Survey shows Chicago understored

Discount Store News, August 15, 1994 by Dawn Wilensky

DSN NATIONWIDE REPORT -- Chicago is an understored market for discount stores where consumers are willing to drive more than 11 miles to get to an outlet, and everyday low price and weekly specials are more important than location/convenience.

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In fact, according to recent survey results, everyday low prices replaced location/convenience as the primary reasons consumers shop at discount stores in the Chicago market.

These results were among the many findings contained in an exclusive study produced by Babson College. The full report will be presented at the conference "A Strategic Look at the Big Three in Discounting" Aug. 17 at Chicago's Downtown Marriott Hotel. The event is being sponsored by Discount Store News, Chain Store Age Executive and Babson College.

The conference will explore the competitive climate of the Windy City market with a particular emphasis on Wal-Mart, Kmart, Target and Venture and will offer insights from their top competitors.

The Chicago study also examined the impact that newcomers Target and Wal-Mart have had on mature chains like Kmart and Venture in the nine communities that lie within Chicago's Cook County.

A similar study was conducted by Babson College last year in the cities of Atlanta, Indianapolis and Dallas/Ft. Worth.

In addition to the new Chicago market study, Douglas Tigert, professor of marketing at Babson College and author of the research program, also will reveal the results of a study conducted in Dallas that focused specifically on the consumer electronics category.

The Chicago study offers many competitive insights into the retail climate and concludes that the Chicago market is understored (with discount stores) since only 68% of participants qualified as shoppers of at least one of the four discount store chains. This is a substantial difference from the 89% recorded in studies conducted last year in Atlanta, Dallas/Fort Worth and Indianapolis.

This is good news for retailers that have been making inroads into the market over the past several years.

Target entered the Chicago area with 18 stores less than a year ago and is clearly in the embryonic stages of its retailing life cycle in the Windy City. Wal-Mart and Kohl's are on the move here, with Wal-Mart stores, on average, only three years old. Venture, Kmart, Sears, Montgomery Ward and JCPenney are all in the mature stage of their retailing life cycle, although both Sears and JCPenney are evolving new strategies in Chicago, the report noted.

None of the eight major chains in the study have high shopping frequency by its customers in the market, compared to the cities surveyed in 1993. In fact, 24% of Wal-Mart customers in the study said they visit a Wal-Mart once a week or more, compared to 40% in the cities studied last year.

This hasn't dampened Wal-Mart's strength in the market. In fact, Wal-Mart and Venture have more primary shoppers (the chain shopped most often by the respondents) than secondary shoppers and as a result are likely enjoying above-average customer tickets, the study said.

Wal-Mart is the overall leader in everyday low prices in Chicago, according to survey results, but Venture follows in second place. However, Venture leads inside the city of Chicago, while losing by a substantial margin to Wal-Mart in the suburbs. Wal-Mart captured 62% of consumer mentions on the question regarding "lowest prices" in the outer suburbs.

Low prices continue to attract consumers to Wal-Mart. This, along with community involvement, value, fast checkout and assortment are the strengths of the chain, according to Chicagoarea consumers who participated in the survey.

Kmart was identified as having few real strengths beyond convenience. One-fourth of survey respondents mentioned "easy to get to" as the chain's No. 1 strength followed by lowest everyday prices at 18% and easy return at 16%. In general, the chain has a negative value image in Chicago, according to the survey.

The chain is trying to remedy the situation via the opening of four Super Kmart Centers in the area, a move the study's author said suggests that the chain may well be on its way to a major conversion in this market.

Venture's flyer program, perceived to be the best among the four chains, remains its greatest attribute in the minds of local consumers.

Target, on the other hand, has achieved a powerful image in the market in many store dimensions. The key strengths focus around store layout and design, fast checkout, new items and community involvement.

The survey concluded that Target has a superior format to Wal-Mart except on price and value; and if Target can close the perceived-price gap against Wal-Mart, it should generate superior sales and profits per square foot.

The survey also tracked each of the chains' strengths in 48 product categories with respondents reporting where they would most likely purchase each of these items.

Of the top four discount chains surveyed, Venture finished first in six categories. Wal-Mart won in only one category (small appliances) compared to 15 to 20 in last year's survey. Clearly, Wal-Mart has only been in the market three years and hasn't had sufficient time to build a loyal following. The chain did finish either second or third in 21 additional categories.