The economics of general stores vs specialized stores

A recent thread reminded me of something I’d noticed before: About 100 years ago, most people would shop at a general store. Today, we tend to shop at (much bigger) general stores as well when we go to a big box store. This does not mean that there are no longer any specialized shops but big box stores are offering many items which used to be found in specialized shops and many of those specialized shops are closing as a result.
Is it accurate to say that general stores were quite common up until sometime during the 20th century?

If so, why were general stores so common up until sometime during the 20th century?
Why did specialized stores gain popularity during the 20th century?
Why has the general store concept come back in the last decades?

My grandfather ran a type of general store (and it’s still in business, though its focus has switched). The were definitely common, usually because they served small rural communities. If you lived in a village with under 1000 people, they couldn’t support too many businesses. Thus is made far more sense for a business to set up to sell as many different items as possible. People would need all the items the store sold, and once you were established, it was hard for any competition to be start up. If you stocked food, and clothing, and hardware, etc., people had a place to buy, and a store that specialized, say, in hardware, would struggle as people spent their money at the general store.

Note, too, that the small individual stores couldn’t compete with each other on price. It cost all stores about the same for their stock. So a second general store couldn’t get established.

In cities, though, there were specialized stores. The larger population made them viable. You could specialize in clothing and not have to include hardware. There was a large enough population to support a small business selling specialized goods.

The change away from general stores had to do with population growth and better transportation. Small towns grew larger. And there were chains that could sell things for less due to their better buying power (if you were buying 1000 of an item, you can demand a better price from your supplier than if you’re buying 10). So they moved in.

I don’t think the general store has come back. Big box stores tend to specialize (e.g., Home Depot, Dick’s Sporting Goods). There are megastores like Wal-mart; those succeed because their buying power leads to lower prices.

The old-fashioned general store is dying out, since they can’t compete on price.

To ask a stupid question, does a department store count as a “general store”?

It seems to me the evolution goes from:

  1. small, community-based general stores
  2. department stores (Sears)
  3. big-box warehouse department stores (Target, Walmart)

During that entire time the specialized stores never disappeared.

There are always two niches. It is always possible to use size the drive economies of scale and lower prices. It is always possible to use specialized knowledge and personal attention to support individual goods. These have been running in parallel in the form we know now since the mid-1800s, when it first became feasible to use modern transportation and communication to support multi-purpose retailers.

Neither has ever gone away. New businesses always find specialized niches in which to appear and then become departments of larger stores as the items become commodities. Look at the rise of thousands of video stores in the 1980s.

It goes backwards as well. Cupcakes were once a minor item out of many in bakeries, but a plethora of pure cupcake stores have sprung up all over the country.

It’s never either/or. It’s both always. As soon as one grows more prevalent it opens opportunities for the other type, so the dominance seesaws back and forth and one may be more noticeable in certain fields at certain times but they’re always both around.

Well said. Essentially, general stores capitalize on economies of scale while specialized ones capitalize on economies of scope.

There was a recent book about the history of A&P. When A&P started they wiped out the small neighborhood grocer through more selection, a more efficient supply chain, and even control of their supply chain through contracts with farmers. This is just from the reviews, I haven’t had a chance to read the book yet.

Specialized stores often survive because a community forms around them. Coin collectors hang out in coin shops. Cigar smokers hang out in tobacco shops.

Also, a specialty shop can carry a broader selection within the specialty. While a big grocery store may sell a lot of tea, they aren’t going to carry vintage pu-erh bricks, matcha whisks, mate gourds & bombillas, super-premium loose-leaf teas, and so forth. The owner of the specialty shop knows the stock and the trade better than anyone you’ll find working in a supermarket, so you can ask for help and advice. I’ve never seen a grocery store that will open containers of tea to let you smell them, but all specialty shops will do that.

I have. It’s pretty good. A&P didn’t wipe out neighborhood grocery stores, though. That happened later. They did badly hurt stores that had no business being in business in the first place, and there were a lot of those. Most neighborhood grocery stores didn’t last five years, A&P or no.

What’s most amazing is the discussion of the rise of chain stores in the 1920s and 30s. The arguments against them read exactly, word-for-word, like the arguments against Wal-mart more recently. That was a half-century after they started, however.

There are still small general stores – the company I work for literally owns ten thousand of them. However, it’s all dependent on a large scale, highly efficient distribution network.

They compete with the small specialty shops by offering the broad variety of products at low prices like a big box store, but compete with the big box stores by being small and convenient like a neighborhood store.