The economy has not been the greatest and it has caused us all to cut back. In some cases buying store brand or buying bulk items to save a few dollars. I have done the same, but a few things caused me to start thinking about cost verses service. There is always a balance for companies and individuals as they determine the best things for those needs.

Certain areas I have alway cut costs. One of those areas to me has always been food shopping. On the higher end, I love shopping at Wegmans for their food selection, bakery, prepared foods and my favorite is their recipes. I have always found I spend more when I go there, but overall I love the experience. To save a few dollars I do like to shop at Giant Foods in PA. I have found they typically have the lowest prices. There is a difference when I shop at each place. I do not expect wow service at Giant (although many times I feel I get it). I do expect that service at Wegmans, and virtually always receive it.

So now you know a little about my shopping habits, I have to tell you about a new supermarket that I went to this week. The supermarket is called Bottom Dollar. As you can judge from the name it is about the lowest price. I knew before going there that selection would not be huge because it is located in a much smaller building than the supermarkets in my area. The location was probably a supermarket that was closed in the early 1990’s or earlier. They advertise brand name products at the lowest possible price. I went there Friday night to pick up a few things, but when I walked in I decided to do a full amount of shopping. I grabbed my cart and entered the store. The first thing I noticed was the small produce section, which was in a refrigerated area. The produce was in boxes and all looked very fresh. There was not a huge selection, but the basics were all there. I grabbed a few things and continued my way around the store. I noticed quickly that the prices were low. They were not the lowest prices I have seen if I compared to sale prices, but much less than regular prices at other places. As an example Pepsi products were $2.88 for a 12 pack. Other places I have seen regular price $3.99 or $4.99 but sale prices as low as $2.50. Lean Cuisines were also similar price. I think they were $2.48 compared to others at $3.99 regular price with sale prices as low as $2. To give you an example of selection, they had maybe 10 different types of Lean Cuisines instead of the large quantity I find at Wegmans or Giant. They did not have a deli or bakery but they did have some of these items that were prepackaged. I was a little disappointed at the lack of deli, since I was planning on buying cheese, and I usually do not like some of the processed cheeses. The lack of bakery actually helped save me money since that to me is usually an add on purchase because ‘it looked good.’ Wegmans bakery always gets me on the add on’s.

Overall I had a full cart load of stuff. Not bad since I was only going for 3 items. I went up to the cashier and started to unload my cart. I immediately noticed the cashier had another cart at the other end of the register. I quickly noticed the cashier was taking all these little items I purchased and placing them in the other cart, just like I was at a warehouse club with very big items. Unfortunately I did not have big items. I had a whole cart load of small items. I also did not bring any of the bags we own from other supermarkets, so I was not sure how I would carry the items into my home. I quickly looked around and found a spot where they had bags for sale. I ran over, grabbed 5 and gave them to the cashier. The cashier immediately rang in the bags and placed them in the cart then proceeded to ring up all the remaining items, piling them on top of the just purchased bags. No effort was made to place any of the items in a bag. This meant at 9:00 PM on a cold night, I was out by my car trying to bag all these little items of food. This took a while and due to the cold it was not done with as much care as I would like. Overall I spent $98, which probably was a savings of $10-$12 compared to other supermarkets. This caused me to think about it and for me I decided it was not worth the saving compared to my time and the better selection. I am sure others will love it and it will be right for their needs. So I know I am willing to pay a premium of 10-15% for better service at a supermarket. Are you willing to pay a premium for service? If so, how much?

Now a funny ending to my supermarket situation. In my rush to fill the bags and load the cars, I must not have loaded the 12 packs of soda in the best way. When I got home and opened the hatch to my Prius, my 2 12-packs of soda fell out of the back of the car bursting on my driveway.

There is always a cost and value debate we always make when we purchase products. I know I prefer Apple computers compared to other brands. The reason is I have always had amazing service when I needed it, and the product I have had from Apple have lasted a long time, compared to similar machines with other operating systems. I still have a Mac that is close to 10 years old and runs as well as it did when I first bought it. During that time I have had a number on non-Apple computers that have not lasted at all. At the same time I know I pay a premium for the computer. It is probably at least 20%, but in my view and for my needs, I am willing to pay for it because I know they will last. I also know that if I do need service, the Apple store team is empowered and very willing to create a great experience. What items are you willing to pay a premium for? What items do you look to save and expect less service?

This weekend I watched Biography of Home Depot on CNBC. It was a fascinating look at a company and the founders that created a new concept that would become a category killer in the home improvement industry. What struck me was not the success of the brand, but really the founders that created the concept. The TV special concentrated on Bernie Marcus, Arthur Blank, Pat Farrah, and investment banker Ken Langone. The story goes like this:

Bernie Marcus was born in Newark, New Jersey  who worked with his father to pay for college.  He received a degree in pharmaceutical studies.  He later worked in a pharmacy but found his true love to be in the store with the Customers (this is why I really connected to the Bernie).  Art Blank grew up in Flushing, New York and graduated from Babson college

Well once there was a retailer named Handy Dan, where Bernie Marcus was eventually hired as a senior executive.  Art Blank worked at the same retailer just outside of college, working his way up through the ranks.  Bernie promoted Art to his staff .  Later, after Daylin corporation, the owner of Handy Dan, filed for bankruptcy, Bernie and Art fought to maintain the success for Handy Dan.  They continued to grow the company, but a dislike grew between Bernie and Sandy Sigoloff, the CEO for Daylin.  One day Sandy brought Bernie into a conference room with many suits and a stenographer.  This was the end for Bernie, Art, and Ron Brill (the first Home Depot employee).  There were many accusations, but I think it is safe to say false ones.  Anyway, I am not judging that.  After this Bernie started making phone calls to contacts he made, one of them being Ken Langone.  Ken convinced him this was the best thing to happen and he should follow his dreams.  They found a strong merchandiser named Pat Farrah, and the group set their sights on Atlanta.  That is where Home Depot was born.

