Regionals counterattack in apparel department, gamble on trends to win high margins - regional discount stores - includes related article on apparel displays used by discounters - Regionals

Discount Store News, August 15, 1994 by James Mammarella

The battle is joined: platoons of buyers clash across a broad front of soft lines selections.

Merchandisers scramble for advantage among endcaps, rounders and slat walls. Divisional managers negotiate the heights commanding key supply routes.

At stake: the survival of whole retail empires, each spanning a dozen states or more.

The relentless hard goods price point barrage by giant national discounters has forced the regionals to retreat from many commodity categories. They seek to turn the tide in apparel.

In chain after chain, full-line discounters are charging up the middle in the highmargin clothing categories. Some deploy expensive secret weapons in the form of private label lines. Others have launched streamlined store prototypes built on apparel and home fashions.

Differentiation is the key strategy: tactics include risky on-trend buying, opportunistic purchases and advanced presentation. Smart choices in accessories, micro-marketing to local tastes, cross-merchandising and effective adjacencies all count. Alliances with apparel vendors that offer promotional support and quick response inventory replenishment are vital.

Regionals must rally the ranks of clerks, associates and department managers to keep displays coordinated, well-stocked and clearly priced, and to give the shopper extra value in service.

Merchandise managers must march to an aggressive price/value drumbeat.

At Ames, Rocky Hill, Conn., new president and ceo Joseph Ettore is upbeat.

"We've done a store-by-store analysis of customer counts and loyalty," he said. "Even though we've had our problems, the customer still wants to see us succeed." Soft lines merchandise, he emphasized, "stands out better in the stores." He said when extra effort is invested in selecting and displaying apparel, female customers--75% of Ames' clientele--notice the difference.

Discounters who decide to appeal to style must be fully aware of the risks. Every soft lines department has experienced overbuys in the wrong color or texture. Markdowns, a painful enough remedy, eliminate such problems but don't win back customers. In playing the fashion game, mass merchants can lose customers even when buyers correctly size up trends.

"If you trade up in price points, you are walking away from a customer," explained Dale Kramer, president and ceo of ShopKo, Green Bay, Wis. "We are going after value customers who want that quality product and not just price."

Kramer said ShopKo standards include heavier fabric weights, improved color-fastness, less shrinkage, sturdier seams and a generous, consistent fit.

ShopKo will carry men's ties and dress shirts for the very first time. The chain has begun trading up to "casual career" looks for women: gauze and cotton dresses priced at $29.99, casual skirts, blouses and even blazers. Traditional department store brands like Peanuts, Palmetto and Nike have become part of the mix.

The crucial role of operations is clear, kramer said. "We are going to be maniacal in terms of executing inventory control and pricing."

pamida, Omaha, Neb., is developing a like-minded culture, with "quality" the new watchword. Don DeLaura, vice president, dmm, said, "Executing better is key: keeping in stock on basics and seasonals, being on top of trend [are the fundamentals that will make the] quality at an opening price point" strategy work.

Vendors who offer support in the category management vein are more highly prized now.

Matt Sudhalter, divisional merchandise manager at Stuarts, Franklin, Mass., said the small New England chain is moving toward being on-line with its apparel vendors with a quick response system. This compact regional chain has begun making special purchases work. "We do not consider ourselves on the tip of fashion," Sudhalter noted, "but we want to have the right styles."

Another Stuarts strategy is to open new format stores: smaller, brighter, focused on apparel. Warmly received by customers in the first handful of locations, Stuarts Too gives the chain the opportunity, Sudhalter said, "to use an upbeat, specialty store look, but matched with low competitive prices."

A parallel strategy is taking shape at Rose's, Henderson, N.C., which plans to test an all-new store type next spring, featuring more than 50% apparel, including some closeout designer labels. Rose's president and ceo George Jones emphasized that Rose's will concentrate on "want to buy" products, not "have to buy."

Jones pointed out that Roses' new affiliation with New York-based Doneger Buying Service has provided the chain with an opportunity to decrease its dependency on imports and year-long programs.

Kathy Hurley, vp, dmm, apparel and soft home lines, noted, "We have to be extremely liquid, open-to-buy; we must react to trends. Markdowns are taken on a monthly basis to keep things moving through the store. If a trend appears, then dies, we can react accordingly."

As they fend off the nationals in apparel, a second front opens on the regionals: they must keep at bay the advancing off-price apparel chains. This $16 billion group includes T.J. Maxx and Marshalls, which together account for $5.3 billion in sales and 1,000 stores. The off-price specialists sell brand names at cut rates.