I have very vivid memories about Service Merchandise, a now-defunct business with a unique ordering process focused on catalog inventory. For a kid, that kind of business model was the ultimate surprise and delight experience because it was so highly interactive.
Don’t remember it? Here’s how it worked.
A Little Bit of History
Service Merchandise was a bit more fun than today’s similar IKEA shopping experience because it carried more than mediocre DIY housewares and furniture. (No shade, IKEA is the bedrock of everyone’s twentysomething apartments and beyond.) They offered a breadth of inventory that included fine jewelry, toys, sporting goods and electronics.
It began in 1934 as a small five-and-dime store founded by Harry and Mary Zimmerman in the town of Pulaski, Tenn. After leaving the wholesale business, the couple opened Service Merchandise, Inc., the first of what evolved into a chain of catalog showrooms that opened in 1960 in downtown Nashville. During the 1970s and 1980s, Service Merchandise was a leading catalog-showroom retailer. At its peak, the company achieved more than $4 billion in annual sales. As the company expanded, it began to open showrooms nationwide, mostly in the vicinity of major shopping malls, which were in vogue in the 1970s.
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An Unusual Warehouse Model
Service Merchandise was well known for its unusual ordering process, which emphasized the catalog, even while within the showrooms. Although other chains such as Brendle’s, Best Products, Sterling Jewelry & Distributing Company and McDade’s used this model, they too eventually had to fold.
The catalog showroom approach was based on the idea that it reduced the risk of merchandise theft (known in the industry as shrinkage), while also enabling customers to shop without the inconvenience of carrying purchases throughout the store while you were still browsing. The downside to this customer flow was that it required people to give their names, addresses and phone numbers with each order. Increasing the risk of identity theft made some customers wary of shopping in such stores.
For non-jewelry orders, customers would enter the showroom and receive a carbon-paper order form and clipboard to record the catalog numbers of desired items. Items were displayed in working order in the showroom, allowing customers to test products as they shopped. Current catalogs were placed on stands in strategic locations throughout the store to allow customers to shop for the items not on display.
When they were ready to place their orders, customers would take the order form to a clerk who would submit the order to the store’s stockroom via his computer terminal cash register, as well as take payment for the items. The customer would then move to the “Merchandise Pickup Area” near the exit, where the order would emerge from the stockroom on a conveyor belt.
This process was altered in the late 1980s to allow customers to place their own orders on a number of self-service computer kiosks named “Silent Sam,” which the company later renamed “Service Express.” A couple of locations even tested out a drive-through experience.
In addition to jewelry and catalog showroom display items, Service Merchandise also had several self-service items that were located on shelves and taken by the customer to checkout as in a traditional retail store. These items included many children’s toys as well as smaller consumer or commodity items such as batteries, film and videocassettes.
In the mid-1990s, the hand-filled paper forms were replaced with barcoded pull tags placed on/near each item in the showroom. Customers gathered these for products they wished to buy, and took these to the cashier to complete the sale in the previous manner, retrieved from the stockroom. By the late 1990s, many of the showrooms had been converted to allow a more traditional approach to shopping in addition to the catalog ordering process. By 2000, all of the remaining showrooms had been downsized and the catalog-style shopping approach was officially abandoned. This was largely due to the inability to compete with big box retailers (Target, Walmart, etc.).
Ahead of its Time
Service Merchandise may not have made the cut into the new millennium, but its unique business model was onto something. Sure, its competitive edge in convenience was quickly squeezed out by the ability to order anything online, but the unique surprise and delight shopping experience is something the likes of which Amazon can never replicate. We’re seeing big players experimenting with similar, more modern takes on this multi-channel shopping experience.
Target, for example, has really doubled down on a multi-channel shopper strategy of offering a diverse mix of physical and digital shopping options. During the pandemic, this has allowed flexibility in accommodating different comfort levels of social distancing. This choose-your-own-adventure style shopping approach has increased reach and has also attracted new customers, while still inspiring loyalty in, and repeat purchases from, existing customers who love the merchandise mix.
What’s Next?
Omnichannel approaches like Target’s are not insular. They’re popping up with big brands that have the means to experiment and invest in new channels, and it will be interesting to see how an increase in online shopping during the pandemic will shape consumer behavior and demand in the future.
We imagine a shopping experience that is a mix of an app –– which is honestly the new “catalog” –– with an experiential way to look at merchandise in either a physical or VR showroom. If you’re already missing Swedish meatballs and losing yourself to a maze of pressed wood, IKEA is now offering a virtual showroom experience.
What I would love to see now is an updated version of a showroom in the front with a warehouse in the back. Workers with wearables and robots would co-work to deliver goods in a fun, socially distanced and experiential way.”
So while conveyor belts and “Silent Sams” sound like a pretty fun little Sunday afternoon, that’s probably just the nostalgia talking. Let’s get real, it’s 2021 and the future is on our phones, and in the hands of robots –– or at least humans with high tech wearable gear.
Gabe Grifoni is CEO of Rufus Labs. His early days in logistics were spent working in his grandfather’s hardware store, loading, unloading and restocking inventory. He attended Lehigh University and graduated with a dual concentration in Marketing and Computer Engineering. He is a relentless innovator with decades of experience in the entertainment and marketing industry creating new products and content, and leading cross-functional teams at Sony, Warner Brothers and Disney for multi-million dollar projects. Grifoni blends his deep technical background and entertainment industry leadership at Rufus Labs as CEO building WorkHero: the most advanced connected operator platform on the planet.
