Discount Stores

AuthorThomas Baird, Earl Meyer, Winifred Green
Pages201-204

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Discount stores are often defined as retail outlets that sell brand-name and private-brand merchandise at prices significantly lower than prices at conventional retailers. To

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offset the lower prices, a number of different strategies and tactics are used, depending on the type of discount retailer. Some of these strategies and tactics include: maintaining a high sales volume; keeping expenses down; negotiating lower wholesale prices; and cutting profit margins. Other tactics are: using inexpensive fixtures, decorations, and displays; minimizing free customer services and maximizing the use of self-service; carrying overstocks and discontinued products from other retailers and producers; and stocking off-season merchandise.

In addition, improvement of operational efficiency is continually sought to control costs. Modern discount stores may range from specialty shops (such as discount bookstores) to major discount chains that typically sell a wide variety of products including hard goods (e.g., major electronics, automobile supplies, toys, and small appliances), soft goods (e.g., apparel, bedding, and bath products), groceries, and other general merchandise.

HISTORY OF DISCOUNT STORES

Discount stores evolved from a series of retailing changes that began in the United States in the late nineteenth century. Following the Civil War (1861–1865), the development of mass-production processes and a mass-distribution system, along with population increases, paved the way for a new approach to retailing—mass merchandising. The first type of mass-merchandising operation was the department store. The second was the chain store, which included variety stores and "junior department stores." The third was the mail-order house. These patterns for mass merchandising remained relatively constant through the 1920s. The genesis of discount retailers, known as "undersellers," also occurred in the early 1900s. S. Kline (1912), J. W. May (1924), and Alexander's (1928) were the early undersellers of soft goods (e.g., apparel).

The Great Depression of the 1930s and the accompanying economic hardships set the stage for another retailing change and the further emergences of discount operations. Grocery supermarkets, the fourth type of mass-merchandising operation, appeared in 1930s. Early supermarkets, pioneered by Fred Meyer (1922) and Hendrik Meijer (1934), were comprehensive grocery stores that were designed for self-service and consumer accessibility. Size and low-cost facilities enabled these supermarkets to operate on low margins and sell below the competition. The inventories of supermarkets expanded to include nonprescription drugs during this time. The starting point for the fifth type of mass merchandising, discount stores, is often traced to the opening of a radio and appliance store by the Masters brothers in Manhattan in 1937.

The development of supermarkets, chain stores, and the predecessors of the discount stores that caused greater price competition in the 1930s, and concern, in the midst of the Depression, for maintaining employment brought about legislative constraints in several states to protect small retailers. These resale-price-maintenance, or "fair-trade," laws provided that manufacturers could establish retail prices for products that carried their brand name, thus legally fixing prices. In 1937 these laws were strengthened by federal legislation, the Miller-Tydings Resale Price Maintenance Act. Even though the laws were difficult to enforce, they would present a major challenge to discount merchandisers over the years to come.

After World War II (1939–1945), discount merchandising grew rapidly. This explosion in growth was fueled by consumer bargain hunting in the face of rising prices, the pent-up demand for goods created by wartime shortages, and the establishment of homes and families by returning GIs. Many consider E. J. Korvette, opened in 1948 by Eugene Ferkauf, as the first discount store. Soon regional discount stores, such as Zayres, Arlans, Gibson's and Two Guys, sprang up across the country to satisfy the demand for consumer...

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