Quote:
Originally Posted by jyl
So how are Nordstroms, Macys, Target, Kohls, Walmart, and all the other department and discount stores still in business and quite profitable? Maybe they just out-competed Gottschalks?
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That's exactly what they did!
Gottschalks had annual sales volume of about $700 million. Wal-Mart is somewhere around $250+Billion, Target is around $82+Billion, Macy's/Federated is around $28 Billion.
In order to stay afloat, you need to be profitable. That can be done by increasing revenues or decreasing expenses or some of both. At Gottschalks, we were buying around $800 million of inventory per year where as Walmart is purchasing around $750 BILLION. They are able to get purchase discounts that simply don't exist for the little guys. Walmart is able to dictate prices buy purchasing entire supplies (in China). By the way, Walmart, Costco, and others are getting great discounts on inventory by paying very low prices from merchandise produced in low-wage countries.
So, where can we cut expenses - Payroll is the next most controllable expense and that's what we were forced to do at Gottschalks. It's quite possible that this affected customer service and then ultimately reduced sales. It's also quite possible that with inflation and rising cost of living, people went to the big stores and bought cheaper stuff. As minimum wage has increased over the years, many smaller companies did not survive and even medium size companies (like Gottschalks) didn't make it. We have far less choice than we had in the past and as we continue to squeeze businesses, we are left with big-box stores and that's it.
jyl - you have stated in some of your posts that "I'm firmly on the "wait and see data" fence here." I don't think you need to wait as there is plenty of history to review. We used to have 1 income families and that was sufficient. We used to have all kinds of services (i.e., full service gas stations, milk delivered at your door, etc...). Raising the lowest incomes to keep up is not the answer as it just keeps pushing prices up and service levels down. I believe that we need to reduce wages at the top and I would do that by limited the maximum tax deductions for payroll.