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Friedman's, Sears illustrate strain of changing markets

For those mature enough to remember an earlier time, it’s a one-two punch:

- The owners of the former Friedman’s Fresh Markets continue a court battle with the local grocery chain’s distributor, Merchants Distributors Inc. of North Carolina, over disposition of the closed local grocery chain’s assets. Friedman’s closed its three remaining stores in January, ending 117 years of continuous business in the Butler area.

- Sears Holdings, the one-time anchor of shopping malls across America including Clearview Mall in Center Township, filed Monday for Chapter 11 bankruptcy protection with plans to close another 142 stores.

Details of the stores’ closings separate them by light years, and yet the circumstances are virtually the same. An examination of these circumstances helps explain how they failed to continue thriving — and how other competitors might avoid some of the pitfalls to which they succumbed.

Friedman’s contract with MDI in 2016 included a loan and a line of credit so Friedman’s could buy merchandise from MDI to stock its store shelves. MDI claimed breach of contract when Friedman’s failed to pay on the loans. Friedman’s said the dispute was not that simple. Friedmans President Carole Bitter claimed MDI failed to do the proper “reset” — the removal of old inventory, signs, displays and shelf tags; and setting up of the new store.

During a deposition, Bitter said the actions of MDI destroyed Friedman’s.

It seems a simple enough dispute to settle: if the contract spells out specific terms of the reset, then MDI is liable; if not, then Friedman’s must pay its bills as ordered by the court.

Sears and its suppliers and creditors are experiencing simlar tensions and challenges in its court filing, but on a much greater and more complex scale. Monday’s Chapter 11 filing lists $6.9 billion in assets and $11.3 billion in liabilities.

Sears was the largest retailer in the nation before the rise of Walmart and, later, Amazon. Monday’s bankruptcy declaration marks the culmination of years of decline for Sears defined by sales declines, cost cuts, borrowing and store closures.

A century ago, stores like Friedman’s and Sears stood at the cutting edge of commodities mass marketing. They were in command of efficient distribution systems providing superior service to their customers and their suppliers. There was plenty of benefit — and profit — to go around.

In more recent years it has become a much more competitive scenario. Alternative delivery systems and marketing networks drive down prices. Yes, they tend to drive down expectations of quality control, product fulfillment and other details related to consumer expectations. But lowest price seems to cover a multitude of retail sins.

It’s not only the stores like Friedman’s and Sears that are under increasing pressure to perform; it’s also the suppliers like MDI to provide merchandise of high quality and low price. They now compete against mega-suppliers like Amazon and Walmart, and the Asian mercantile powerhouse that fills their warehouses.

In the end, the once-powerful retailer is pitched against the once-lofty distributor, fighting over the scraps. The consumer has moved on. Walmart’s $500 billion in annual sales makes it the world’s largest retailer; Amazon ($178 billion) is the world’s largest online retailer.

It does make you pause and wonder: 50 years from today, will Walmart and Amazon be where Sears finds itself now?

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