15566_4.5_000012067999XSmall

Creative Destruction: Chain Store Wars

by Elaine Schwartz    •    Aug 1, 2013    •    547 Views

Visiting an Amazon distribution center in Chattanooga, Tennessee on Tuesday, President Obama was told by independent booksellers, “We are disheartened to see Amazon touted as a ‘jobs creator,’…when..the exact opposite is true.”

Small retailers opposing large firms is nothing new.

In You’ve Got Mail, Meg Ryan owned the independent bookstore and Tom Hanks ran the big box chain. Hanks locates nearby, puts her out of business and they fall in love. Just like the film, during the 1990s, the big box chain stores got good deals from publishers, charged less for books and attracted the indie store customer. Predictably, the number of independent book stores plunged. You can see their decline from 4,000 20 years ago:

Creative Destruction Independent Bookstores from Christian Science Monitor

From: The Christian Science Monitor

For close to a century, small stores have fought the spread of chain stores. Displaying their resistance, the Springfield, Missouri chamber of commerce initiated an anti-chain campaign with the slogan, “Keep Ozark Dollars in the Ozarks.” During the 1930s, when states responded with new anti-chain taxes, the president of A&P said:

  • “If the people of the United States like our stores so little that they are willing to tax us out of business, that is their affair. We will shut up shop.”

Just several years ago, hoping to preserve the neighborhood café, a community group in my school’s NJ town opposed the first Starbucks. Their protests sounded a bit like this cartoon from 1923 that was originally in Truth.

Creative Destruction chain storesThe independent book sellers’ reaction to President Obama reminds me of Joseph Schumpeter’s creative destruction. A retailing innovation that is more efficient than the single small store, Amazon might be a part of the unsettling process through which firms with new technology destroy old ones that cannot compete against them. Is it possible though that there will always be a niche for the indie book store?

Sources and resources: The WSJ article with the book sellers response to Amazon was my starting point for moving backwards to the history of chain store opposition that is described in this academic paper, in this excellent discussion of the “Amazon Effect” and in this Washington Post column on continuing opposition to chain stores. For more on Joseph Schumpeter and creative destruction, econlib is always a handy reference.

 

« »