It wasn’t that long ago that when you needed something in the United States, you knew you could find it at a department store. Big ones like Marshall Field’s, Carson Pirie Scott, Wannamaker’s, Woodward & Lothrop and Filene’s worked to be one-stop shopping for everything you needed. Maybe you remember a time when Marshall Field’s had a grocery in the basement, appliances and electronics on the top floor and everything else you could imagine in between.
Yes, you could find these things in other places, but in Chicago Field’s carried the best of everything. If you wanted the newest and greatest television set, you could go to the State and Randolph store with its Tiffany glass ceiling, get your new TV and maybe some great clothes. Later that week a green truck would pull up in front of your house to deliver and set up the TV.
Department stores were designed to provide everything under one roof. Certain items and departments sold better and had better returns than others–but department stores were obliged to sell everything under every category imaginable. If it was new, the department store would carry it. Otherwise, for many consumers it just wouldn’t exist.
Consumers and producers alike were drawn to department stores. Consumers, because it was the only place in town to get many items. Producers, because it was the only place in town to sell your new products to the consumers they wanted to reach. It was a powerful combination that made department stores unbeatable and very profitable for a hundred years.
And then came the category killers.
Best Buy exploded on the scene in the late 80’s and early 90’s, offering a wide selection of electronics and household appliances. The stores had stripped down looks, were located on cheap real estate and were big. You could compare models from many brands – more than Field’s offered–and get at home installation–just like Field’s, but without Field’s prices. These
“category killer” stores took high margin electronics and appliances from department stores and left everything else behind.
Desperate to protect their one-stop-shopping reputation and big margins on electronics, the department stores scrambled to compete. They created exclusive brands just for their stores, slashed prices and tried flashy marketing. But nothing worked. Consumers saw the low prices and big selection and voted with their wallets.
Today very few department stores sell electronics or appliances. It was a serious blow to department stores’ profitability and sustainability. For department stores that lacked strong downtown shopping districts it was a deathblow. For everyone else, it put them on the ropes.
And then came the on-line stores.
The Chicago Tribune and the Sun Times are facing situations similar to that of department stores in the early 1990’s. Not very long ago, if you needed to know something current – news, sports scores, stock prices, movie times, and airline ticket prices–you picked up your local newspaper. Everyone picked up a newspaper. For this reason, newspapers could guarantee unbeatable mass coverage.
Like department stores, consumers chose newspapers because it was the only place to find new stuff, and advertisers went to newspapers because it was the only place where you could find all the people.
But daily newspapers held onto their monopoly of coverage because the cost of production was so high. It was rare for a new daily to be launched, and were usually done by wealthy iconoclasts on behalf of “the people” rather than as shrewd business decisions.
Then the internet arrived. Once production costs were no longer tied to distribution, readers began to choose other venues for specific information. The category killers for news were Craigslist, ESPN.com, Fandango.com and others. Newspapers quickly began to lose their readership.
It’s been a long, slow decline for newspaper circulation. Earlier this week the Chicago Tribune announced its daily circulation was 501,000. Ten years ago it was 627,000. For the Sun Times circulation has fallen to 312,000 from 472,000 in 1999.
Worse yet for newspapers, sensing that there are more effective ways to find consumers, advertisers have begun to shift their ad buys to other channels.
Department stores, weighed down by their big, downtown emporiums, went into a downward spiral after category killers arrived. Philadelphia’s Wannamaker’s, D.C.’s Woodward & Lothrop and Boston’s Filene’s no longer exist. Carson’s is gone from downtown and Marshall Field’s State Street store–now Macy’s–often seems more like a tourist destination than a working store.
Daily newspapers differ from department stores in that they produce their product as much as they deliver it to the consumer. With this difference comes an opportunity, newspapers can choose to stop trying to be a one-stop-shop and serve individual segments.
Some large daily newspapers will continue to be profitable–like the Chicago Tribune–because of sheer momentum. But like department stores, daily newspapers are living in a changed world that won’t change back. Unless they radically alter their model and focus on whom they are serving, their future is bleak.