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From Supermarkets to Supercenters: Employment Shifts to the One-Stop Shop: Warehouse Clubs and Supercenters Have Expanded into Market Segments Long Dominated by Department Stores and Supermarkets, Eroding Employment and Sales in These Giants of Retail Trade; the Increasing Dominance of Warehouse Clubs and Supercenters Will Force Yet More Structural Changes upon the Industry

By Strople, Michael H. | Monthly Labor Review, February 2006 | Go to article overview

From Supermarkets to Supercenters: Employment Shifts to the One-Stop Shop: Warehouse Clubs and Supercenters Have Expanded into Market Segments Long Dominated by Department Stores and Supermarkets, Eroding Employment and Sales in These Giants of Retail Trade; the Increasing Dominance of Warehouse Clubs and Supercenters Will Force Yet More Structural Changes upon the Industry


Strople, Michael H., Monthly Labor Review


Dramatic changes in product delivery channels are reshaping the landscape of retail trade. Warehouse stores and supercenters are quickly moving into market segments once dominated by department stores and supermarkets. The supercenter is seen as a one-stop, low-price shop for many consumers' needs--from apple pie, to blue jeans, to tires. Over the past several years, this changing dynamic has become more evident not only anecdotally, but also through various Federal statistics. This article reviews recent trends in employment, sales, and establishment data for warehouse clubs and supercenters, department stores, and food and beverage stores. The analysis presented looks at the increasing dominance of supercenters and its effect on employment in the more traditional retailers: food stores and department stores.

Warehouse clubs and supercenters

Warehouse clubs originated in the United States with the 1976 opening of Price Club in San Diego, California? Initially, the clubs offered a wide selection of merchandise at discounted prices to other establishments for resale; essentially, the clubs functioned as a wholesaler. Eventually, the clubs expanded into retail by opening their doors to select "members," or customers who had paid a membership fee. While initially the concept was a money loser, firms were turning a profit by the early 1980s. With the success of Price Club, many more firms joined this niche, making warehouse clubs "the fastest growing format in U.S. retailing during the decade of the 1980s." (2)

The supercenter is an offshoot of the hypermarket concept, which has existed in Europe since the 1960s. Indeed, the second-largest retailer in the world, France's Carrefour, is a large owner of hypermarkets. (3) In 1984, through a partnership of Euromarche and Super Value, hypermarkets first found their way to the United States with the opening of a Biggs in the Cincinnati suburbs. (4) Today's U.S. supercenters have evolved from the European hypermarket model. Both are essentially the combination of a supermarket and a general merchandise store; however, the supercenter has a greater selection of general merchandise products? Unlike warehouse clubs, supercenters are open to the general public and have no special eligibility requirements for customers to shop there.

Despite the relative newness of warehouse clubs and supercenters in the United States, they are firmly entrenched in the retail market. As warehouse stores and supercenters continue to expand, they compete with retailers across almost all retail markets. The increased competition forces chains to adapt and can lead to downsizing, a phenomenon that has drawn great media attention. The overall effect of the increased competition on employment and sales is examined in the remainder of this article.

Shifts in employment

Employment in retail trade, as measured by the Current Employment Statistics (CES) survey, accounts for about 1 in 8 private payroll jobs. (6) Retail trade and total private employment shared similar characteristics leading into and coming out of the 2001 recession. Both employment series peaked in December 2000 and then declined for approximately 30 months, eventually reaching a trough in 2003 (retail trade in June and total private employment in July). From peak to trough, the private sector lost almost 3.5 million jobs, with retail trade accounting for nearly half a million of them. Since reaching their respective employment troughs, retail trade and the private sector as a whole have experienced similarly mild recoveries: private employment did not fully recover until June 2005, nearly 2 years after reaching an employment trough, and retail trade has yet to fully recover the jobs lost. (See chart 1.)

[ILLUSTRATION OMITTED]

Within retail trade, food and beverage stores and general merchandise stores together account for more than 1 in 3 jobs, so employment trends in these two industries can have profound effects on the industry as a whole.

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From Supermarkets to Supercenters: Employment Shifts to the One-Stop Shop: Warehouse Clubs and Supercenters Have Expanded into Market Segments Long Dominated by Department Stores and Supermarkets, Eroding Employment and Sales in These Giants of Retail Trade; the Increasing Dominance of Warehouse Clubs and Supercenters Will Force Yet More Structural Changes upon the Industry
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