Case 5: Phar-Mor (1992)

• Prof. Dr. Klaus Henselmann
• Dr. Stefan Hofmann

In 1982, Michael “Mickey” Monus and a friend, David Shapira, visited a “deep discount” drugstore in Cleveland and decided they had seen the future. They acquired a single drugstore in Youngstown, Ohio, and dreamt of building it into a large pharmaceutical empire using “power buying”, that is, offering shoppers fewer selections but great savings. The retailer’s business strategy was to sell prescription drugs and household products at prices lower than other discount stores. The formula worked: “Phar-Mor, Inc.” soon outpaced the companies that had provided the start-up money, primarily Pittsburgh-based Giant Eagle, a supermarket chain in which Shapira’s family held the biggest share. By 1988, there were 100 Phar-Mor stores; Venture Magazine honoured Monus, who was running the show as president and COO, as one of the year’s top entrepreneurs. “Big money” signed on to the cause, and Phar-Mor stores kept getting larger as Monus expanded into lines such as sportswear and fax machines. Within ten years, Phar-Mor was operating in almost every state, coast to coast, with nearly 300 stores. On June 30, 1992 (the fiscal year-end of Phar-Mor), Monus posted sales of more than USD 3 billion.

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