"We've come to a point where every retailer, in some way, is a discounter,"

Thirty years ago Department Stores were regional. They knew their customers, they bought for local tastes and preferences and they worked hard to keep their customers. Their leaders were "merchandisers" whose primary focus was the satisfaction of the desire's of their customers.

The retail landscape is starkly different today.

Beginning in the late '70's the American retailer discovered "private label". Private label are house brands. House brands (merchandise that is manufactured directly for the retailer bypassing independent designers) now make up 70%+ of the merchandise offered in most retail stores. Companies like Limited, Gap, Macy's, Dillards and the rest found that by bypassing middle men that they could increase GROSS margins to 70% to 85%. Retailers thought that by having merchandise made directly for them by factories in locations like Hong Kong, The Marianna Islands, India, Bangladesh and many other countries that they (the retailer) could offer their customers a more unique selection of merchandise. Worse, these retail organizations began to be led by executives with financial expertise instead of merchandising expertise.

Unfortunately for the retailer their merchandising showed a lack of creativity. But that was not the point. The point for the retailer was that they could now "mark-down" their merchandise and still show a profit. Consumers soon learned that they did not have to pay full retail for anything, the stores further squeezed profit by reducing levels of customer service and the primary driver for the consumer became price, price, price.

"If I see 20 percent off, I say forget it. Or even 25 percent. I definitely go for the 40, 70 or 80 percent," said Sandstrom, 68. "That's what I look for and I never used to be that way. I just feel I'm going to get what I can get for as little as I can."

So says a consumer quoted in an article today on the San Francisco Gate Web site. Read the article.

The American retailer has lost their way. A major "shake-out" has already begun and I expect it to continue. If the American retailer wants to once again begin to create loyalty they are going to have to go back to basics including value (not cost but VALUE), service and most important refocus their attention on their customers.