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12/07/04
Adventures in Retailing Part II: Two Guys in Retail Land, by Ross Miller

My mega-store memories of youth are of the Two Guys from Harrison (later known as Two Guys ) in Union, New Jersey just off infamous Route 22 and down from its even more infamous Flagship--the ship-shaped building that has hosted several different establishments over the years. Two Guys never ventured far from its roots in Harrison, a burg best known to commuters for its woebegone PATH station, but it foreshadowed the future of retailing.

The Union Two Guys store was huge and filled with discount merchandise and much of which said Made in Japan when that was still a pejorative term. Many of my cherished toys and my first transistor radio came from that store. When my parents went shopping there, they would leave me in the play area with a handful of nickels and I would immerse myself in the various pinball machines and other forms of electric entertainment until they gathered me back up. Two Guys had everything school supplies, clothing, records, electronics, house wares, jewelry, hats, and in its last days, groceries. Unlike the downtown department stores (Macy s Bamberger s, etc.), which were where the retailing action was in New Jersey during the early 1960s, Two Guys was all on a single sprawling level with seemingly unbounded parking.

Long before it closed its doors, Two Guys went into the typical retail death spiral. Anything in the store that broke stayed broken. It looked a lot like my local Kmart (Martha among the ruins) looks today and the way that my local Wal-Mart is beginning to look. (Don t expect me to comment on the Sears/Kmart merger.)

Maybe Two Guys was ahead of its time. Maybe not. Maybe all retailers have a life cycle that includes death or a related transformation. As went Two Guys, so went E. J. Korvettes, Woolworth s, and all the rest. The two guys that are the real focus of this commentary are not from Harrison. Wal-Mart is from Bentonville and Target is from somewhere like the MoMA design store (or maybe just the Michael Graves section). I have done only a quick in-and-out at my local Wal-Mart since my notable excursion this past summer, though I must admit to being a regular Target customer.

Given enough time, both Wal-Mart and Target will almost certainly succumb to a combination of market forces and their own stupidity. I m not one to bet on which will far by the wayside first (and if I did, I d be tempted to bet against myself). Target still seems to be working on finding themselves. The newest store in the area has an embedded Starbuck s and even the older stores look like new stores that have not quite figured out what they are doing. But at least shopping at Target is an inoffensive experience, though I wish they would ditch that mascot dog of theirs (maybe Old Navy could use him).

Wal-Mart, on the other hand, knows exactly what they are. In an attempt to develop a General Theory of Wal-Mart, I have come up with my two special theories of Wal-Mart. Bear in mind that my theories apply only to Wal-Mart and not Sam s Club. Any unified theory of Bentonville retailing must wait for future generations of economists.

The first special theory I call Miller s First Law of Wal-Mart. It goes like this:

It only pays to shop at Wal-Mart if you going to purchase goods worth one-thousandth your personal annual income. For example, a crack dealer who makes $350,000 a year should only shop at Wal-Mart if he expects to purchase at least $350 in goods. This law was derived using certain assumptions about the psychic cost of being in Wal-Mart and the opportunity cost of waiting in line. I would provide the details, but Harvard can probably use a problem like this on their economic theory general exams. (My favorite generals problem began Lobster live forever... and I m almost certain that it was written by an economics professor who could pass for the humanoid form of the aliens in the movie Galaxy Quest. )

The second special theory that I came up with is even simpler and it is not suitable for economics graduate study. Here it is:

Wal-Mart hates people.

I suspect that Wal-Mart did not always hate people. At some point, the greeters must have been there to welcome people rather than grunt and look to see if they were carrying automatic weapons into the store. In business school circles, Wal-Mart is famous not for its retailing prowess, but for its ability to work its computers and bash its suppliers. In other words, while Target is clearly trying to enhance my shopping experience in order to keep my business; Wal-Mart does not seem to care about me, their associates, or anyone. Worse than that, Wal-Mart is not even willing to go through the motions. That would cost too much money.

I am well aware that all around cyberspace Wal-Mart is taken to task for abusing their associates in myriad ways and that a best-selling book has chronicled this abuse. I am in no position to judge Wal-Mart as an employer and while there is no bigger employer in the U.S., I am sure that there are worse ones. On a personal level, the problem is that Wal-Mart abuses their customers by making them shop in dirty stores, wait in unconscionably long lines, and interact with associates who mostly range from catatonic to rude. (I am sure that Wal-Mart has some wonderful associates, too. I have never met them. If you or a close relative works there, do not bother to send me hate mail.)

The market, however, is in a position to judge Wal-Mart. Over the past two years while the S&P 500 Index has moved up over 20%, Wal-Mart stock has gone nowhere. Could it be that the people that Wal-Mart hates the most are its shareholders? Next week will be the last of my regularly scheduled commentaries for a while, possibly a long while, possibly forever. But before going sporadic, I will explain my current thinking about Google, China, and the meaning of life itself in next week s commentary entitled Going Sporadic.