Sitting down at lunch one day with me, they wanted to know what impressions I had formed in my travels around the country. I thought a moment and then replied that what we call the new economy--what in fact passes for modern-day capitalism--had perhaps grown too efficient, too successful in meeting our everyday needs. I said that there were too many stores in America, too many choices beguiling the consumer, and that the economy was now built on too much debt. Doug and Pat quietly nodded in agreement.
But if I were asked the question again, I might answer differently. I would say that I'm stunned by how much small-business owners like Doug Meredith work and how little they complain. I would say that the "new economy," when viewed from up close, appears in some ways not new at all. It is harder, yes, because nothing ever stays the same now, and the lulls that in the past allowed for complacency or a mistake have disappeared. But owning a small business has never been easy. I would say, too, how remarkable it is that despite years of betrayal and adversity the Merediths exhibit no rancor. There is instead a serenity, a bone-deep sureness about what has been accomplished. The Merediths have built a good business and in so doing have built a good life.
One can't know the Merediths without believing that every small business, even one as seemingly ordinary as a local pharmacy, can assume its own special nobility--because of the tests it presents, the self-knowledge it offers, the life it makes possible. But mostly, as the Merediths' story makes plain, to make it in business here in America at the end of the century, you must first safeguard your soul.
Do that, and the rest is simple.
'I Feel Your Pain': Consolidation is hitting industries of every kind
What makes Doug Meredith's life as a small-business owner so tough is what's going on around him--namely, ongoing and widespread consolidation. Although the pharmacy business has been hit hard in recent years, it is far from unique. These days, it seems as though every business--from veterinary hospitals to charter-bus companies--is being consolidated. Retailers, manufacturers, distributors--everybody's feeling it. Here is a snapshot of what's happening in a few representative industries across the country--and why.
PHARMACIES
What's happening: From 1994 to 1995, independent drugstores saw sales climb just 0.5%, while drug chains experienced an 11% rise in sales. Since 1990, nearly 9,000 independents have disappeared, and the segment has seen its share of the total market decline from 26% to 18%.
Why: Managed care drives insured patients to high-volume prescription providers. Large drugstore chains and supermarkets have merged to capture that business at lower margins while they enjoy economies of scale. Insurance companies, meanwhile, favor high-volume providers.
AUTO-PARTS MANUFACTURERS
What's happening: Suppliers to the auto industry are getting bigger and fewer; their numbers have dwindled from 10,000 in 1975 to 2,800 today. Their estimated average annual revenues have risen from $100 million to $300 million in the past five years.
Why: Most suppliers must have global manufacturing capabilities. Automakers are desperate to drive costs down. Suppliers must add more value by making more components and controlling more of the "geography" of the car.
RESTAURANTS
What's happening: Independents are losing market share to chains. In 1995, the restaurant industry grew by 3%. But the top 200 "quick service" chain-restaurant companies saw sales grow by 6%, twice the industry average. The top 10 companies accounted for 28% of the industry's total sales. In 1995, the top three companies brought in 18% of total sales, versus 12% in 1980.
Why: Fast-food operators have grown more flexible at situating stores and changing menus to suit consumer tastes. They have also spent a lot on advertising, with the bigger players spending more to reinforce brand image. At the same time, cash-strapped consumers search out value and convenience.
RADIO STATIONS
What's happening: Market-forced mergers. From January 1996 to February 1997, there were more than 2,100 radio-station mergers, representing an aggregate value of $15 billion. That compares with 1,400 deals in calendar-year 1995, worth $5.5 billion. The average-size deal among publicly reporting radio broadcasters increased from $14.7 million in 1990 to $39.4 million in 1995.
Why: New federal regulations allow media companies to own substantially more media outlets. Multistation companies can cut better deals with large advertisers and can spread out "canned" content, such as music, traffic, weather, or business reports, across more stations.
CREDIT-CARD PROCESSORS
What's happening: Bigger players are taking greater share. In 1995, the number of general-purpose and retail private-label credit-card accounts in the United States rose by 12%, to 808 million. The number of accounts processed by the top 10 third-party credit processors rose by 23%, to 197 million, or 24% of the total.
Why: Credit-card processing combines a high fixed cost--a big central computer facility that supports a global network--with very low variables (or incremental costs), motivating processors to aggressively add customer volume to raise profits. Consumers, meanwhile, are carrying more credit cards.
Edward O. Welles is a senior writer at Inc.
Resources
BAY PHARMACIES, Doug Meredith, 112 Cherry Point Mall, Sturgeon Bay, WI 54235; 414-746-2970 88
NATIONAL COMMUNITY PHARMACISTS ASSOCIATION, 205 Daingerfield Rd., Alexandria, VA 22314; 703-683-8200; www.ncpanet.org 88
