Dillard's Days

As mentioned earlier, Dillard's is the major department store chain that operates in half the country that the other half of the country has never heard of. It doesn't have stores in the biggest media markets, having expanded out of the southeast by picking up some grand old stores, among them Stix, Baer & Fuller in St. Louis and The Higbee Co. in Cleveland, and then reeling in the Mercantile chain, which included a lot of small-city stores such as the Root Store in Terre Haute, which I remember well.

The story of Dillard's is interesting. When I first became interested in department stores in the 1960s, I first heard of Dillard's as "Dillard's Brown-Dunkin" in Tulsa. That was a name to remember, as was its main competitor, Vandever's. (The site Lost Tulsa doesn't have anything to do with Vandever's or Brown-Dunkin, but it does mention a local competitor, Froug's. Something about those Tulsa names.) Then I saw that Pfeifer-Blass in Little Rock had essentially the same logo and put together that it must be run by Dillard's as well. And that was the last I heard of Dillard's for some time.

As it turns out, at that point there wasn't much more about Dillard's to tell. It could have remained a small-city chain in the Southwest. What I didn't know about Dillard's was how new it was at that point, having been started in the 1930s. Most department stores in the 1960s were 60 to 70 years old, and thus the founder was out of the picture and oftentimes the founder's children as well. The stores were into that dread Third Generation -- where many of the heirs don't want to run the family business but want the money, while locally the business is seen as an institution whose owners don't care about it as much as its customers do. Dillard's was fresh and was run by a man who wanted to own a big department store chain. And he succeeded.

What most interests me is how the story turns from a human story to a financial one. The early tale is of the buccaneering Bill Dillard. who, having come from a tiny Arkansas town and gone to Columbia, buys little stores in places like Magnolia and experiments with his product line -- do we sell appliances? do we offer Green Stamps? It's a human-scale world, one that the general shopper (or general newspaper reporter) would feel comfortable talking or writing about. By the end of the story, it's about "cutting operating costs, interest expense, and average gross margin. The company also divested itself of some of its non-core operations." (Yeah, sounds like newspapers again.) We're into the realm of the specialist and the investor. It's inevitable with growth, but it reminds of the statement about Knight Ridder: The last decision Knight Ridder made was the one to be listed on the NYSE in the 1970s. After that, analysts and investors made all the decisions for Knight Ridder.

So much of our thinking about institutions like newspapers and department stores gets caught in the space between business realism and sentiment. Sometimes the only way the stories connect is that vague business notation called "goodwill," the intangible value of the fact that people like and care about your product. Just looking at the numbers tells a simple story. But ignoring or dismissing customer sentiment and just focusing on the bottom line can bring a backlash that is worse than simply trying to adjust to it, irrational and costly though it may be.