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For a glimpse at how the retail landscape has changed since the recession began in December 2007, look no further than the annual list of the nation's largest retailers.
Department stores are shrinking. Discount chains are growing. And Wal-Mart Stores Inc., the long-standing top seed, is so far ahead of its peers that the second through seventh largest retail chains combined would still generate less annual revenue than the $405.6billion rung up at the world's largest retailer last year.
“The economy hasn't been a losing proposition for everyone,” said Susan Reda, executive editor of Stores magazine, an arm of the National Retail Federation and publisher of the annual list. “And retailers who have made it through the recession will be well positioned to grow in the future.”
The Washington-based trade group this week released its annual list of biggest U.S. retailers. The ranking, compiled by London-based market researcher Planet Retail, is based on 2008 revenue.
Among the biggest changes from the 2007 ranking: Home Depot dropped two notches from its No. 2 spot, where it remained for much of the housing boom, as many homeowners strapped by the economic downturn put off remodeling projects and others battled with banks over mortgages to stay in their homes.
Electronics giant Best Buy Co. appeared on the top 10 for the first time, after a steady climb from No. 16 in 2000. It unseated Supervalu Inc., which dropped to No. 11.
Sears Holdings Corp., parent of Sears and Kmart stores, clung to the top 10, falling to ninth. The retailer has been steadily losing ground for more than a decade, according to the list. In 1992, the two stores held the second and third spots on the list and together generated more annual revenue than No. 1 Wal-Mart, according to the trade group's data. As recently as 2000, Sears ranked fourth and Kmart fifth.
Meanwhile, Mooresville-based Lowe's rose a notch to No. 8, a big step up from its No. 14 spot in 2000. The home improvement retailer took advantage of Home Depot's misstep of cutting back staff. Home Depot's move, under former CEO Robert Nardelli, hurt customer service. Nardelli came under fire at Home Depot for his oversized pay package and management style.
Lowe's positioned itself as a cleaner, friendlier alternative to Home Depot. That strategy helped Lowe's hold its own during the economic downturn, said Paula Rosenblum, managing partner of RSR Research, a Miami-based retail consulting firm. Still, she predicts Home Depot, which is in the midst of a turnaround under chief executive Frank Blake, is angling for a comeback.
“Lowe's was hitting the right note during the boom,” Rosenblum said. “The question is, in the coming couple of years with so many foreclosures, it implies there is a lot of remodeling to be done. It will be interesting to see how it will play out. It's going to be a two-horse race.”
Another consistent climber is Costco. The warehouse club known for upscale merchandise has overtaken Target as a place to find cool stuff on the cheap. Costco rose two notches to the No. 3 spot, behind Kroger. Target, for its part, regained its No. 5 spot after dropping to sixth in 2007. In comparison, Costco ranked No. 9 behind Target at No. 7 in 2000.
Retail consultant Burt Flickinger III points out a common factor among the retailers climbing the ranks: managers who grew up within the company and know it inside and out.
“They all have continuity of management,” said Flickinger, managing director of New York-based Strategic Resource Group. “These are people who are born and raised in the company instead of executives who are more focused on taking care of themselves than taking care of their team or their consumers.
“It's like the Chicago Bulls keeping Michael Jordan and Scottie Pippen around for all (six) championships.”
