Discount veteran Ames to liquidate after 44 yrs. closings end era of Northeast regionals - American retailers struggle to survive, industry consolidation - Statistical Data Included

DSN Retailing Today, August 26, 2002

NEW YORK -- Ames' liquidation is the final chapter in the story of a company founded in 1958 that had been a fixture in its markets and an important employer in hundreds of rural communities. However, its demise also is part of an emerging story about the changing face of American retailing, where a few key players are gaining market share and establishing the era of the national chain.

This evolution has made for a complex set of consequences that can be seen playing out across the United States. While Kmart remains in Chapter 11 and many companies struggle, several key retailers continue to report growth, even if not up to the pace of a few years ago. Undoubtedly, Wal-Mart, Target, TJX, Bed Bath & Beyond and Kohl's will emerge from the current recession in an even more powerful position than they were in the 1990s, when the economic boom tended to compensate for weaknesses and helped stumbling companies recover from mistakes.

Since the '90s boom went bust, neither weaknesses nor mistakes have gone unpunished, so Lechters discovered too late that it had become obsolete in the changing retail landscape and didn't have the time to reinvent itself. For its part, HomePlace succumbed to competition and a business strategy that never completely caught on with consumers, while Waccamaw fell victim to ambition, acquiring a company that already was in bankruptcy and foundering.

However, even the boom couldn't save the regional discounter. Given the ongoing growth of a few major retailers, it isn't just the economy that is pounding weaker retailers. For players in the home business, such as Lechters and Home-Place, the growth of formidable specialists, such as Bed Bath & Beyond, played a critical role in their difficulties, as did the expansion of the home business by discounters who discovered they could get less expensive, better-quality goods by exploring--and, in the case of domestic vendors, leveraging--the improved manufacturing capacity overseas.

Major discounters didn't just outdo specialists, however. Particularly two, WalMart and Target, found approaches to the customer that were effective. Wal-Mart used the old tried-and-true low prices, but coupled that with an almost fanatical devotion to driving prices even lower, while maintaining and frequently improving quality. By doing so, it fundamentally changed the relationship between the vendor and the retailer, insisting its suppliers adopt its doctrine.

In the meantime, Target figured out how to bring style to what had been a business that focused on utility Discounters were developed to offer lower-income and working-class consumers low-price, basic alternatives to the more fashionable, but more expensive, products found in department stores and mid-tier retailers. Target worked out how to do it with style.

While Target's selection may not be stylish in the traditional sense--most of its goods still reflect the basics philosophy of discounters and sits pretty much on the same part of the fashion curve as its immediate competition--the retailer provides a range of options that ensure most consumers can find something consistent with their tastes. And Target did something else that discounters had traditionally found to be difficult--they figured out how to keep the store neat. That, as much as style, may be responsible for its success with the core discount store audience and even more affluent consumers.

Wal-Mart and Target represented a one-two punch that knocked a string of retailers into bankruptcy or consolidation. The Northeast certainly wasn't alone in that respect, as the demise of Venture proves. Still, no region's retail landscape was more dramatically altered in recent years than that of the Northeast.

A couple of decades ago, you would be hard pressed to identify any retailer as dominant in the Northeast. Sears and JCPenney were in the market, but urban retailing in the middie of the market was still heavily influenced by discount department stores, particularly in the cities and suburbs. Defunct banners, such as Alexander's, were an important retail destination for working-class consumers, while bargain stores and similar low-price formats continued to be critical purveyors to lower-income shoppers. Off-pricers were, and continue to be, a critical part of the retail landscape in a region that is more label conscious on average. And regional discounters were myriad, particularly in more rural geographies. Stuart's, Jamesway, Caldor, Bradiees and Ames all were formidable players.

Ironically, Ames began the '90s in bankruptcy, a development that was predicated by an ambitious purchase, this of Zayre's. As the '90s ended, a revitalized Ames purchased Hills and set the stage for a second stint in Chapter 11 when that deal failed to perform up to expectations. Ames' beginning-decade bankruptcy was followed soon after by that of Stuart's and, in July 1993, Jamesway found itself in Chapter 11.

Ames emerged from bankruptcy in December 1992. Likewise, Stuart's rose from its Chapter 11 filing before its final demise, emerging in October of that same year. Jamesway and Stuart's liquidated in 1995. A smaller regional, Rich's, ran out of steam a couple of years later, liquidating in early 1997. Ann & Hope, another smaller regional, also fell victim to the competitive environment and got out of the discount store business as the '90s closed.