Chain Store Guide Through The Ages: 2000s
This year, Chain Store Guide celebrates its 80th anniversary. In honor of this occasion, we are hosting a monthly series of editorials called “Chain Store Guide Through The Ages”, starting with the 1930s. Each month we will take a look at a different decade and review what was happening in that time and how it effected the industries we now serve. Though we started off printing paper directories, our delivery of essential business sales leads has evolved into a robust and powerful online database system used by many of the top Fortune 500 companies today.
Chain Store Guide In The 2000s
The new millennium began with a collective sigh of relief as the Y2K bug failed to show up. On September 11, 2001 the U.S. experienced a shocking terrorist attack. President Bush declared a war on terror in response to the attacks and that set in motion wars in Afghanistan and Iraq. The nation was also hit with a series of severe natural disasters. The East Coast was hit with several hurricanes during the early part of the decade. Hurricane Katrina struck New Orleans and parts of the Gulf Coast killing nearly 2,000 people.
The way in which people consumed music, video, and other content had changed drastically due to advances in technology. The iPod debuted early in the decade and later the iPhone which revolutionized the cell phone industry. Blu-ray, Wi-Fi, HD, Flat Screen, and GPS all became household names. Traditional print media made the move to online. The way in which people communicated and networked changed as well. Social media websites such as My Space, Facebook, and Twitter exploded in popularity. Online retailing gained steam as well. Online only retailers such as Amazon as well as traditional retailers experienced tremendous growth in this area.
In November 2008, Barack Obama was elected President which made him the first African-American President in the history of the United States. Shortly before, the nation was struck with the worst financial crisis and recession since the Great Depression. Before President Bush left office in 2008, the $700 billion bank bailout bill was signed into law. Unemployment sky rocketed and the housing bubble burst almost overnight sending housing prices into a free fall all across the country. The economic growth and prosperity the country had experienced came to an abrupt halt and the next few years brought economic hardship and instability across the country.
Expensive designer clothing was still sought after by some, however, casual and comfortable clothing styles at reasonable prices were the popular choice at the start of the new century. The fashion trends of the 2000’s saw the fusion of previous styles. For the most part, the mid-late 2000’s did not have one particular style but recycled vintage clothing styles from the 1940’s, 1950’s, 1960’s and 1980’s.
Despite the numerous and mixed fashion trends of the 2000’s, items of clothing which were popular throughout the decade include Ugg boots, hoodies, high-tops, and skinny jeans. The decade also brought eco-friendly and ethical clothing, such as recycled fashions and fake fur. As with any other time period, you just never know what new trendy or outrageous style will emerge next on the fashion scene.
True Religion Brand Jeans, which now has 150 stores, got their start in 2002. The clog craze began the same year when Crocs introduced a new kind of comfort. Accessory retailer Charming Charlie has only been around since 2004, and with well over 200 stores the company expects rapid growth to continue. Ascena Retail Group Inc. was formed in 2011 and is now the parent company of women’s apparel retailers Charming Shoppes, Dress Barn and Maurices, and tween retail chain Justice.
As previously noted in last month’s historical review, the decade of the Nineties proved to be a retail game changer, introducing companies which were essentially reflections of new technologies. Most prominent of these technologies was the Internet, as corporations now employed a brand new platform from which to sell products and services. The new century has most significantly proved to be a continuation of the above.
Redbox is one of the most impressive of the new century startups, as the first nationwide chain of kiosks to offer overnight rentals of DVDs. Starting with a standard rental fee just $1.00 per day the system grew impressively. These vending machines are located at virtually all locations of ubiquitous retailers including Walmart and Walgreens.
Redbox proved to be significant in the downfall of the leading video rental chains Movie Gallery, Hollywood Video and finally Blockbuster. The new concept of Redbox kiosks made the traditional chains seem antiquated in terms of price, time needed per visit and availability of the kiosks 24/7.
Verizon Wireless began operations in early 2000 as the result of a complex merger, essentially between Bell Atlantic and GTE Wireless. Through the decade, other wireless providers were brought into the system including Alltel. Currently Verizon wireless operates the largest mobile network in the United States.
Gamefly Inc. is often thought of as the Netflix of video gaming. As Netflix surely compromised the industry dominance formerly enjoyed by Blockbuster, Gamefly has upset the financials of brick and mortar industry leader GameStop. However, unlike Blockbuster, Gamestop has been proactive in maintaining its position in the market with creative offerings and pricing schemes, including buying and selling used games.
While tech-based retailers have been much the rage for the past twenty years, enterprising brick and mortars continue on paths of rapid growth. Five Below entered the market as a new style dollar store model with a wide variety of merchandise, all at price points of five dollars or less. The company is on pace to open 60 new locations this year after consecutive years of opening at least 40 new locations.
Throughout the decade and up to present day, the retail drug industry has been dominated by the three big players – Walgreens, CVS Caremark, and Rite Aid. All have made significant changes and improvements to their respective businesses over the past 10+ years. In 2000, Walgreens was up to 3,000 retail pharmacy locations. By fall 2007, it had doubled its retail network to 6,000, highlighting the explosive growth it experienced during the decade. Also in 2007, CVS Corporation and Caremark RX Inc. completed their transformative merger, creating CVS Caremark, the nation’s premier integrated pharmacy services provider. In 2009, CVS operated over 7,000 pharmacy locations, and in 201 the company exceeded $100 billion in total revenue.
For Rite Aid, the decade was a mixed bag. In 2007, it completed its purchase of the Brooks and Eckerd drugstore chains, cementing the company as the largest drugstore chain on the east Coast and the third-largest nationally. However declining profits, problems with the integration process, and store closures led to a 75% drop in stock price before closing at an all-time low in 2009. Today, the much leaner company is still the third largest drugstore chain in the country, while recently in 2013 reporting three straight sets of positive earnings per share.
