Retailers as Brands Major retailers of the past were usually sellers of other firm’s brands.

Grocery chains sold brands of products from Procter & Gamble and Kraft. Department stores sold fashion brands ranging from Levi’s to Tommy Hilfiger. Hardware stores sold Stanley tools and Kohler plumbing fixtures. That’s changing. To be culturally relevant today, the goal for retailers is to be not just a seller of branded products, but to be the brand in the minds of consumers. This is fueled partly by the fact that an increasing proportion of sales and margins is derived from store brands (”private brands”) at most retail chains.

More important, in an era of too many retailers chasing too few consumers, it’s fueled by the need to be positioned in consumers’ minds as the place that delivers the satisfaction of a Stones or KISS concert. It may not matter to consumers whether that satisfaction is derived from manufacturers’ brands, the store’s brands, or the right combination of both. In consumers’ minds, it’s the total experience that creates a retailer’s brand. Are the right products in stock? Are prices in the expected range? Are personnel knowledgeable and friendly? Do the location, atmospherics, and in store logistics invite consumers to the store, delighting them so well that they return and tell their friends? Some retail brands are succeeding, none so well as Wal Mart, as you’ll see in Chapter 4. No retailer has had faster growth in sales recently than Florida based Chico’s, the boomer oriented retailing champion in ability to relate to consumer lifestyles. Kohl’s, Container Store, and 99 cent stores are other big winners in understanding changing lifestyles and relating to them.

Now let’s take a moment to look at some of the major financial developments of the past few years:

1. The worst market crash since the Great Depression, with U.S. stocks losing 50.2% of their value—or $7.4 trillion—between March 2000 and October 2002.

2. Far deeper drops in the share prices of the hottest companies of the 1990s, including AOL, Cisco, JDS Uniphase, Lucent, and Qualcomm—plus the utter destruction of hundreds of Internet stocks.

3. Accusations of massive financial fraud at some of the largest and most respected corporations in America, including Enron, Tyco, and Xerox.

4. The bankruptcies of such once-glistening companies as Conseco, Global Crossing, and WorldCom.

5. Allegations that accounting firms cooked the books, and even destroyed records, to help their clients mislead the investing public.

6. Charges that top executives at leading companies siphoned off hundreds of millions of dollars for their own personal gain.

7. Proof that security analysts on Wall Street praised stocks publicly but admitted privately that they were garbage.

8. A stock market that, even after its bloodcurdling decline, seems overvalued by historical measures, suggesting to many experts that stocks have further yet to fall.

9. A relentless decline in interest rates that has left investors with no attractive alternative to stocks.

10. An investing environment bristling with the unpredictable menace of global terrorism and war in the Middle East.

Much of this damage could have been (and was!) avoided by investors who learned and lived by Graham’s principles. As Graham puts it, “while enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster.” By letting themselves get carried away—on Internet stocks, on big “growth” stocks, on stocks as a whole—many people made the same stupid mistakes as Sir Isaac Newton. They let other investors’ judgments determine their own. They ignored Graham’s warning that “the really dreadful losses” always occur after “the buyer forgot to ask ‘How much?’ ” Most painfully of all, by losing their self-control just when they needed it the most, these people proved Graham’s assertion that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”