"Montgomery Ward is gone. J.C. Penney Co. announced the closing of at least 47 stores in January. The department stores are really under siege. Maybe it's that Americans are sick of slogging through those big neutral places that just have redundancy and soft goods that all look alike and ready-to-wear that's dull. Maybe it's that size is boring in many instances, and too much of nothing is bad.
Passion counts. Passion counts more than size.
-- J'Amy Owens, president, The Retail Group, Seattle
"Conversely, you have Target, which is very big and very good, because it represents time savings, it represents the sure thing -- 'I know I'm going to get my needs met when I go there, I understand what they sell, and I can anticipate its being in stock.' That model, that construct, is big and efficient and simple to understand and also hip. Nothing is more hip than Target, and if Target can be hip, there's hope for all of us.
"Big can be both bad and good. It's not ever only about size. How a smaller retailer can compete is really the $64,000 question. The answer is by picking a niche, because niche rhymes with rich. There are contenders that can ride the edges or the fringe of generational desires, and they offer a fashion direction and a position that Target never could. There is still plenty of room for specialty stores to provide fashion direction and leadership and to take risks and to be innovators, and there is a huge market for that. Because they're more nimble and they don't source themselves, meaning they don't try to be the manufacturer as well. They can move faster. Passion counts. Passion counts more than size."
Rick Andron, 55
President, U.S. Pool Corp., Boca Raton, Fla.
Revenues: $6.5 million
Status: Start-up that is pursuing a roll-up strategy in the pool-service industry in south Florida, a fragmented market that has traditionally been dominated by small companies
"About two years ago we identified a niche that consisted of hundreds of mom-and-pop operators. The largest had roughly 1,000 pools in a geographic area that contained 175,000 pools. So there was really nobody that was over a fraction of 1%.
"We began the acquisition of small companies in our service area, and selectively chose a number of operators who had strengths in different fields. That gave us collective expertise in each of the main areas that constitute a comprehensive pool-service-and-repair company.
"Right now we have 4,000 pools, so we're about four times larger than our nearest competitor in south Florida. The advantages are that we have the expertise, we have full-time customer service, we have human beings instead of answering machines answering the phone.
"We can work out marketing and other arrangements with manufacturers, and because of our size, we can get larger discounts. We are also one of the only companies capable of handling 500 or 1,000 homes and hardly blinking in doing so."
Jim Collins, 43
Management educator, coauthor of Built to Last: Successful Habits of Visionary Companies and author of the forthcoming Good to Great: Why Some Companies Make the Leap ... and Others Don't
"To be a great company, you absolutely must be the best in the world at something. That doesn't mean that you need to be the largest, however. To cite one example: Patagonia Inc., absolutely without question the best company in the world at outdoor clothing, with an environmental conscience. Yet Patagonia explicitly shuns size and in fact got itself in trouble in the mid 1990s when it grew to be too big.
"There is a natural size needed for any company to be the best in the world at what it does. Sometimes that requires significant size (for example, Wal-Mart must be large to be the best at what it does), but other times it requires being smaller. (Patagonia must remain small to truly be the best at what it does.) The real question is not, How do we become bigger to compete? but, How do we become the absolute best in the world at something, and what size do we need to be to be the best?"
Amir Malin, 46
CEO, Artisan Entertainment, New York City and Los Angeles
Revenues: $400 million
Status: Midsize film company in an industry with both very large and very small players
"We're obviously not one of the large major studios. On the other hand, we're not one of the very small independent companies out there that are involved in a handful of projects, probably doing $30 million, $40 million, $50 million in revenues. We're kind of in the middle, and the great thing that we have is the ability to duplicate all the functions of a major studio at a fraction of the overhead costs that exist at the major studios. So I think that's a big positive.
"On the other hand, the large studios are involved in a wide variety of businesses above and beyond film and entertainment. That gives them another income source to offset the rough days we all experience.
"However, the larger the entity, the more difficult it is to make decisions. There's no reason today that we need the overhead structure that exists in Hollywood in order to effectively market and distribute films. But it's a legacy that exists because the people that move into those positions are happy with the status quo. It's a business that's very much driven by revenues, so the cost structure in generating that revenue is never looked at carefully, and I think that's a big problem inherent in our sector.
"We tend to be a little more strategic -- a little more innovative -- and use a little bit more guile and ingenuity, or we try to, in coming up with our campaigns. And that, I think, was evidenced by what we did on The Blair Witch Project.
"Given the businesses that we're in, I think we're at a perfect size. That being said, we may expand into other areas, and that will require us to increase in size. So we'll see."
Michael Powell, 60
Founder and owner, Powell's Books Inc., Portland, Oreg.
Revenues: $44 million, including $9 million in online sales
Status: Seven-store chain and Internet bookstore in an industry in which small independent bookstores have lost significant market share to a few much larger national chains
"I come from an industry that traditionally has a lot of small players and two or three large players. We are in between. Size certainly matters, and not always in a positive way. One can look at Borders, which did not have an Internet strategy; at Barnes & Noble, which is having a difficult time executing theirs; and at Amazon -- everyone knows its dilemmas. Then the independents are so small that it's very difficult for them to pull the resources together to take on new initiatives, especially technological ones. I think there is a middle area where you have sufficient resources but not so many resources that you become wasteful and lethargic.