HOME & HARDWARE INDUSTRY
The decade of the nineties exited on a strong financial note for the home center/hardware industry. Continuing on a slew of strong growth years into the new millennium, many companies in this industry maintained rates of unprecedented annual financial growth. In the early part of the new century, the housing boom grew as almost never before. This was in large part a reflection of the overall strength of a national economy riding the crest of a budget surplus.
Unfortunately, just past the middle of the decade, other factors behind the housing boom began to emerge. The term ‘subprime’ came out of obscurity and quickly became a fixture in news reports.
It turned out that speculation in housing had run amok. Loans were not just being granted based on traditional consumer merits. Loans were being given away with little in the way of true collateral. The term ‘flipping houses’ emerged and eventually was so commonly mentioned that it became the fare of a television show. The subprime crisis went from obscurity to a much mocked practice, as it was discovered that poorly backed mortgage loans were being bundled and sold internationally as financial securities, as if they were secured notes or bonds.
Suddenly, most companies in this market saw once rapidly rising annual financials quickly sink. The subprime crisis brought recession-like results to this market well before the recession crippled the rest of the country.
Though the past few years have been rough on this industry, especially pro dealers who so rely on builders with new housing starts, a couple of major startups emerged out of mergers and acquisitions of prominent distributors. BlueLinx Holdings began operations in 2004 when the company was essentially created to acquire the distribution division of Georgia-Pacific Corporation.
ProBuild Holdings began operations as a result of what was basically the merger of two powerful building products distributors. The Strober Organization was an established, growing power, representing the Eastern United States. The Lanoga Corporation was a similar power focused on the Western US, with strong holdings deep into Alaska.
Both of these new companies seemed destined for growth and greatness until the subprime crisis hit, followed by the recession. Like most companies in our industry, financials became challenging and location closures, at times a must.
In the restaurant industry, the 21st century has seen the explosion of the fast-casual gourmet hamburger. At the start of the decade, the most well-known of the “better burger” chains, Five Guys Burgers & Fries, had a grand total of five locations. At the end of 2012, that number had swollen to more than 1,100. Trying to cash in on this movement have been a number of burgermeisters, including BGR The Burger Joint, Cheeseburger Bobby’s, The Counter Burger, Smashburger, and Square One. Established restaurant-operating companies jumped into the competition with Front Burner Brands (The Melting Pot) opening Burger 21 locations, Bold Foods (headed by celebrity chef Bobby Flay) debuting Bobby’s Burger Palace, and Red Robin Gourmet Burgers Inc. introducing its Burger Works concept, a stripped-down version of its casual dining model. Coffee and Buffalo wing restaurants have continued to be popular, as are ethnic and other fast-casual concepts.
Entering the fast-casual fray in a big way is pizza. Long considered impractical for cooking in a quick-service environment, new technology and methods are putting the lie to that thought. The past few years have seen the rise of Blaze Pizza, M.O.D. (Made On Demand) Pizza, Pie Five (a new concept from Pizza Inn), Pizza Fusion, and Your Pie among others.
Greek and Mediterranean foods also lend themselves to the fast-casual business model, as exemplified by chains such as Garbanzos Mediterranean Grill, Roti Mediterranean Grill, and Little Greek. Fast-casual sandwich makers continue to enter the marketplace, with names like Smiling Moose Deli, Which Wich, and Earl of Sandwich.
Apparently the sky’s the limit for new concepts and new variations on old classics when creative chefs and restaurateurs put their thinking toques on. We can only hope the next eight decades will be as exciting in food service as the past eight decades have been.
SUPERMARKET / GROCERY INDUSTRY
The supermarket industry during the 2000’s was largely defined by a series of mergers and acquisitions, as well as a number of emerging food trends, all of which have shaped the current state of the industry. Most notably, SUPERVALU was involved in two influential acquisition activities. In 2006, it acquired most of the Albertsons locations in addition to other regional chains including Acme, Jewel, and Shaw’s. The deal created a nearly $35+ billion retail and wholesale food company. The company proved too big for its own good, and it struggled to maintain efficiency while juggling its largest network ever of retail supermarkets with a successful wholesale grocery business. The deal seemed doomed from the start, and after years of declining store sales and underperforming stock prices, SUPERVALU again entered into another large deal. In 2013, the completed sale of all Albertsons and locations and other banners to Albertsons LLC/Cerberus reunited all Albertsons locations under one owner. The deal left SUPERVALU with only 200 retail stores, it’s still successful Save-a-Lot franchise network, and the wholesale business while Albertsons once again operates a network of 1,000+ retail locations.
The explosive growth and popularity of natural and organic foods as well as demand for healthy, on-the-go food options translated into similar growth for supermarket chains Whole Foods Markets and While Oats. In 2007, the two agreed to merge. The controversial deal went through a series of Federal Trade Commission decisions and antitrust law discussions. Ultimately the deal was allowed to proceed after Whole Foods agreed to close/sell some of the acquired locations. The combined company continues to experience tremendous growth today and is recognized as a trend-setting leader in the industry and has paved the way for other natural/organic food chains. Founded in 2002, Sprouts Farmers Market has grown to over 150 locations today through organic store growth and acquisitions, most notably Sunflower Farmers Market. In late 2013, British giant Tesco’s failed U.S. venture Fresh & Easy was sold to Yucaipa Companies with hopes to revive the struggling brand.
Don’t forget to read our Company Snapshot follow-up stories that will spotlight a company from each industry in this decade. You can read them later this month on our NewsRoom page, or by signing up to our email newsletters.
Chain Store Guide
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