Retail challenge: meet customers' changing needs - International Mass Retailers Association convention

Discount Store News, July 4, 1988 by Laura Liebeck

Retail Challenge: Meet Customers' Changing Needs

NASHVILLE, Tenn. -- Today's discount retailers are challenged to compete not only with one another but with the entire retailing community. They face growing governmental restrictions as well as customers with less disposable income and even less free time, according to four of the nation's top mass merchants.

Discounters also face the challenges of dealing with an increasingly diverse customer base, the graying of the U.S. population and often adversary relationships with suppliers.

These declarations were but some of today's retail challenges mentioned by executives from Sears, Dayton Hudson, Wal-Mart and Hills. These retailers made their comments during a seminar, "Challenges Facing Retailers in the Years Ahead," moderated by new Child World president Peter Hayes, at the International Mass Retail Association annual convention.

Of the four top executives, two, Bruce Allbright, president of Dayton Hudson, and Michael Bozic, chairman and chief executive officer of Sears Merchandise Group, focused most of their remarks to a discussion of the changing preferences of their customers due to levels of disposable income, age and competition.

David Glass, president and ceo of Wal-Mart, said that retailers and manufacturers must overcome their adversary positions and learn to work together. And Stephen Goldberger, chairman, president and ceo of Hills Department Stores, remarked on the increasingly important role the federal government is playing in the lives of retailers.

Goldberger made special mention of the recent Supreme Court ruling that supports manufacturers' right to restrict sales to discounters in preference to retailers who charge more for their products.

Goldberger, the 1987 IMRA chairman, also called on retailers to examine the effect a possible increase in the minimum wage would have on their business and the "ripple effects" of such potential governmental changes as mandatory health insurance, catastrophic health care insurance, comparable pay for comparable work, child care, textile quotas, and even solutions on gray market goods--recently ruled legal by the Supreme Court.

"The government is becoming our partner--and not a silent one," said Goldberger. "To meet the challenge, we must realize it's there."

Wal-Mart's Glass told a large audience that improving relationships with suppliers is a necessity for an effectively-run business in this highly-charged retail environment.

"New relationships have to evolve, a partnership between retailer and supplier," said Glass, noting that Wal-Mart is already taking steps to rectify adverse relationships based on mutual trust and common objectives.

Glass suggested retailers eliminate paperwork with some of their best vendors. Toward that end, he said Wal-Mart picked three sku's of merchandise from one supplier who agreed to replenish stock in the distribution center as needed.

Prior to this new relationship Wal-Mart had a fill rate of 95 percent on one particular item, 15,000 cases of the product in stock to serve the stores and 48 turns a year. Since the transition, the vendor supplies merchandise based on shipment information from the distribution center. Wal-Mart has achieved a 99 percent fill rate with 7,000 cases of product in storage and a turn rate that soared 79 percent to 86 turns a year.

"All of us need to change the way we do business. We need to be partners, and not just look at the short term," he advised.

Retailers are also challenged at the store level to effectively meet consumer needs and shopping preferences.

Both Allbright and Bozic concentrated their remarks on the challenges of redefining their objectives and their customers in an increasingly competitive retail arena.

"Retailing today is definitely more demanding than it was even in the 1960s and 1970s," said Allbright of Dayton Hudson, parent company to Target and Lechmere. "The population is aging; there are fewer teenagers; and today products are bought at all kinds of outlets," he said.

In addition, he said, there is more "commodization" of products and said that such items as motor oil and pantyhose are already in this group and TVs and microwave ovens are fast becoming commodity items, too.

Allbright noted that there is a slowdown in the development of new products which help drive consumer traffic into the stores and not much time between the introduction of a new product and its second, more improved next generation.

Consumers today have many shopping outlet alternatives, said Allbright, and they are better educated and more discerning customers. "They cannot be fooled" on advertising private label vs. national brands, he said.

Retailers today are challenged to stay in control of their business--to concentrate on becoming more efficient operators, reduce expenses and distinguish themselves from their competitors, said Allbright.

Today's customer base is increasingly so diverse, Sears' Bozic commented, that Sears is challenged to meet those changing needs. "We have a vision of what we must be at Sears," said Bozic, noting that the nation's largest retailer is no longer a mass merchandiser--offering everything to everyone--but is quickly becoming "a powerful, multiline retailer in specific categories."