The story of how a small group of pharmacies has survived one economic plague after another over the past 25 years.
A Small-Business Life
Spending a quarter century weathering one economic plague after another can leave a man wondering what's so new about the 'new economy'
Doug Meredith first arrived in Sturgeon Bay, Wis., on a raw March day in 1974, wind and rain lashing out from a dark sky. "It was an ugly, ungodly day," Meredith recalls. "Everything about it said, 'Don't come."
But Meredith, intent on owning a business, was out to defy the gods. He set his sights on a local pharmacy whose owner wanted to retire. Meredith was managing a pharmacy a couple of hours south, in a Milwaukee suburb, but that meant working for someone else. One night, he and a fellow employee had gotten to talking. "We could do this ourselves," they said.
The two men spread the word via the network of salesmen who made the circuit of pharmacies in the Upper Midwest, and soon a reply came back. There was a drugstore for sale in Sturgeon Bay, a town of 7,000 in the northeastern corner of the state, on Lake Michigan. Meredith, who grew up deep in the northern reaches of Wisconsin, hard by Lake Superior, was looking to get back to the country. Sturgeon Bay, even on that ungodly March morning, looked just fine to him.
The Maelstrom
The deal was struck 23 years ago this November, and Doug Mere-dith, now 58, has since spent the core years of his life tending a small business in a small town. Today Bay Pharmacies encompasses two locations, 38 employees, and enough sales per square foot to put the business in the top 5% of all U.S. pharmacies. Meredith's payroll now exceeds his first-year sales by 50%. When he first came to Sturgeon Bay, the town had five pharmacies. Now it has three: Meredith's two stores and Wal-Mart.
Meredith put every dime he had into the purchase of the business--$20,000 for his half share. The seller, in fact, financed the down payment on Meredith's house, where he moved with his wife and four small children. Looking back across the years, Meredith concedes that he never thought about not making it: "I was too young to know better."
Others--competitors, partners, neighboring merchants--have quit along the way, affirming what many small-business owners already know: there may be greater opportunity for the lone entrepreneur these days, but that promise is often mined with grim surprises. Partnerships have blown up in Doug Meredith's face. Employees have stolen from him--and have been stolen away by competitors. The local economy, supported by an old-line industry, nearly collapsed. Wal-Mart came to town, as did Kmart. Both in the same year.
"Brutal" is how Meredith describes the past five years of intensifying competition and eroding profitability in his industry. The average independent pharmacy now nets less than 3% after taxes, a 20% drop in five years. In the 10 years before 1993, 1,000 independents across the country went under; in the three years since, 3,000 have. "Sometimes it seems," concluded a weary Meredith on an afternoon last winter, "like the only time you win is when you die."
Bay Pharmacies' history--with its litany of late-century economic and managerial plagues--is unique in its particulars but universal in its kind. It is also a reminder that all the happy talk about the new economy can ring hollow when the reality behind the rhetoric is faced square on. Struggle and survival are the operative words here. Victories are few, and rewards are mainly intangible. The little that Doug Meredith has accrued as a small-business man has come from hard work and fair dealing. For him, the mere act of staying in business for nigh a generation now amounts to a private sort of honor.
His is the tale of a small-business life.
Partner trouble
At the outset of Doug Meredith's stewardship, Bay Pharmacies occupied a single 5,000-square-foot downtown location on the corner of Third and Jefferson Streets, which today is the home of the Donna movie theater. Meredith and his first partner pumped new life into the business, watching it grow by 15% a year from 1974 to 1977. The previous owner didn't advertise much; they did. He kept his prices high; they cut theirs.
They were also quick to heed customers who resisted change. Meredith inherited 300 personal charge accounts, which he wanted to eliminate. But the idea offended the first three customers he queried. Didn't he trust them? Didn't he know they always paid their bills on time? "People up here don't believe in plastic," says Meredith. "When they get a bill, they pay it." He quickly relented and, in fact, later expanded the store's charge program to keep pharmacy accounts from drifting over to Wal-Mart.
In 1976, a local independent grocer left downtown for a site in a new shopping center on Sturgeon Bay's west side. Meredith and his partner followed in 1977, opening a second--larger--location. Because of construction delays, the store wasn't up and running until November, and Meredith cursed himself for trusting the builders. "People don't change their buying habits in the middle of the winter. We died on the vine, just died."
For the next three years, the store struggled to atone for that blunder. Meredith was putting in 70-hour weeks, and his partnership was fraying.
The partner accused Meredith of stealing. He claimed that the incidentals Meredith typically signed for--a meal here, a new set of tires for the delivery van there--were, in fact, personal expenses. Then, on the day before Thanksgiving, the partner summarily called in auditors to review the books. Disgusted by the charade, Meredith sent the bookkeeper home. The auditors found nothing.
Meredith's main wholesaler offered to back Meredith in a buyout of his partner, lending him two months' worth of inventory to keep the west-side store afloat while Meredith, unable to carry the business alone, searched for a new partner.
Extremes
Sturgeon Bay is 45 miles east of Green Bay, the seat of the Door County peninsula that juts into the blue expanse of Lake Michigan. I went there to report this story in mid-January, arriving at what felt like the onset of the next ice age but what passes instead for January in Wisconsin--subzero temperatures intensified by a cutting wind. Ice jammed the harbor, which was dominated by the hulking shapes of the 1,000-foot-long freighters that haul iron ore down through the Great Lakes.
