Thursday, December 17, 2009

Sol Price—A Retail Revolutionary

We were saddened to hear about the passing of Sol Price, a retail legend who revolutionized retailing over the past several decades. We also have some very personal links to Sol, and can trace McMillanDoolittle origins almost directly to that era of profound retail change.

For those not aware, Sol Price founded Price Club, which was the original membership warehouse concept pre-dating any of the efforts we see today. He almost single-handedly created the notion of this business, which is now well over a $100 billion business in the US and taking root internationally as well.

It all started with Sol Price in a single club in San Diego in 1976. Sol had the revolutionary idea of re-inventing the productivity chain in retail: Carry a few of the absolutely critical sku’s, sell in incredible tonnage, with great velocity, at extremely low margins and charge membership fees paid for by consumers for the privilege of shopping. And, being the brilliant merchant that he was, Sol also figured out that creating a treasure hunt environment that mixed unexpected surprises with the staples would keep customers loyal and coming back again and again. In the process, he created retail stores that drove volumes in excess of $100 million, unheard of that time and still rare today.

While we are all now familiar with how the model works, so many pieces were so radical at the time that his ideas were dismissed by many in retail. Of course, there were a few people paying close attention. Jim Sinegal of Costco worked for Sol Price and later launched his own concept and eventually acquired Price Club. Our founder, Sid Doolittle, was an early follower as well, and partnered to open The Warehouse Club in the Chicago market. Other early models included BJ’s, The Wholesale Club, and Pace. And, there was a guy named Sam Walton who used to visit Sid Doolittle at his first Chicago location on the weekends…..600 stores and nearly $50 billion in revenues later, Sam’s Club remains a staple of US shopping.

For many of us who have worked at McMillanDoolittle for a long time, we had the privilege of learning the lessons of high productivity retail from Sid Doolittle first hand. For such a simple idea, execution becomes incredibly complex and razor thin margins necessitate an extreme focus on all of the levers of retail profitability. But, while the clubs have been around now for 30+ years, the lessons of productivity are slow to take hold. Even today, with all of the analytical tools at a retailer’s disposal, the club model still produces 50 to 100 times the productivity per sku than the retail models it competes against—drug stores, supermarkets, discounters and supercenters.

In our book, Greentailing and Other Revolutions in Retailing, we began our discussion reviewing historic revolutions in retail, ranging from the birth of the supercenter to the advent of the Internet. And, there was certainly a prominent place in that discussion of the contributions of Sol Price and clubs. In an era of so much sameness, the real innovators tend to stick out. Sol Price was one of the true icons of modern retailing.

1 comment:

  1. A very nice remembrance of a real industry leader. I too had my career intersect with his in several meaningful ways.

    First, I had an aunt by marriage become his second or third wife for a short while.

    Second, Sol tried to hire me to become his V.P. of Real Estate but his "best offer" was well below the salery I was then earning! (He thought that his offer of stock should have been enough to capture my imagination).

    Finally, I successfully negotiated with him to lease space in several former Price Club stores he owned personally that Costco did not want to buy when they acquired the Price Club. It turned out that Sol badly miscalculated the renovation costs and he later confessed they were two of the worst deals he had ever made.

    However your characterization of Sol as someone who "revolutionized" retailing is a bit extreme. I would characterize him as someone who advanced retailing through "evolution" rather than "revolution" because there were many retailers (mostly supermarkets) that sold their goods on pallets with limited selection and high turnover. I can still remember walking through White Front, GEX,GEM and others in the 1960s and watching the stock boys use their box cutters to open the tops of the top cases and then simply walk away. I was jealous because I could easily remember my days of restocking shelves in the various retailers that I worked and having to stamp each item and place it on a clean shelf.