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“The Only Way Is Up”: Overoptimism and the Demise of the American Five-and-Dime Store, 1914–1941

Published online by Cambridge University Press:  10 May 2017

Peter Scott  and
James T. Walker
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Abstract

We examine a classic “wheel of retailing” episode: the abandonment of the five-and-dime pricing formula by American variety chains. The variety chains switched from a conventional product lifecycle, focusing on cost reduction through standardization, to a reverse path up the “service cost–unit value” continuum. We show that, rather than reflecting deteriorating managerial acumen, this shift was a response to the continued imperative for growth following retail format saturation. Firm-specific (rather than format-specific) competitive advantages were too weak for any chain to be confident it could win a within-format price war, making interformat competition through raising price points more attractive.

Type
Research Article
Information
Business History Review , Volume 91 , Issue 1 , Spring 2017 , pp. 71 - 103
Copyright
Copyright © The President and Fellows of Harvard College 2017 

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106 These include a full set of fixed effects, which may also indirectly capture firm- and store-level factors and other unobservable elements. We also include year effects to capture economy-wide exogenous impacts specific to any given year.

107 Based on annual report data on sales from 1908 (or the earliest available year thereafter) to 1940. “Record of the 5 and 10 Stores' Growth,” 110–33, Kresge papers.

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