Ames adopts new pricing strategies: Great value, special buys reinforce chain's repositioning - Ames Department Stores Inc., new services - Brief Article - Statistical Data Included

DSN Retailing Today, Feb 25, 2002 by Mike Duff

ROCKY HILL, CONN. -- Ames is determined to give its low- and fixed-income customers a more exciting and convenient shopping experience with the addition of a dollar-store style Great Value section and an ongoing expansion of off-price style Special Buys. With these two programs, Ames intends to reinforce its positioning with consumers in the strongest terms.

"We have to scream value," said president and coo Denis Lemire. The Great Value section currently is being rolled out after a one-store test in East Hartford, Conn., near Ames' Rocky Hill headquarters. It will take advantage of a gap in seasonal store presentations between Christmas and spring, with product getting the feature treatment briefly before being moved to its permanent, but still prominent, location.

The Great Value section, essentially a bay with several central floor displays and a position in the facing power aisle, will emphasize everyday needs and sharp prices, Some national brands are featured, but, for the most, part generic brands are offered in packaging that takes its cue from the coast-to-coast labels. The great majority of the 325 to 350 SKUs available, on average, are consumables, including strong presentations of canned and boxed food such as snacks and cereal, as well as plastics, household chemicals and HBA.

The section comes complete with a signage package in a red and yellow color scheme that includes overheads and shelf takers and touts prices in dollar increments, such as $1, two for $1, two for $3, etc.

In part, the section addresses an issue that troubled the retailer as recession and rising fuel prices hurt sales volume beginning in 2000. Many customers cut back spending to their most essential purchases, consumables and medication. As Ames stores don't offer pharmacies, the addition of low-priced consumables will address this aspect of the core customer's needs the chain can best tackle. The Great Value section offers convenience for customers who might not be inclined to make multiple shopping trips, particularly seniors with debilities and moms with kids in tow.

Special Buys, Ames' take on off-pricing, has been a growing element of operations for some time. It first became prominent in apparel and now represents about 20% of sales there. Recently Ames expanded it to domestics, where it already has reached 10% of sales, and even in hard lines, where is constitutes about 4% of gross revenue.

Special Buys is one aspect of a larger effort to look at sourcing. Ames has increased its purchasing of overseas goods for its standard offerings in many any categories as it seeks to strengthen the value presentation it provides customers. Off-pricing has the bonus of providing sharp prices in brands Ames' customers know, such as Cannon in domestics, and lending more excitement to the store visit.

How these initiatives fare in the stores is a performance issue, Lemire said. "We're not saying it's going to be 60% of food or 10% of chemicals. We're going to let it find its own level."

Chairman and ceo Joe Ettore said executives recognize moving in such directions entails some risk, particularly in terms of store-level operations and quality control. And Ames has put in measures to minimize the risk, including planograms that cover many configurations, communication with store managers and employees and product standards.

Bob Obernesser, an analyst with McMillian/Doolittle, said Ames, if it properly gauges the risks and pays attention to customer education, has a good shot to engage shoppers and enhance the buying experience. "If they can get the darn thing into the psyche of consumers, they have a good chance with it," he said.

On the flip side, Ettore said, the merchandising initiative will not only reinforce Ames' value message, but also help Ames further differentiate itself "You don't see these e things in other guys' stores," he said.