Test highlights new focus on music, games and digital - Consumer Electronics - ShopKo Stores - Brief Article

DSN Retailing Today, Oct, 2002

ShopKo's new consumer electronics initiative is a dramatic departure from past departments and could serve as a real profit center going forward as the chain sets its sights on new, emerging markets. The highly experimental venture debuted this month in ShopKo's Ashwaubenon, Wis., store across the street from its headquarters. And although management clearly points out this is a test, it's a test they hope will realize increased profits from an existing space, in addition to extending the retailer's reputation with the highly coveted, newly targeted Generation Y shopper.

In the past, department settings largely sold CE basics, such as smaller-screen TVs, telephones, boom boxes and prerecorded music and movies. Over the years, DVD players and rudimentary home theater systems have been added, but little has changed in terms of expanded assortment or product displays.

If even a few concepts of this program are successful, all that is about to change

The test is twofold. The first component focuses on increasing sales and reducing shrink within the existing product assortment and departmental layout by adding a specifically trained associate to staff the department full time. As of late September, it was in place in five stores. The intention is to increase sales of higher-priced items otherwise under lock and key to prevent shrink, which is a large problem in these categories, particularly with increasingly popular and profitable video game products. The newly staffed department should allow for more interaction and help facilitate sales. The shrink reduction alone could help offset the increased payroll costs associated with the effort, said Gary Hillermann, senior vp and gmm of hard lines.

The second component is where management looks to inject some energy. "We intend to take electronics to the next level," he said. To that end, the Ashwaubenon store now boasts a 5,000-square-foot department, expanded from the typical 3,000-square-foot CE space. The area is self-contained with a controlled entrance and exit, rigged with monitors and sound systems, and teeming with what management hopes will be excitement.

"There's going to be a lot of fun associated with the shopping experience," said Hillermann. "We're going to have walls of interactive games, TV monitors all over the place and a lot of music listening stations. It's phenomenal."

It's also a test. The retailer has a long history of developing ambitious merchandising programs to test at this very location near headquarters. The intent is to see which parts of the program work--service, assortment or fixturing--and then incorporate those successful elements into other stores. This new initiative is no exception. Said Hillermann, "The concept store will be a learning experience."

The store's product assortment is vastly expanded and includes bigger-screen televisions--flat-screen versions and digital units--hand-held computers, MP3 players, digital cameras and camcorders, DVD home entertainment systems, and video game components--both hardware and software.

The experiment is born of several things. Primarily, the electronics category is growing overall with specialty chains, such as Best Buy, enjoying double-digit gains as the digital-product cycle deepens. Consumers are more accustomed to buying products in a limited-assistance sales environment, opening up more opportunity for discount stores to cash in on the trend. In ShopKo's case, CE already was one of the most profitable areas, in spite of the limited assortment and lack of dedicated sales staff.

"We're very excited about this overall combination of tests," said Hillermann. "It's taking a business that's really important to us and taking it to another level."