Pareto Store; Everything Store; Everything Else Store

See here for the idea behind writing kata.

We live in the suburbs. We used to go to Costco.

Everyone in the suburbs loves Costco. People shop for food there, buy gifts there, talk to each other about their favorite finds ("I love this deli tray!" "thanks, would you believe I got it at Costco?"), revel in what they find there.

We had to stop going to Costco.

It's a fine store for many things, but over time we kept striking things off our list of "acceptable" items. Their croissants are fine — until your family of three is on day six of eating stale croissants, just muddling through so as to not waste money. Their eggs are fine — but why are the yolks so pale, and the shells so thin? Their clothes are fine — as long as you don't care about trying things on, and don't care if nothing you wear ever quite fits despite being the "best" size. Their meat is fine — but why does this pork belly have a weird odor?

It got to the point where goods "acceptable" for our use case had dropped to 10% or less of all products they sold — and when the average Costco only carries 3700 SKUs^[1], that's quite the small footprint!

Now, we shop at BJ's, which is like Costco, but less so. BJ's has more SKUs, has smaller warehouses, is closer to home, has smaller portions, and has better average quality. But the net effect on our shopping is the same: we buy Pareto products, mostly staples, in large (but not too large!) quantities to get us through the week.

Costco and BJs and Sam's Club and all the rest are Pareto Stores. They never have exactly what you want (if you have preferences), but they have goods that satisfice for 80% of what you want buy. (Oddly, Trader Joe's is also a Pareto Store.) And since you're mostly indifferent to the goods you buy, that's okay.

We used to go to H-Mart for all our groceries. Whether we needed noodles, or rice, or sauces, or milk, or fresh vegetables, or eggs — H-Mart took all our grocery money. They don't excel at "American foods," carrying only a paltry selection of the top SKUs at too-high prices, but on net, it's fine to spend $6 on six tubs of applesauce once in a while when you don't have any at home. H-Mart is locally Pareto for American foods — and, arguably, for everything but Korean food. A Chinese, or Japanese, or Filipino, or American family can shop at H-Mart and purchase most things they would ever need, but must still go from time to time to a store that specializes in their favorite cuisines to stock up on some essentials they just can't get anywhere else.

Where we live, our choices for groceries are adequate. But the problem with Pareto Stores is that over time they suck the oxygen out of the room for any store that can't claim a niche.

Think about it: milk, eggs, and bread have traditionally acted as loss leaders for older grocery chains. Kroger put those items toward the back of the store, on steep discount, in the hopes that you would go to the local Kroger store instead of a competitor, and on your way to buy milk, eggs, and bread, you would go ahead and buy everything else you need.

Over time, though, Pareto Stores like Costco, Super Walmart, Super Target, and a dozen other stores that share the same template began chipping away at the economic model that built local grocery stores.

My parents have watched this process evolve over the past 20 years. Even in their small town, they used to live a half mile away from a small, locally owned grocery store that had most of what you could find at a Kroger or similar. But as they, and everyone else, bought an increasing share of their groceries from large, far-away, Pareto Stores, the local stores folded, one after another.

On the flip side of Pareto Stores are Everything Stores, the canonical example of course being Amazon. Amazon has everything you've ever heard of (and a bunch of stuff you haven't), and to stay competitive, stores like Target are increasingly becoming marketplaces in order to compete with Amazon. Target's product search defaults to Target goods, and third parties, because for every search result they give you that ends up in a purchase, some money ends up in their pocket.

Yes, presumably, Target profits more for selling goods they carry... but the economics of being an Everything Else Store just aren't enough for most companies to thrive anymore. The center of the normal distribution, where most dollars were historically made, has been chopped away by the likes of Costco, resulting in the long slow retail implosion of the past 30 years.

Retail has always been tough, but if you want to make it in the present day, you have a small number of business models to choose from:

• Be a Pareto Store
• Be an Everything Store (protip: you probably don't have the resources for this)
• Find a niche; curate goods of a kind. Five Below sells knick knacks to "people who like Temu quality but don't want to wait for delivery;" luxury stores in upscale markets always have some viability. Find a way to have a distribution of products that doesn't overlap too highly with the Pareto distribution.
• Be the only guy in town (rural general stores, e.g.)

... and, even then, odds are you won't get rich. Sears is gone, K-Mart is gone; most local shops are gone; COVID did its best to kill stores that would otherwise have continued struggling on for years.

All this adds up more driving, more delivery, and more isolation, as we stockpile pantries full of stale croissants and closets full of cheap knick-knacks. I guess this state of affairs is America's emergent and collective revealed preference for how we want to shop, much as it pains me to admit; we are so worried about AI slop polluting the commons, but in a way, the slop is already here, has already been here for 20 years.