Regional merchandising isn't what it used to be - it's better - Editorial

Discount Store News, August 15, 1994 by Tony Lisanti

As you read this issue devoted to regional discounters, Part Four in DSN's Power Merchandising series, one point is apparent: There is a preoccupation with differentiation.

Regional discounters are testing more new merchandising concepts than ever before in their history to find a niche that enables them to compete more effectively (and in some cases to merely survive) with The Big Three.

To some extent, it seems that the regionals have come full circle in their co-existence with Wal-Mart, Kmart and Target. At one time, smaller chains simply followed the leaders and incorporated the concepts The Big Three were successfully executing. Now each regional chain is making a more concerted effort to mold its own distinct identity and culture. Slowly but surely a "dare to be different" style is emerging among venerable chains that were for many years trapped in a time warp and seduced by the nostalgia of the "good old days of discounting."

This re-emergence of the regionals is being led by a new breed of savvy executives who realize that fundamental strategic changes driven by a fresh influx of merchandising ideas must be implemented to make the discount store concept viable in the next century.

The proof of these changes is clearly evident in new prototypes that have been introduced by regional chains. If you have visited any of these new stores--Bradlees, Caldor, ShopKo, Hills, Pamida, Venture, Rose's, Jamesway or Stuarts--I am sure you will agree that there is a fresh approach to merchandising and design that is being implemented, which I believe will be further enhanced over the next few years.

Certainly, the emphasis is on soft lines, but more important is the fact that many regionals are finally realizing that they don't have to be dominant in every product category to be competitive. They have learned to capitalize on their strong product categories and downsize or eliminate the weaker ones. Historically, there has always been a reluctance to do this. The discount mentality dictated merchandising as many product categories as possible--regardless of turns and margins. For example, Hills has strengthened its position in toys, while downsizing its mix in crafts and automotives.

Another clear example of this is detailed in a consumer research study conducted in the Chicago market by Babson College. The report, identified Wal-Mart and Venture as both having 24% of the area's primary shoppers, but with different product profiles. Venture was strong in Rubbermaid, sweat-shirts, costume jewelry, table/floor lamps; Wal-Mart was strong in knitting wools and yarn, H&BC, cosmetics, pet supplies, party supplies, sporting goods and snack foods.

Will this strategy work? Is differentiation the answer or merely a desperate attempt to survive?

Overall, I believe the regionals will survive, and in some instances grow, despite the tremendous competition from The Big Three. I'll leave the "more serious" handicapping to executive editor Don Longo (see column below).