Service Merchandise

History

Service Merchandise was founded in 1934 by Harry and Mary Zimmerman as a five-and-dime store in the town of Pulaski, Tennessee. The first of what evolved into a huge chain of catalog showrooms opened in 1960 on Broadway in downtown Nashville, Tennessee.

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. In the early 1980s, the Service Merchandise headquarters moved from Nashville to nearby Brentwood, Tennessee, becoming one of the first businesses to plant itself in the area that is now known as Cool Springs. In May 1985 the H. J. Wilson Co. was acquired by Service Merchandise for approximately $200 million. Raymond Zimmerman, CEO was attracted to Wilson's stores to gain a firmer foothold in the Sunbelt states. Several of these Wilson's locations included an off-priced apparel department of about 15,000 square feet (1,400 m²). Service Merchandise also had other wholly owned subsidiaries featuring retail stores such as Zim's Jewelers, HomeOwners Warehouse (later called Mr. HOW Warehouse), The Lingerie Store, and The Toy Store.

Service Merchandise was a prominent sponsor of Wheel of Fortune. During that game show's shopping era (1975-1989 in daytime, 1983-1987 in syndication), contestants could opt to take a gift certificate from the company if they did not have enough money remaining after shopping to purchase any of the other remaining prizes shown. In addition, they also provided some of the prizes on The Price Is Right, Shop 'til You Drop on The Family Channel, and Shopping Spree.

Downfall

The company lost market share in its housewares and electronics sectors to giant discounters such as Wal-Mart and Bed, Bath & Beyond, and later Best Buy and Circuit City. Although Service Merchandise was early to embrace the Internet in the 1990s, generating tens of millions of dollars in sales, it was not enough to offset the damage being done by the mega-chain stores springing up nationwide. Until its closure, however, Service Merchandise enjoyed a strong jewelry department, continuing as the largest watch retailer in the United States.

Gary M. Witkin was appointed to the new position of president and chief operating officer in 1994.

The company responded to the enormous market pressures with a series of restructuring plans that included the discontinuation of unprofitable product lines such as electronics, toys and sporting goods, and refocusing on fine jewelry, gifts, and home decor products. Many of their showrooms were also closed or downsized significantly. During this time, the company was successful in sub-dividing a number of its company-owned stores into two or three units and sub-leasing the newly created spaces to other national chains thus reducing costs and at the same time, generating more mall / store traffic.

Bankruptcy and liquidation

While in the process of changing its retail format, a group of creditors forced an involuntary petition for bankruptcy under Chapter 11 on March 15, 1999, seeking court supervision of the company's restructuring. The company later filed a voluntary Chapter 11 petition to improve relations with its vendors and creditors in an effort to stabilize its business.

Raymond Zimmerman, son of the original founders (who had been instrumental in the process of building the family business into a multibillion-dollar empire) resigned as Chairman of the Board in November 2000. The company subsequently attempted to pull itself out of bankruptcy once again in the summer of 2001, but the economic downturn following the September 11, 2001 attacks proved to be a hurdle the company could not clear. With only 200 catalog showrooms left, the stock valued at less than one cent per share, and no profitability in sight, Service Merchandise ceased operations and shuttered all of its remaining stores by early 2002.

Revival

Service Merchandise resurfaced again in 2004, as an online only web store, selling a similar line of merchandise. Raymond Zimmerman bought the former company's name and logo at an auction, and he continues to be the owner of the newly formed company, which is still in operation.

Showroom ordering process

Service Merchandise was well known for its unusual ordering process which emphasized the catalog, even within the showrooms. Although there were other chains that used this model such as Brendle's, Best Products, Sterling Jewelry & Distributing Company, and McDade's, they too eventually suffered the same fate. None was as successful as Service Merchandise.

The reason behind offering the catalog showroom approach to retailing was that it reduced the risk of merchandise theft (known in the industry as shrinkage) and also enabled customers to shop without the inconvenience of physically dragging their purchases throughout the store. The downside to this approach was that it required the customers to give their names, addresses, and phone numbers whenever an order was placed. The risk of identity theft made some customers wary of shopping in such stores, particularly when purchasing simple household items such as batteries.

For non-jewelry orders, customers would enter the showroom and receive a tablet which included an order form 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 Service Merchandise catalogs were placed in strategic locations throughout the store to allow customers to shop for items that were not on display. When ready to place their orders, customers would take the tablet to a clerk who would act as a cashier and submit the order to the store's stockroom (this process was altered in the late 1980s to allow customers to place their own orders with a self-service computer terminal named "Silent Sam", which later was renamed "Service Express"). 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.

In addition to jewelry and catalog showroom display items, Service Merchandise also had several self-service items, which were located on shelves, and taken to the checkout to be paid for as in a traditional retail store. These items included many of those in the toy department as well as smaller, low priced items (such as batteries, film, and video cassettes).

The jewelry department, which was featured prominently in the center of every showroom, operated on a first-come, first-served system, in which each customer would be individually served by a jewelry clerk.

Also in the mid-1980s, Service Merchandise experimented with the installation of Drive-Thru windows at two showrooms (near Chicago and Nashville), allowing customers with phone-in orders to pick up their orders without leaving their automobiles. The concept was not expanded beyond its test stores, but remained in place at those locations.

In the mid 1990s, the tablets were replaced with barcoded pull tags placed on/near each item in the showroom. These were taken to the cashier instead of the tablet in order to purchase the item, which would still be 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.

Support of the Muscular Dystrophy Association

Service Merchandise was known as one of the largest corporate donors to the Muscular Dystrophy Association during its time as an established company. Chairman/CEO Raymond Zimmerman would appear multiple times on the yearly Jerry Lewis MDA Telethon to present donations on behalf of the company and its customers. Around each showroom were several collection boxes for MDA, and each store also sold MDA fundraising shamrocks at St. Patrick's Day. Even during its bankruptcy and liquidation, Service Merchandise continued to be a large supporter of MDA.