Many of you may not know, but my background when I was younger was in retail management.  I have always had love affair with the direct Customer contact environment that retailing has.  I have long watched what worked, and what was a failure.  In my lifetime I have seen this changing environment, great management choices, very poor ones and many going out of business.  I remember working in the home improvement business when Home Depot was entering the area I live.  You could easily see why it was a category killer.  The same was true regarding the expansion of Walmart.  I have seen many that simply could not keep up.  Of course through this expansion other companies built themselves up as strong competitors to both Walmart and Home Depot.  I also think the time will come where another company changes the game and places these companies at risk.  But who and how?

Many have said the future of retailing is Amazon.  I agree Amazon has been a killer of many products, especially books and DVD’s, but I think for many other products people want more.  This post was inspired by the Home Depot founders, but I know I will not have my Ken Langone to help secure the large amount of financing necessary to recreate the retail landscape, so I thought it might be fun to throw it out here.  As I have watched retailing for years, I know there are certain keys to success.  The first key is amazing Customer Service, which I am not too sure many retailers currently do well.  Second is convenience, which the web has made much easier.  Third is atmosphere, which some retailers do very well  by reducing clutter and making it easy to shop, but most fail here too.  Fourth is a strong dedicated team that understand the products and how best to utilize them.  The original Home Depot did all of these well, but as time went on some of these things drifted away for them.

So what can we learn from the past? Well the internet boom for online retailers is not as new as you think.  We have seen this before, but instead of the net, it was the catalog.  The internet may have killed off the paper catalog but it still created the same category, just instead of dominance by Sears or J.C. Penny, the dominating force is Amazon.  During the catalog boom, a new style of retailing emerged with names like Best, Basco, Service Merchandise and many others.  They were known as Catalog Showrooms.  In these stores you could see the merchandise, and if you wanted to buy you would fill out a slip (seems silly today) and it would magically come through the belt.  This allowed for Customers to touch and feel the merchandise prior to buying.  A key for many purchasing items, especially higher end merchandise.  I can easily make the case that Circuity City was also a catalog showroom, just without much of a catalog.  The original, successful Circuity City was a showroom with various merchandise with excellent sales people to help you out.  Customer Service was the name of their game and they did this very well in the early days.  Later, as they faltered in other areas, Circuit City also did this concept well with their web business and picking up your order within 30 minutes.  Unfortunately for Circuity City, and many of these other retailers they tried to shift there model to something they were not.  I saw the end when Circuit City left the appliance business and tried to build a self service area in their stores for software and other computer products.  This, just like similar changes made at other retailers, caused them to alienate employees and their own Customer base.  Questioning what you are as a business will alway set you up for failure.  As these companies made changes to their model, instead of setting themselves up for a boom during the early years of the internet retailing, they simply went bust.  Many of their names may still be around, but they were purchased by companies that simply wanted to build websites using the name, nothing more.

So what would the future of retailing look like?  The concept would not be very different than what you see at Amazon.com for the web.  The only major differences would be the showrooms.  These would be placed at strategic population centers, similar to the placement of Ikea stores.  These centers would have showrooms to play with the merchandise, high tech transmitters for purchasing and service personnel to truly help those that want it, when they wanted it.  While in the store you would have full access to reviews of Customers from the website, as well as competitive information.  These centers would have easy pick up of merchandise for those that order over the web and would like quick gratification.  Merchandise ordered in the store would be delivered in the same manner.  These facilities would also serve as the mail distribution centers for items purchased on the net to be shipped.  To maintain lower shipping costs, items would ship from the nearest facility to the Customer.   A key learning from successful online retailers, like Zappos, they must offer an easy to understand and fair return policy.  Thanks to companies like Amazon, there is amazing technology for picking merchandise in a fast and efficient manner.  This structure also helps reduce shortages and theft, creating a better retail investemnt.  The showroom would be a clean, very friendly place to browse.  It would not have the typical brick and mortar retailer mentality of ‘pile it high and let it fly.’  This would be a place Customers would love to shop.  Sales people when requested, but not the car shopping experience of running over the moment the prospective Customer is in your sight.

This is not a revolutionary idea, in fact you do not need to look far to find similar concepts.  The Apple Stores have revolutionized retailing for Apple products.  Apple had a problem, no retailer sold their merchandise well.  They also did not wield the power to change the model at existing retailers, so they went one step further, they build a model that would work.  They utilize high tech equipment to make the experience great for everyone that visits, yet they do not try to oversell the Customer.  You know if you visit, help is there if you need it, but if you just want to play with the computers you can do that.  Of course I know when I play with the latest and greatest Macs, I almost always want to leave with one.

For those that believe internet shopping is the future, I agree, but it is only part of the equation.  Many brick and mortar retailers have tried to incorporate web sales into their existing business , but, in my opinion, not very successfully.  Best Buy offers it, but someone has to go out on the floor to try to pick the items.  Walmart will ship items to the store, but you have to wait for them to get there.

Retailing is not very difficult, as the founders for Home Depot proved.  Find out what people want, and deliver it in the way they would like to receive it.  Retailing is just like social media for business, there is no reason to over think it.

It is time for someone to build the new way of shopping from the ground up, but, even before looking at the present, review what you can learn from the history of retailers long gone!