Many readers may be too young to remember Service Merchandise, a chain of approximately 400 retail stores that disappeared around the turn of the century. The product assortment was similar to what consumers might find in any general merchandise retailer, but the inventory management set it apart.

Single items of each product lined the comfortable aisles. To make a purchase, customers filled out a form as they browsed, noting the number, colors, and sizes of each purchase they wanted to make. At the back of the store, they turned in their order sheets, which employees used to collect all the desired items from the stockroom. The employees loaded the purchases onto a conveyor belt, which brought everything right to the customer. While waiting, customers also could browse the Service Merchandise catalog and add additional items to their basket.

The appeal of this model was that it avoided requiring customers to carry heavy items through the stores. All inventory could be stocked in back rooms, without the need to worry about attractive presentations or sufficient spacing. In addition, the approach helped limit theft.

But Service Merchandise stores failed to compete sufficiently well against the emergence of big box retailers. So why are we talking about them now? According to some observers, the problem of Service Merchandise was not that its concept was poor but that it was too innovative, too early. As evidence, these observers point to the expanding numbers of showroom-type stores being opened by various types of retailers.

A prime example is Apple Stores, where all the high-tech devices are stores in back, with only a few versions of the computers and tablets available for consumers to peruse in the main store. Several brands that started as e-tailers also are experimenting with one or a few showrooms, to enable customers to interact with their product line in person. Examples include the clothing retailer Bonobos and the eyeglasses innovator Warby Parker. Amazon’s new pick-up stores for online orders might mimic some elements of the Service Merchandise model as well, to enhance efficiency and positive interactions with customers.

Discussion Questions

1. What was Service Merchandise?
2. Why did it go under?
3. Is the Service Merchandise retail format being reinvented by modern retailers?
4. Do you believe the Service Merchandise retail format will be successful today?  Why or why not?

 

Source: Tom Ryan, Retail Wire, April 6, 2015