Successful small shops grew into department stores and chain stores. Competing with these larger stores was difficult for small shopkeepers, unless they had a point of difference such as another line of goods.
Chain stores – which have branches in different towns – emerged in Britain in the 1850s, and by the 1870s men’s clothing and grocery chains had become established. Chain stores soon spread to other types of retailing.
Early New Zealand chain stores
International and local chain stores operated in New Zealand. Among the first local chain stores was Hallensteins.
Jewish immigrant Bendix Hallenstein opened a general store in Invercargill in 1863 before moving to Queenstown. Soon he had branches in Arrowtown, Lawrence and Cromwell. Next he opened a clothing factory and menswear stores in many centres. By 1900 he had 36 branches throughout the country. His business model was high turnover with small margins (small profits on each sale). By doing this he could sell his clothes more cheaply than competitors who owned just one shop. Economies of scale (as production increases, the cost per unit produced decreases) were also important. This method of making money was also employed by department stores – which had the added inducement of everything under one roof.
Whitcombe and Tombs
Christchurch booksellers Whitcombe and Tombs followed in the chain store path. First set up in 1882, they bought a Wellington store in 1894. They had also opened a London office to purchase books. A Melbourne office opened in 1903. They entered the Auckland market in 1916, and built a printing works. Soon they also had branches in Invercargill, Timaru, Lower Hutt, Hamilton and Hastings, with printing facilities in Auckland, Wellington and Christchurch.
Phoenix, Reynolds and Zealandia
Bicycle manufacturer Robert Murie started making his own Phoenix brand bikes in 1893, and soon had seven stores throughout Otago and Southland. The Auckland-based firm Reynolds began making and selling bikes in 1895, and went on to open shops in Wellington, New Plymouth and Palmerston North. The Zealandia Cycle Works had branches in Napier and Ashburton and a shop and factory in Christchurch.
An example of an overseas chain store is the Singer Manufacturing Company, which sold sewing machines in a number of countries. It opened its first New Zealand store in 1883, and by 1906 had 14 New Zealand stores.
Vertical and horizontal integration
Chain stores that produce their own goods are examples of vertical integration. By controlling the supply of goods, shop owners are less subject to delays and can also control quality. Chain stores – shops selling the same products in different markets – are also examples of horizontal integration.
Chain-store brands were recognisable throughout the country, which made advertising more profitable as consumers in different suburbs and cities knew the brand. Chain stores also saved money by centralising management, and if they produced their own goods they had even more control over their business.