TELECOM Digest OnLine - Sorted: Re: New Monopoly in Dept Stores -- Federated and May Co to Merge

Re: New Monopoly in Dept Stores -- Federated and May Co to Merge
4 Mar 2005 07:44:20 -0800

Tony P. wrote:

> Stupid laws regarding the sale of alcohol are on the books of nearly
> every state. In Rhode Island you could not sell alcohol at a store on
> Sundays but taverns and bars were permitted to sell. That just changed
> and some stores are open, others don't see the benefit.

Alcohol laws are a special case explicitly described in the
Constitution. When Prohibition was repealed by the 21st Amendment,
the Amendment stated that control was up to the states. Thus, states
have special power to regulate alcohol unlike other commodities.

Some states won't allow mail order (Internet) alcohol orders and this
is now under litigation as to whether that's Constitutional -- without
the 21st Amend states wouldn't be allowed to do so because of the
Commerce Clause. It's come down to two conflicting passages in the
Constitution and which one takes precedence. IMHO the 21st Amendment
takes precedence, "stupid laws" or not. Of course, we could always
repeal the 21st Amend <g>.

Growing up in Pennsylvania where liquor/wine was only sold in State
Stores (their original name) it was unsettling for me to see them sold
in supermarkets in some other states.

Bob Goudreau wrote:

> Macy's, Lord & Taylor, etc. don't compete in a "department store
> market"; instead, they are merely smallish players in a much larger
> RETAIL market.

That has always been a basic issue in anti-trust -- to define the
market place. When IBM was hit with an antitrust suit in the 1950s,
IBM clearly had a near monopoly in punched-card machines but far less
of one in computers (there was Univac doing well in those days), and
not a monopoly at all in all of information processing.

Likewise for the Bell System -- in basic telephones, yes, but
what about if one included private communications like intercoms
or private telephone networks that large organizations maintained
on their own? What about if one included radio communications
and movie soundtracks which the Bell System once was involved
with but dropped out of (IIRC by orders of the govt)?

The other issue about the Bell System was that it was heavilly
_regulated_ by both the states and feds. The Bell System was not
allowed to use its technology to go into other fields, where it
probably could've been quite successful.

As to dept stores, I agree there are other players, but there always_
were other players in retail. Dept stores once had to compete with a
lot of neighborhood specialty stores and small chains. Discount
stores of one kind or another have been competing against them for
many years. Those kinds of smaller stores are mostly gone now.

> I would be surprised if even the combined market share of Federated
> and May approached the market share that Sears, Roebuck achieved in
> its heyday.

With Sears, it depends on the defined market. I don't think Sears was
as big in dept stores as in its catalog.

In any event, to me the classic dept store is a defined market and
potentially a very big one. Cities used to have a large variety of
dept stores. Shopping malls once had different big stores than the
next mall down the road, now they're all the same. For example, in my
area there are two big malls about 10 miles about. Years ago no big
store was duplicated, but today, thanks to mergers and closures, all
the big stores are duplicated in both. Will there be a need for two
big Federated stores in _each_ mall?

As a shopper, if Wanamaker's didn't have what I wanted, I'd go up the
street to Strawbridges, and then over to Gimbel's. Three different
stores, run by three different companies. As mentioned, I _also_ had
the choice of numerous smaller specialty stores and discount stores.

> The management of some of the old department store chains that have
> fallen by the wayside (e.g., Montgomery-Ward) seems to have stumbled
> into the same trap that railroad companies fell prey to half a century
> ago. Namely, they defined their market sectors too narrowly. While
> railroad executives believed they were in the "railroad business",
> their consumers treated them as being in the *transportation*
> business. Thus, the railroads got their lunch eaten by airlines (to
> which most of the railroads' former long-distance passengers eagerly
> flocked) and to a lesser extent by trucking firms (which grabbed a
> quick-growing share of the freight-transport business, though rail
> still plays a much more important role in moving freight than it does
> in moving people).

First, a correction. The railroads knew they were in the
transportation business and set up bus, trucking and even aviation
units and cooperative agreements. But the govt made the railroads get
out of most of that stuff.

Second, the traditional old line dept stores actually had considerable
variety. The modern mgmt have eliminated a lot of departments and
special services. Gimbels, for example, had a scouting/camping dept,
art supplies dept, and bookstore.

> I think this sort of gradual fade into irrelevance is what terrifies
> the heads of Federated and (heavily-indebted) May. ...

It's their own fault, and merger won't fix it, anymore than merging
the Pennsylvania and New York Central railroads saved them.


> That's why the consolidation of the department-store sub-sector of the
> overall retail market troubles me no more than the shakeout that
> occurred in the typewriter manufacturer sector a few decades ago, or
> in the buggy-whip manufacturer sector several decades before that.

Unlike typewriters and buggy whips, people still need clothes and

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