The picture of resilience - ShopKo Stores - Brief Article - Editorial

DSN Retailing Today, Oct, 2002 by Tony Lisanti

As ShopKo Stores celebrates its 40th anniversary, this venerable retail company should be proud of all it has accomplished in the tumultuous segment of discount retailing.

This regional retailer that had, justifiably so, loftier dreams and higher expectations a decade ago when it embarked on its Vision 2000 transformation strategy should take solace in the fact that the new philosophy really did work. The program repositioned the company and helped it survive during a very difficult time in the history of retailing, and resulted in the demise of several of ShopKo's competitors.

ShopKo now has the distinction of being the only traditional regional discount chain and it should display that moniker proudly. While it reflects the resiliency and strength of ShopKo, it more importantly demonstrates the retailer is well positioned for the future.

Admittedly, it's a smaller, more humble company, but it has the wherewithal to build on its solid foundation and inherent strengths to be successful over the next decade and beyond. The core competencies that will enable ShopKo to compete and grow include the following:

* Health care. From its pharmacist founder James Ruben, ShopKo has always positioned health care as its core business and marketed it aggressively to drive traffic and incremental sales. ShopKo's pharmacy business now represents 23% of the company's revenue.

* Lifestyle merchandising. Similar to Vision 2000, ShopKo continues to exploit differentiation by creating dominant destination departments that reflect contemporary trends. Current examples include its new home store of the future, its mattress program, its new consumer electronics program and its teen department called Urbanology.

* Culture. ShopKo has enjoyed a long history of support and loyalty from its employees, which was a distinctive characteristic shared by many of its former regional chain counterparts. This sense of pride and commitment to the company should help ShopKo withstand any more turbulent times and accomplish its goals over the next few years.

* Brand differentiation. The ShopKo name has tremendous recognition among its customers and with clever marketing and advertising messages should be able to drive traffic into the stores. In addition, the combination of proprietary brands coupled with other non-traditional brands, such as Nike and Champion in apparel, position ShopKo as a viable competitor against national chains.

* Pamida. The acquisition of this rural value discounter in 1999 still raises questions about its viability and whether the company will ever be able to fully integrate its operations. However, some positive signs of improvement are beginning to show, including the addition of the retailer's core pharmacy business and food to Pamida stores. If ShopKo can overcome the quandary of Pamida, then it will virtually guarantee the success of the company in the future.

Since Vision 2000 was introduced a decade ago, ShopKo has undergone various transitions in leadership and several years of financial scrutiny. But as it celebrates 40 years as a leader and a survivor in discount retailing, this Midwest retail icon still has the potential to grow, prosper and restore shareholder value, and also to do something many of its rivals couldn't: survive to celebrate more anniversaries.