Service Merchandise was once one of Middle Tennessee’s most successful businesses for decades until the changing retail landscape derailed it 20 years ago.
Originally called Shainberg & Zimmerman’s Wholesale Company, Service Merchandise was founded in 1934 in Pulaski, Tennessee by Harry Zimmerman. He was known for selling cosmetics, toys, glassware, and other household items. It started as a wholesale family business until the early 1960s. Zimmerman’s eventually moved to 305-307 Broadway in Nashville as the business grew.
Service Merchandise has grown from a wholesale business to catalog showrooms. Their first catalog showroom opened in Nashville in September 1960. Business was booming; the company was able to open additional locations, including on Nolensville Road, Rivergate, Hickory Hollow and Memphis.
Customer satisfaction was a top priority for the company; they pride themselves on providing a variety of quality merchandise at discounted prices. All products come with a manufacturer’s warranty. In addition, Service Merchandise has implemented a money back guarantee if a product does not meet customer expectations.
In 1962, the company opened its new $40 million headquarters in Brentwood. About 10 years later, Harry Zimmerman’s son, Raymond, became president of the company and its future turned out to be bright. At one time, Service Merchandise was listed in the Fortune 500. It was the nation’s largest catalog showroom retailer until its bankruptcy in 2002.
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Service Merchandise filed for bankruptcy on March 15, 1999. At the time, it was the largest bankruptcy in Tennessee and among the top 20 in the nation. The company operated in Chapter 11 bankruptcy for three years until they finally called it quits.
After filing for bankruptcy, the company closed around 150 stores and laid off 30,000 employees. News of the bankruptcy left customers and employees with feelings of shock and discontent.
“It’s sad. I grew up here. A lot of these people are like family to me,” said 19-year-old employee Tammy Locke.
“We’re going to miss this place for shopping. The prices are really great,” said Carl Hill, a long-time customer.
Although the company would miss, some customers have expressed complaints.
In a 2002 article in Tennessean’s Bush Bernard, a customer, Cynthia Fisher, said she was unhappy when the company shut down its catalog operations. Another couple, Brad and Charity Kimes, said they stopped shopping because filling and paying for an order and then going to a warehouse to pick it up became too much of a hassle.
In addition to problems with the catalog concept, a number of other factors contributed to the company’s decline: low holiday sales, the aftermath of 9/11, and shrinking store sizes. Moreover, the company did not have a solid financial base. According to a 2002 interview with Virginia-based retail consultant Ken Gassman, Service Merchandise was “falling into a financial abyss for which there was no return.”
In response to customer complaints and falling sales, the company implemented a new purchasing system. Previous systems required customers to view product samples in showrooms. They then collected their items on a conveyor belt at the exit.
This new purchasing system was part of a larger company-wide overhaul led by CEO Gary Whitkin. The aim was to avoid consumers having to stand in multiple queues and to speed up the overall checkout process. The hope was that shorter payment terms would attract consumers and boost sales.
Although innovative for its time, it was not enough to prevent the company from going bankrupt. The company had accumulated about $1.3 billion in debt to various creditors and retailers. Bankruptcy eventually turned into liquidation, leading to the downfall of a retail empire.