Re: New Monopoly in Dept Stores; Federated and May to Merge

I think the reason that anti-trust concerns about this merger are so muted is precisely that it is so UNLIKE the old Ma Bell situation, which was a true monopoly for most of the country (barring the relatively small market share that the independent telcos had). Macy's, Lord & Taylor, etc. don't compete in a "department store market"; instead, they are merely smallish players in a much larger RETAIL market. And over the past few years, they have been getting their butts kicked in that market, by the likes of Wal-Mart, Target, Kohl's, Home Depot, Lowes (both now selling lots of appliances and home furnishings), Costco, Best Buy, Old Navy, Dick's Sporting Goods, Linens & Things, and so on.

I would be surprised if even the combined market share of Federated and May approached the market share that Sears, Roebuck achieved in its heyday. In fact, the proposed combination of Federated and May reminds me of the recent shotgun marriage of two other troubled retail giants, Sears and Kmart. Each of these new combo chains, in fact, owns less than 10 percent of the overall retail market (see

The management of some of the old department store chains that have fallen by the wayside (e.g., Montgomery-Ward) seems to have stumbled into the same trap that railroad companies fell prey to half a century ago. Namely, they defined their market sectors too narrowly. While railroad executives believed they were in the "railroad business", their consumers treated them as being in the *transportation* business. Thus, the railroads got their lunch eaten by airlines (to which most of the railroads' former long-distance passengers eagerly flocked) and to a lesser extent by trucking firms (which grabbed a quick-growing share of the freight-transport business, though rail still plays a much more important role in moving freight than it does in moving people).

I think this sort of gradual fade into irrelevance is what terrifies the heads of Federated and (heavily-indebted) May. They are starting to notice that department stores are a shrinking sector of the overall retail market, and that many young people think of stuffy old department stores as a place where their parents shop. It will be interesting to see if they can fight this trend, but I have my doubts. That's why the consolidation of the department-store sub-sector of the overall retail market troubles me no more than the shakeout that occurred in the typewriter manufacturer sector a few decades ago, or in the buggy-whip manufacturer sector several decades before that.

Bob Goudreau Cary, NC