The only way is up: retail format saturation and the demise of the American five and dime store, 1914-1941

We examine a classic ‘wheel of retailing’ episode – the abandonment of the five and dime pricing formula by American variety chains. These switched from a conventional product lifecycle, focusing on cost reduction through standardisation, to a reverse path up the ‘service cost - unit value’ continuum. We show that, rather than reflecting deteriorating managerial acumen, this was a response to the continued imperative for growth following retail format saturation. Firm-specific (rather than format-specific) competitive advantages were too weak for any chain to be confident it could win a within-format price war, making inter-format competition through raising price points more attractive.