Matthew Yglesias: Incomplete Chain-ification

Incomplete Chain-ification

Whenever one travels to anywhere nowadays, it's impossible not to be struck by the fact that floating on top of the underlying regional or national differences, there's a lot of chain-driven homogency. Starbucks and McDonalds everywhere. Etc. But then there's this interesting middle ground -- chain brands that are many places, but not everywhere.

Phoebe Maltz needs to end a post on hipster crappiness with a bit of a clarification. "Stores like Duane Reade (a drug store chain similar to Walgreens)." This got me thinking. We've got Duane Reade in New York, along with CVS and Rite-Aid. Here in DC there's CVS and a little Rite-Aid, but no Duane Reade and no Walgreens. I've seen Walgreens in Long Island, but not in NYC, DC, or Boston. I infer from Phoebe's post that they exist in Chicago. In Florida there's a chain drug store called Eckerd, which I noticed they also have in the Norfolk area. In New York, supermarkets are D'Agostino, Gristedes, or Food Emporium. Here in DC, they're Safeway or Giant. In Norfolk, I saw Food Lion, which I'd heard of because of the famous lawsuit, and which I also saw when I went to the Outer Banks. But none of the supermarkets I know from the NYC or DC markets. In the Boston area, the only supermarkets I saw were Star Market, though I assume there's some competing chain somewhere.

This all strikes me as somewhat odd. There's something to be said for the local, independently-owned enterprise. The case for such things is familiar, I patronize many such places, and it's obvious why such things would be different everywhere. There's also something to be said for the vast chain. Homogeny, though at times annoying, also has its values. And there are the economies of scale to consider.

But the sort of semi-national chain store patchwork we see in the supermarket and drugstore businesses seems to lack a rationale. Similarly with consumer banking, which is famously a patchwork of regional chains. What prevents the supermarket (or drug store) market from being consolidated into three or four (or five, or whatever) big truly national chains? Basically, these places are all the same anyway. There's no local character embedded in the Giant brand. Why not reap further economcies of scale by merging? I suppose that probably is happening, slowly. But why have certain retail industries more resistant to consolidation than others? You don't have regional chains in, for example, retail clothing sales. You have lots of truly local stores and a few big nationwide brands.

March 6, 2005 | Permalink

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» Chain Reaction from Kalblog
Matthew Yglesias asks why there are still local chains. Well, with banks, there are state banking laws that for years prevented consolidation, and especially the big New York banks from buying anyone else. But consolidation has been happening quickly i... [Read More]

Tracked on Mar 6, 2005 7:06:20 PM

Tracked on Mar 6, 2005 7:21:37 PM

» Small Chains from The Bit Bucket
Matt Yglesias wonders why we have regional chains: the sort of semi-national chain store patchwork we see in the supermarket and drugstore businesses seems to lack a rationale. Similarly with consumer banking, which is famously a patchwork of regional ... [Read More]

Tracked on Mar 7, 2005 6:20:50 PM

Comments

I think oftentimes, these regional chains are owned by larger chains, but they keep the original name of the regional company when they buy it up because the larger company assumes the regional name has better cred than a large outsider would have in said region. I know, for example, that Kroger onws lots and lots of supermarkets that aren't Kroger supermarkets (Kroger is dominant in much of the Midwest), but it also owns QFC which is the major competitor to Safeway in the Pacific Northwest.

Ben P

Posted by: Ben P | Mar 6, 2005 3:02:31 PM

You're running into the regional chain things, all of which are probably itching to be the one global brand and drive the others into oblivion, unfortunately. It is charming to see a White Castle or a Steak 'n' Shake when one doesn't have one at home, isn't it? A reminder that, if everything is the same, everywhere, one can never go on vaction, really.

Posted by: Brian C.B. | Mar 6, 2005 3:03:44 PM

Oddly, I think Astoria has more Eckerdses than Duane Reades, while of course in Manhattan there seems to be a zoning regulation tha requires a minimum of 3 of the latter be placed in every block...

Posted by: Scott Lemieux | Mar 6, 2005 3:08:16 PM

Within the last few months the Dallas area Eckards with taken over by CVS. And most of our K-Marts closed down.

Most of us out in Red America buy our clothes at Target or Walmart. I presume the ones that go the more upper-middle-class stores in malls pay a premium for the status of a classier brand. That greater free margin is possibly why small clothing stores are profitable.

