The closing of Dillard\u2019s\u00a0downtown store, in 2002, marked the end of a major chapter in the history of Cleveland retailing.\u00a0 Local department stores, for over 150 years had ruled the roost.\u00a0 These retailers had something for everyone from inexpensive daily necessities to high-priced luxury goods.\u00a0 Department stores not only catered to the current needs and wants of their customer-base, but also, attempted to anticipate their future wishes.\u00a0 Shoppers appreciated their efforts, and bought from them year in and year out.\u00a0 Brand loyalty and store loyalty became synonymous in the minds of most customers.<\/p>\n
Part of the financial success enjoyed by large retailers originated with their competent sales staff.\u00a0 These friendly salespersons knew a great deal about the items they sold.\u00a0 In addition, many kept handwritten records on their repeat customers that included such things as clothing size, color preferences and\/or specific fashion styles.\u00a0 Salespersons often contacted preferred shoppers when a desired item arrived.\u00a0 They wanted to know whether or not they should set it aside for them for pick up later.\u00a0 In emergency situations, some might even deliver an item to a customer\u2019s home at no additional cost.<\/p>\n
Repeat business depended on the ability of local retailers to remain at the \u201ctop of their game.\u201d\u00a0 Innovation revealed itself in many distinctive ways.\u00a0 It ranged from free home deliveries and supervised playgrounds for children to customized credit services and spectacular annual events.\u00a0 The Industrial Revolution\u00a0produced a new mechanized world that prized business efficiency\u00a0and production standardization.\u00a0 Savvy retailers, recognizing this vital connection, wasted no time before capitalizing on it.\u00a0 Traditional large department stores became the conduit between product manufacturers and the buying public.<\/p>\n
Cleveland department stores, like other U.S. retailers, achieved their business goal by offering vast supplies of desirable goods and services\u00a0at reasonable prices.\u00a0 However, this shopping experience extended far beyond routine daily business transactions.\u00a0 Local department stores also assumed the responsibility of educating the public about the ins and outs of retailing, and how to take advantage of the many things offered.\u00a0 As the outspoken New York clothier Sy Syms so often said \u201can educated consumer is our best customer.\u201d\u00a0 Truer words were never spoken.\u00a0 Through informative demonstrations, interaction with salespersons and special advertising, customers over time became discerning shoppers.\u00a0 They soon recognized the differences between quality products and junk items and between value and unfair pricing.\u00a0 These lessons proved invaluable as the retail market in the U.S. became more sophisticated.<\/p>\n
Like other successful business ventures, traditional department stores\u00a0admirably responded to specific consumer needs and wants.\u00a0 Even in New York City, a discounters\u2019 paradise, independently owned and operated large department stores posted sizeable profits into the 1970s.\u00a0 This being the case, then what happened?\u00a0 Many of their problems originated with Baby Boomers. This generation was like no other in recent memory.\u00a0 They demanded an exhilarating retail experience.\u00a0 Specifically, they insisted upon an informal shopping environment where discount pricing took precedent over all other considerations.\u00a0 Baby Boomers also sought convenience which meant shopping primarily in the suburbs.\u00a0 Discount department stores in the 1970s seemed to fulfill their needs.\u00a0 However, savvy shoppers, beginning in the 1980s, sought out bargains from other previously untried retail sources.\u00a0 Warehouse clubs, TV shopping networks\u00a0and discount stores websites became the latest rage.\u00a0 On-line marketplaces such as EBay\u00a0and electronic commercial companies like Amazon increasingly cut into traditional retailing\u2019s territory starting in the 1990s.<\/p>\n
The department store industry, as a whole, and Cleveland stores, in particular, might have survived this latest on-slot of competition had they discarded some of their outmoded business ideas quickly.\u00a0 After all everyone in Cleveland knew who Higbee\u2019s and the May Company were, but few had ever heard of store such as Giant Tiger\u00a0or Uncle Bill\u2019s.\u00a0 Unfortunately, these large downtown retailers failed to heed the warning signals.\u00a0 Instead, they continued to practice retailing in the good old fashion way.\u00a0 Any changes made in the 1960s and 1970s were mostly cosmetic, nothing substantive.\u00a0 Department store retailers should not be criticized too harshly for their lack of insight.<\/p>\n
Who knew, perhaps those discount department stores\u00a0were little more than a passing fade.\u00a0 Short–term thinking supported this notion.\u00a0 However, from a long-term perspective, everything in business was changing at an alarming rate.\u00a0 It was just a matter of time before traditional downtown retailers would have to face that fact.\u00a0 Without major changes, they were destined for extinction.\u00a0 Unable to beat growing competition and beleaguered by profit losses, changing ownership and mounting debt, Cleveland department stores, beginning in the 1960s, closed their doors.<\/p>\n
