More Big Box Blues

I know my ranting about the pending demise of the big box retail format sounds crazy, but the facts are getting harder and harder to ignore.

The National Retail Federation just released the preliminary results of a survey where 8,500 respondents where asked about the customer service provided by retailers.

The retailer with the best service? Amazon. In fact, 7 of the top ten retailers don’t even have stores.

Details, such as they are, are here:

http://www.thestreet.com/story/10627227/1/amazon-kohls-top-for-customer-service.html?cm_ven=GOOGLEFI

None of the top ten are big box stores and I don’t yet know where they fall on the list, the full results won’t be released until January.

So just how important is customer service?

The top two retailers on the list, Amazon and Kohls, both posted great third quarter results in what may be the worst retail environment of the modern era. Amazon had a 69% increase in profits while sales rose 28%. Kohls posted a 20% increase third quarter profits and a 2.4% increase in same store sales.

Meanwhile, back in the big box, Lowe’s saw a 30% decrease in profits, Home depot was down 8.9%, Target held on with an 18% gain and Wal-Mart answered back by pledging to cut prices, yet gain, on 60 hot selling items for the holidays.

Holidays which, by the way, have started even earlier than ever. Black Friday sales started this week, a week before Black Friday, in Wal-Mart and Sears. Other big boxers are expected to follow suit.

What will the effect of this increase in price cutting have on future earnings? We’ll have to wait and see, but it just can’t be good.

KKR takes Dollar General public and I feel validated!

Just once I’d like to be right and rich!

Late last month I highlighted the growth of the “Super Discounters” and noted that one of the largest, Dollar General, had been taken private by KKR.

Well, this Friday Dollar General is slated to go public again and the buzz behind the offering is strong. The details are in this WSJ article titled: Dollar General Dresses Up for Its Debut, Deal is one of the year’s signature IPOs

http://online.wsj.com/article/SB125772559135637369.html?mod=WSJ_hps_sections_markets

Naturally, I agree with the WSJ’s assessment when they agree with me.

I think they got it right when they talk about the company’s upside potential. But I had to laugh when an analyst stated in the article that he thinks consumers who traded down to the Super Discounters will return to shopping at Wal-Mart once the economy begins improving. His rational was "we contend that when consumers have more money in their pockets, they are less likely to shop in those channels (meaning stores like Dollar General) because the experience isn't as pleasant as in more moderate and higher-priced channels”.

Really??

The shopping experience is pleasant at Wal-Mart?

I’ve shopped Dollar General and I can tell you personally that it beats the stuffing out of shopping at a Big Box.

The store is easy to navigate, not dirty or run down, and it has everything you usually need for cheap. While not a day at the beach, the experience of shopping in a Dollar General was way better than at Wal-Mart if for no other reason than it saved me a half hour of wandering. I got what I needed and got out, with no one in line in front of me.

If you believe in the wisdom of “following the money”, then you have to take note that KKR is going public with Dollar General. Combined with the other factors affecting consumer behavior during this recession, the growth of this model of retail is a big reason why I think the days are numbered for your typical big box outlet.

The guys at KKR guys are very rich, because they are most often right.

Now, where’s my payday?