Catalog Showrooms Face Extinction Old Retail Format Buried By Competitors Like Wal-Mart

Eisenhower was starting his second term, cars had tail fins and catalog showrooms were becoming the rage in retailing.

Customers viewed merchandise samples in sparse showrooms and leafed through fat catalogs to make their picks. They scribbled numbers on order forms and gave them to clerks who disappeared into a stockroom for the goods.

Catalog showrooms thrived until discount stores such as Kmart and Wal-Mart started to dominate the marketplace, offering customers low prices and aisle after aisle brimming with ready-to-buy products.

Faced with aggressive rivals who offered a more attractive shopping setting, the companies weren’t able to compete. The 1990s has seen the virtual collapse of that type of retailing.

“The catalog showroom concept is a retailing dinosaur,” said Kenneth M. Gassman Jr., analyst at Davenport & Co.

In the early 1990s, two Washington, D.C.-based chains, W. Bell and Evans Products, went out of business. In September, Best Products Co. Inc. of Richmond sought bankruptcy protection for the second time and sold off most assets in October.

The largest catalog showroom operation, Service Merchandise Co. in Nashville, Tenn., is also facing tough times. The 408-store chain lost $12.3 million in the third quarter.

“Year by year by year, the list gets shorter and shorter,” said Laura Liebeck, news editor at Discount Store News, a trade publication in New York.

Catalog showrooms were born in the 1950s because of a unique set of conditions in retailing.

Before the 1970s, federal and state fair trade laws allowed manufacturers to name a price for their products and force stores to stick to it. If Black & Decker decided a drill should sell for $50, stores had to price it at $50. Balky stores could be cut off by the manufacturer, Gassman said.

The only stores not covered were wholesalers, who sold at a discount but not to the general public.

Using that loophole, catalog showrooms set themselves up as wholesalers, but almost anyone could join and buy cheaper merchandise.

“Their sole competitive advantage was low prices,” said Gassman. “The shopping experience was poor. There was virtually nothing on display. But they didn’t need to offer anything more than low prices.”

But by the 1970s, the fair trade laws were struck down as unconstitutional and retailers were allowed to charge whatever. As the laws loosened, Kmart, Wal-Mart and other discount stores gobbled up market share.

Catalog showrooms were unable to fight back. Their sales peaked in the mid-1980s at about $10 billion. “Today, the number is closer to $5.5 billion to $6 billion and diminishing rapidly,” said Gassman.

Shoppers like Jacqueline Kotvas of Richmond are one reason for the downturn.

She goes to a catalog showroom only when she’s looking for something specific. “I wouldn’t come here just to look around,” she said.

Best Chairman and Chief Executive Officer Daniel H. Levy acknowledged his company should have changed its format when it emerged from its first Chapter 11 reorganization in 1994.

The 169-store chain tried to alter its style earlier this year, turning its showrooms into stores specializing in jewelry and ready-to-assemble furniture.

But it was too late.

“There are good things about catalog showrooms,” Levy said. “But the shopping process itself is not something (customers) seem to like. (It) is outdated and too difficult.”