We have Whole Foods here in Dallas, but the subset of people who demand organic lettuce is much smaller. Anyway, Krogers has it also.

Posted by: bob mcmanus | Mar 6, 2005 3:10:00 PM

Everyone's favorite chain should be Cum-N-Go Quik Mart, which is having trouble expanding out of the Midwest (Minnesota or North Dakota).

Posted by: John Emerson | Mar 6, 2005 3:15:05 PM

There's a Walgreens in Union Square in NYC.

Posted by: Barbar | Mar 6, 2005 3:19:31 PM

Haven't been to Eastern Mass recently, but I think the Star Market got eaten by Shaw's and 'Purity Supreme' by Stop&Shop. Or vice versa.

Posted by: abb1 | Mar 6, 2005 3:22:38 PM

QFC may be a competitor in Seattle, but it doesn't really exist in Oregon, at least as far as the Portland area. What does exist all over the Pacific Northwest, and is also owned by Kroger, is Fred Meyer. Kroger also owns Ralph's which is one of the major chains in Southern California.

When I moved from LA to Portland a year or so ago, I noticed that my new Fred Meyer grocery store was almost exactly the same (from layout to signage to color scheme) as the Ralph's Fresh Fare that I left in LA. I think they're getting a lot of milage out of the economies of scale, Matt.

Oh, and one way to see if your local supermarket is owned by someone else (sometimes works) is to check the

Posted by: ryan | Mar 6, 2005 3:24:03 PM

Hmm. Well, Walgreens actually exists in Boston, though the one I know of is only about a year old. Star Market in Boston is actually Shaw's these days, though some of them kept the Star name. (They all stopped being 24 hours, which was incredibly annoying.) Chicago has Jewel/Osco (same family as Albertsons and Shaw's) and Dominick's (same family as Safeway).

I always assumed supermarkets were exactly like department stores, where May stores may be named Filene's, Foley's, Hecht's, Marshall Field's, etc. depending where in the country they are.

Posted by: Jade | Mar 6, 2005 3:28:58 PM

yeah, but they all aspire to be huge, national chains. you're just looking at a snapshot in time.

Posted by: praktike | Mar 6, 2005 3:38:48 PM

Jade, are you thinking of the Central Square, Cambridge Walgreens, or a different one? I think that one has been around for at least a year and likely far longer.

Posted by: B | Mar 6, 2005 3:48:52 PM

Whole Foods (green produce, red beef, pink seafood, pale, wan customers) is building into upscale communities in the South. Giant and other mainstream chains are shopping more organic products, now, under chain-specific brands, and a wider South Asian and Central American selection. I doubt I'll be seeing any Food Lion sushi--and I hope I never do, given the stores' history--but there must be a growing market specialty market subset, everywhere.

Posted by: Brian C.B. | Mar 6, 2005 3:51:48 PM

Philadelphia has Eckert's, too. As well as CVS's and Walgreen's. Then there's Wawa ...

I never saw a Duane Reed till I started to work in Manhattan.

The linked blog entry ... and the NYT article to which THAT is linked ... are both more interesting.

Posted by: Eisbar | Mar 6, 2005 3:55:23 PM

Small quibble: Food Lion is actually in the D.C. suburbs in both Maryland and Virginia.

And, yes, they are much cheaper than Giant or Safeway!

Posted by: Joey | Mar 6, 2005 4:06:55 PM

For what it's worth (admittedly not much), I put forward the notion of the spread of chain stores as an indicator of national cultural unity in "One State, Two State, Red State, Blue State".

Here's the relevant section:

[SNIP]

Symbols are one powerful means by which societies communicate their common values, beliefs, benefits and sanctions to their members. Today, there is perhaps no better iconic representation of American cultural homogeneity than Starbucks.

Much as McDonald’s ushered in a “Burger Index” of national cultural unity in the 1970’s, the Starbuck’s “Latte Level” is now almost universal across the United States. Ever the automatons of middlebrow culture ourselves, we visited Starbucks locations in no fewer than 11 towns (Liverpool, NY; Terre Haute, IN; Albuquerque, NM; Santa Fe, NM; Flagstaff, AZ; Santa Barbara, CA, Saratoga, CA; San Francisco, CA; Elko, NV; Salt Lake City, UT; Buffalo, NY).

