got cleaned out were the ones selling mass-market products in a mom-and-pop setting."
Wass estimates that independent toy retailers now claim just 5% to 10% of the market. "But," he adds, "if we work together to educate the consumer, we can grow that to 15% or 20%."
How? Wass says that surviving independents should promote their stores as distinct alternatives to mass marketers. They can stock educational products, sell toys that are not advertised on television, and offer a higher-priced, higher-quality line of goods. And independents can stage community events that emphasize their intimate setting.
David Kresge, senior vice-president of analytical services at Dun & Bradstreet Information Services, concurs that small retailers succeed by "focusing on the specialty end of the market. If you compete on a commodity basis, you are doomed."
Peter Reynolds, president of Milwaukee-based Brio America, a $25-million division of a $150-million Swedish toy company, says he distributes solely through specialty toy stores because "they sell toys based on what is in the package rather than what is on the package. Specialty stores get the product into the hands of the consumers and explain to them what the value is," he says.
Funeral Homes
Market share of top 3 operators (Service Corp. International, Loewen Group, and Stewart Enterprises): 12% in 1993; 2% in 1984.
Status of mom-and-pops: Very much alive.
Sweeping consolidation is taking place in this historically family-held profession, but you can't really see it. That's because, notes William Barrett, director of corporate communications for Service Corp. International (SCI), "when we buy a funeral home, we don't make any changes that are visible to the public." SCI comprises about 5% of funeral homes and conducts about one out of 10 funerals. It has grown from one Houston location in 1962 to a $1-billion international corporation with 1,431 locations. SCI purchases groups of high-volume funeral homes in urban areas and consolidates their back-office operations.
"Doing anything that interrupts the relationship with a funeral home's community is a mistake," explains Barrett. So each acquisition retains its name and, ideally, its director, but behind the scenes all functions are centralized.
Most independent funeral homes have high fixed costs because they're always ready to handle peak volume. SCI is more efficient. In Houston, for instance, SCI's limousine service has 13 hearses and 12 limos for its 17 funeral homes. If all 17 operated independently, they would need 24 hearses and 19 limos to accommodate their funerals. SCI's preparation centers embalm bodies around the clock. And member funeral homes get good prices on caskets -- the single-largest funeral cost -- because SCI buys in volume.
For most unaffiliated independents, little has changed. The majority are family-owned businesses at least one generation old. Ruth Anne Ohde owns Ohde Funeral Homes, in Manning, Iowa, with her father and brother. She believes they run their business (founded by her grandfather in 1905) as efficiently as the big players do. They handle 100 to 120 deaths a year and, with the help of their three employees, provide "old-fashioned personal service to families."
Hardware
Market share of top 25 home-center chains: 32.9% in 1993; 24.9% in 1988.
Status of mom-and-pops: Hammering away at niches.
Although most of the 22,000 hardware dealers in this country remain independent, the hypergrowth of warehouse retailers like Home Depot ($433 million in revenues in 1984, to $9.23 billion in 1994) has forced small players to huddle into voluntary chains. Purchasing collectives like Cotter & Co. and Ace Hardware Corp., whose member stores carry names such as Ace and True Value, buy wholesale goods almost as cheaply as the big players do, enabling them to price competitively. And they share other costs like TV advertising to enhance their brand.
Such arrangements have helped independents to deliver value -- or at least the perception of it -- to customers leaning toward superstores. "All independents have learned to be skilled at variable pricing," says Ellen Hackney, spokesperson for the National Retail Hardware Association, in Indianapolis. "They know which items are price sensitive."
