March 31, 2000, Volume 1, Number 13

A large proportion of retail sales are generated by a few players. One way to check the ups and downs of these leading players has been the Chain Store Age Magazine’s annual list of the top 100 retailers in the U.S. The International Council of Shopping Centers (ICSC) examined these lists more closely to answer a few questions. For instance, has the list changed over time? Which companies and categories dominate? How much have they grown?

THE EXECUTIVE 100
ICSC collected and compared the Top 100 lists for 1988, 1994 and 1998. In 1988, retailers that made it to the Top 100 list grossed $399.3 billion in revenues, or 31% of total non-automotive retail sales. In 1998, revenues for the top 100 retailers totaled $891.7 billion, more than doubling the revenues of the elite group in 1988. Their share of total non-automotive retail sales had risen to 43%. Revenues of these 100 retailers grew an average of 8.4% per year from 1988 to 1998.

Since 1988, three retail formats have dominated the executive list—supermarkets, department stores and discount stores (see Chart 1 below). The combined revenues of these three comprised more than 60% of total revenues of the 100 retailers in the list.

Chart 1.

In 1988, supermarkets took the lion’s share of the top 100’s total revenues, with 28.1%. Department stores placed second, accounting for 17.4%, while discount stores were a not-so-distant third, with 15.9%. In 1994, supermarkets still dominated, with their share increasing to 29.1%. The performance of discount stores, however, improved significantly, as their share increased to 22.9%, bringing them to second place. This gain occurred partly at the expense of department stores, whose share had declined to 15.0% by 1994.

After another five years, the picture changed altogether. In 1998, discount stores dominated, capturing about 25% of the top 100’s total revenues. By that time, the share of supermarkets had dropped 5.4%, to 24%. This decline can be easily linked to a reported rise in spending on food away from home over the past few decades. To some extent, there is also the increasing competition with discount department stores for Health and Beauty Aids and in-store pharmacies; and with warehouse clubs for food. Meanwhile, department stores’ share fell to 14.8%. This may not be significantly different from the reported share in 1994, but the decline in share over ten years was unquestionably noteworthy.

A closer examination of the Top 100 list revealed that 72 retailers from the 1988 list managed to make it to the 1994 roster. Seventy nine from the 1994 list survived and remained members of the 1998 elite group. However, only 56 retailers made it to all three lists.

SALES CONCENTRATION
Within each of the retail segments, sales were concentrated among a few players. Moreover, the strength of these few players increased over time, as evidenced by the growth rates in their revenues. Let’s take a look at the three retail types discussed in the preceding section.

Supermarkets/Grocery Stores

The three largest supermarket chains from 1988 to 1998 were Kroger, American Stores and Safeway, with combined revenues of $72.6 billion in 1998. These three account for a little over one-third of the total revenues generated by all supermarket retailers that made it to the Top 100 list. Over the 10-year period of 1988-1998, revenues of these three top supermarket chains grew an average of 3.6% per year. The supermarket segment remains one of the least concentrated of all retail sectors. In 1988, 24 supermarket retailers made it to the 1988 list. The number increased to 30 by 1998.

Conventional Department Stores

The effects of the mergers and acquisitions that transpired during the mid- to late-1980s lingered through the nineties. Yet, three key retailers within this segment remained consistent—Sears, Roebuck & Co., J.C. Penney and May Department Stores. This trio held onto the top three spots until 1998, when Federated bumped May from third to fourth place. The combined revenues of Sears, J.C. Penney and Federated were $87.8 billion in 1998. Revenues of the top three increased an average of 4.5% per year since 1988. Throughout the years, the top three firms represented about two-thirds of the combined revenues of all department store retailers in the Top 100 list.

Discount Department Stores

Of all retail formats, discount department stores displayed the highest degree of sales concentration. Wal-Mart, Kmart and Target remained the strong leaders within this retail segment. These three generated revenues over $200 billion in 1998, with double-digit growth (12.9%) per year in the last decade. They comprise over 90% of the total revenues raked in by the discount stores within the top 100 list. Notable is Wal-Mart, whose revenues in 1998 reached over $137 billion, more than double the combined revenues of Kmart and Target. In any case, these category-killers show no signs of weakening as they continue to open more superstore formats, showcase more general merchandise that now include branded items, expand regionally and globally, and participate in e-Commerce.

The dynamics behind the retail industry from 1988 to 1998 included buyouts, mergers and acquisitions, new store concepts, increased store openings (not to mention superstore formats) and international expansions. While it certainly is prestigious to be part of the Executive 100, the club does not provide lifetime membership—some companies’ growth eased off, while others filed for bankruptcy. It will be fascinating how this list will evolve in the next few years, given the new distribution channel for retailers, the Internet.