The passage of the Consumer Goods Pricing Act of 1975\u00a0(PL 94-145, 89 Stat. 801) made this situation more precarious.[1]<\/sup><\/a> This act prohibited U.S. manufacturers from setting up established price lines for items sold by conventional retailers.\u00a0 Washington lawmakers hoped that this law would stimulate an ailing industry.\u00a0 Specifically, they wanted to encourage extensive retail competition by eliminating the requirement that all top quality, name brand items must be sold through \u201creputable retailers.\u201d\u00a0 Reputable retailers, in this instance, generally meant traditional department stores.\u00a0 Eliminating that legal restriction opened the floodgates.<\/p>\n Large numbers of discount stores suddenly appeared.\u00a0 Some department stores responded by closing their doors.\u00a0 However, most downtown retailers remained calm.\u00a0 They had survived worse economic crises in the past.\u00a0 A rebounding national economy in the 1980s provided many of them hope.\u00a0 Also, the arrival of a dynamic Canadian entrepreneur\u00a0named Robert Campeau\u00a0in 1984 added a whole dimension to U.S. retailing.\u00a0 He not only appeared to understand the needs and wants of retailers, but also, possessed the kind of capital necessary to insure their industry\u2019s survival during these tough economic times.<\/p>\n Through leveraged buyouts, the Campeau Corporation gained control of both Allied and Federated Department Stores.\u00a0 The accumulated debt resulting from these buyouts was fantastic.\u00a0 However, Campeau reassured both Allied and Federated stockholders that the only way to make a great deal of money was to invest heavily in retail corporations traditionally known for their high returns.\u00a0 Speculative investments, of that nature, were not meant for the faint hearted.\u00a0 However, the bull stock market of the 1980s seemed to encourage this kind of freewheeling investment, and Campeau was willing to chance it.<\/p>\n As mentioned earlier, this kind of large-scale investment came with built-in risks.\u00a0 Much of it rested on credit.\u00a0 There was very little hard species behind it.\u00a0 As long as the stock market remained bullish and inflation levels remained stable then this kind of speculative investment would in all probability pay high dividends.\u00a0 However, if there was the slightest downturn in the market or a sudden rise in inflation then a selling frenzy would occur.\u00a0 Only the most nimble investors would survive that financial turmoil.\u00a0 Even well-healed investors like Campeau often lost a great deal on such speculative ventures.\u00a0 The Stock Market Crash on October 19, 1987 saw the Dow Jones\u00a0slip by more than 500-points.\u00a0 That represented the largest drop in a single day ever.\u00a0 It definitely affected the future of the Campeau Corporation.\u00a0 That company, for the next two years, tried to recoup its losses with no success.\u00a0 Unfortunately, the market had bottomed out, and these national store chains were two of its many casualties.<\/p>\n Unable to meet its $7,500,000,000 debt obligation, Allied and Federated, on January 15, 1990, filed for bankruptcy protection under Chapter 11.[2]<\/sup><\/a> That action if approved by the court would allow them to operate through reorganization.\u00a0 Bankruptcy courts often turn down such requests.\u00a0 After all, why should they be given special privileges often not afforded to smaller, individually owned businesses?\u00a0 However, the financial repercussions resulting from the closing of Allied and Federated stores would have been devastating to the U.S. economy.\u00a0 Therefore, the court ruled in their favor.\u00a0 Restructuring meant restocking merchandise, establishing a reasonable debt repayment schedule and liquidating unprofitable divisions.\u00a0 These retailers, in exchange, received $700,000,000 in loans.\u00a0 Federated Department Stores\u00a0received from Citibank\u00a0a 12-month loan of $400,000,000, while the Allied chain got a 15-month loan from Chemical Bank\u00a0for $300,000,000.\u00a0\u00a0 The new Federated stores, with Macy as its banner, represented a leaner version of its former self.[3]<\/sup><\/a><\/p>\n New discount stores, on-line marketplace services and a host of specialty shops soon filled that void.\u00a0 The question facing the retail industry today is whether the remaining national chains will continue to dominate or will some other business archetype replace it?\u00a0 It is anyone\u2019s guess.\u00a0 However, one thing is certain.\u00a0 Today\u2019s retail success stories are no longer the logical result of individual innovation and intuition.\u00a0 Like so many other modern-day businesses, large retailers represent an amalgamation of business experiences from many directions.\u00a0 Historically speaking, large local department stores symbolized a phenomenal business success.\u00a0 They played crucial roles in the evolution of U.S. business.\u00a0 They represented an economic phenomenon second to none, well worth emulating in today\u2019s uncertain world.\u00a0\u00a0 Having said that, what practical lessons do they offer us?<\/p>\n <\/p>\n