There’s consolodation in the retail world:
NEW YORK – “The winner here will be the customer,” said Federated Chairman, President and Chief Executive Terry Lundgren of his company’s plans for newly acquired May Department Stores. His plans for the combined company, which consists of almost 1,000 stores, include lower prices for consumers–at the expense of suppliers and mall owners–a better selection of merchandise and upsize fitting rooms.
This buyout couldn’t come at a better time for department stores, which have been on the decline. Their market share has dropped to 18.2% while specialty stores and discounters such as Target (nyse: TGT – news – people ) and Wal-Mart Stores (nyse: WMT – news – people ), have been growing. Online retailers such as Amazon.com (nasdaq: AMZN – news – people ), which reported record growth over the holidays, are on the rise as well. And as all these retailers compete for attention, the company that can best serve shoppers will win their dollars. Customers may truly turn out to be the winners.
What is it that makes some boards think that one big business in the declining field is automatically better than two small ones? Surely, consumers will benefit, but a troubled industry (in this case, department stores) is still a troubled industry.
And if you think one big company will more easily weather a storm, just think of the HP/Compaq buyout.