The Good Old Days

Extreme Value Retailing (EVR) was invented by F.W. Woolworth in 1879 in Lancaster, Pennsylvania. When asked why he was successful, Woolworth simply replied that “he made his customers feel rich.” While retail fads may come and go, Extreme Value Retailing (EVR) and “making customers feel rich” will never go out of style. Woolworth's first boss once described him as “the worst salesman in the world” but he was smart enough to come up with the formula of selling large quantities of low priced products with minimal service. By “making his customers feel rich,” he developed immense customer loyalty. He introduced EVR to the masses and changed the face of retailing forever.

At its peak Woolworth had 10,000 stores. The Woolworth building in New York was the tallest building in the entire world when it was completed in 1913. Sadly, after a 118-year existence, Woolworth was liquidated in 1997 and now is just part of retailing history.

What could have made this retailing giant fall? Woolworth's decline began in the early 1980's and continued to get worse until it eventually collapsed in 1997. DOLLAR stores began in the early eighties and with their success of dollar items, more and more stores began popping up everywhere. By 1997 it was clear that DOLLAR stores were a permanent part of the retail landscape. It's clearly no coincidence that Woolworth descent kept pace with the expansion of the DOLLAR store industry. DOLLAR stores just were doing a better job of “making their customers feel rich.”

Woolworth, McCrory and others like them were just beaten at their own game. Dollar Stores and DOLLAR sections within conventional retail establishments are now carrying the torch as king of EVR. For those of us in the EVR business these are in fact “the good old days.” Nowhere can a consumer “feel as rich” as when they stroll down an aisle in a store full of dollar items.

EVR works because America is a nation of consumers who spend a comparatively high percentage of their income on non-essential items. We are a nation of shoppers and spenders. Limited income combined with an insatiable desire to shop creates a perfect environment for providing consumers with products at lower prices than they expect to pay in conventional retail formats.

However low prices alone are not the only reason why EVR works so well and will continue to work. Prices and convenience are a potent combination that simply can't be beat. Consumers have less time to shop than ever before. According to MAS Marketing, consumers visited malls 1.4 times per month in 2000 compared to 3.1 times per month in 1980. Their monthly shopping hours reduced from 10 hours per month in 1980 down to only 2.9 hours in 2000. Convenience had become a key issue and most EVR stores offer that convenience.

According to Retail Forward, consumers visited small format EVR stores more often in recent years while reducing how often they visited supermarkets and discount department stores.

Today's EVR merchants address this desire for convenience by placing their stores in convenient neighborhood locations. A recent survey discovered that 45% of consumers feel convenience is the number one factor that determines where they shop. The second reason was price (42%). Clearly the recipe for success in an EVR format is a combination of low prices and convenience.

And that combination is driving growth. When you consider that an EVR store needs just 4,000 homes to support it - versus 25,000 households for a Target store - it's obvious the industry is going to continue expanding. How far? Consultants believe that by the year 2010 the number of EVR stores will rise from today's 20,000 to approximately 45,000-60,000.

These are the good old days. Let's enjoy them and take advantage of the opportunity set before us at this time.