The cultural low point came in Elko, Nevada. There, I wandered through a casino, stumbling through row after row of slot machines, all in search of espresso advertised on a highway billboard. While the Starbucks played its reggae compilation featuring Jimmy Cliff and Burning Spear, I gazed out at the hordes of senior citizens at the casino, showcasing “Your Social Security Dollars at Work.” I knew then I had become everything I ever hated or feared.

[SNIP]

Posted by: Jon | Mar 6, 2005 4:07:07 PM

They are in the process of becoming national superchains, but it takes time, and talent, and sometimes it stalls out before it can reach the top. Regional chains stop growing because they run into other regional chains, which have made a nice niche for themselves in their region. Of course, this often leads to merge/acquire one another, sometimes keeping the old names...

Sometimes, there's a limit to how fast an enterprise can grow. Here in California, we have In-N-Out Burgers which are hugely popular but are only found in CA and a handful of Western states. INO would spread much faster, except the stores are all owned by the original founders, and they promote from within, so there's a limit as to how fast they can grow. Fry's Electronics, another beloved/hated California chain, is wholly owned by the Fry family. They're opening three or so new stores a year, but that's all they can afford, and it'll take a while to reach the east coast at that rate.

I presume White Castle and Steak-N-Shake haven't expanded into California for much the same reason. If WC decided to start operations in, say, the SF Bay Area, they'd have to invent things from scratch - finding suppliers, hiring staff, relocating experienced employees from the east/midwest, launching a media campaign to notify the Bay Area of their existence. WC has no knowledge of or insight into the fast food market in SF - how will they compete against Carl's Jr. and In-N-Out? Seems like a lot of risk - it's best that they keep putting up restaurants in every new east coast exurb, where their infrastructure already exists.

Krispy Kreme is an example of a regional chain that went national in a big way - and suffered for it. Too fast, too soon, too overextended.

Posted by: FMguru | Mar 6, 2005 4:10:23 PM

"You don't have regional chains in, for example, retail clothing sales."

Sure you do. Hecht's. Dillard's. Filene's. I think some of these were bought up but that that just proves that this is really "somwhat odd" at all. Stores start small, expand, and, sometimes, get bought up.

Posted by: AF | Mar 6, 2005 4:11:38 PM

Safeway is a national chain, isn't it? It doesn't seem to be all that more successful-- maybe economies of scale require really physically large (Walmart) supermarkets, not just geographic spread.

Posted by: A different Matt | Mar 6, 2005 4:12:11 PM

Resistance is Futile. Prepare to Be Assimilated.

Posted by: Lucretius of Wal*MART | Mar 6, 2005 4:22:11 PM

FMGuru - There's a White Castle in Hollywood.

Posted by: Greg | Mar 6, 2005 4:35:36 PM

Lucretius of Wal*MART,

I believe the phrase you're searching for is: "All your base are belong to us"

Posted by: Petey | Mar 6, 2005 4:45:03 PM

There is still some lingering identity attached to the regional brands. Look how unhappy people are that Federated tried to rename The Bon Marche "Bon-Macy's" or Rich's "Rich's-Macy's". People in the Northwest and Southeast, respectively, did not like having their brands changed.

Posted by: niq | Mar 6, 2005 4:49:59 PM

I wish Piggly Wiggly would go national.

Posted by: Petey | Mar 6, 2005 4:55:56 PM

"Fry's Electronics, another beloved/hated"

ummm...hardware. Installed a mobo, CPU fan as big as a coffee mug, another big HD last Friday, kept everything else the same. Spontaneous reboots led to an intuitive analysis:

I...needed...more...power.

So last night at 9PM I picked up the dual-fan 500 watt (12V-28A) power-supply and installed it without removing anything else. (!).

And now you know why I buy my clothes at WalMart.

Posted by: bob mcmanus | Mar 6, 2005 4:57:47 PM

Most of the "regional" supermarkets and deparment stores are actually national chains that retain the names they had when they were actual local stores. Macy's, Dillards, Hechts, Rich's, Marshall Field, Bloomingdales are all local names that are owned by Federated or May (which itself was a local department store at one time) and now they are merging too. The grocery stores aren't quite as consolidated but it is coming. Jewel/Osco (a Chicago Grocery chain) is owned by Albertsons out of Salt Lake and I think they own a few others. Safeway owns a bunch of local chains as does Kroger (Harris Teeter for example). And in Fast Food you've got the St. Louis/Panera/Atlanta Bread Company and Hardee's/Roy Roger's depending on where you live.

Posted by: Freder Frederson | Mar 6, 2005 5:00:04 PM

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