Herman's opens New York store with micromarketing plan - Herman's Sporting Goods Inc., Manhattan, New York, New York

Discount Store News, Sept 6, 1993 by Richard Halverson

NEW YORK -- In a new Manhattan store opened here last month, Herman's resurrected an old advertising slogan while heralding a new merchandising approach aimed at securing a competitive niche against the growing sporting goods megastores.

First, Herman's reinstituted the advertising slogan, "We Are Sports" from its early days as a 76-year-old veteran of New York City retailing. Then it unveiled a new store design it hopes will bring it "from the '70s to the '90's."

At the opening, president Al Fasola blamed foreign ownership--and neglect--by a British company for using the sporting goods chain as a cash cow to help reduce its own debt of 21.2 billion.

Herman's was the victim of an ill-conceived and ill-executed expansion strategy that took it away from its Northeast home turf to as far as San Francisco and Detroit, he said.

Fasola represents the investor group that bought Herman's March 15 in a leveraged buyout and declared Chapter 11 bankruptcy a few days latter. Herman's has closed 132 of its units outside the Boston to Washington, D.C., corridor and retrenched to a Northeast core of 124 stores. The new Manhattan unit on West 57th Street at Sixth Avenue brings store count to 125.

This year, Herman's plans to remodel 16 existing stores and open another new store in Morristown, N.J., and relocate one more in King of Prussia, Pa., Fasola said, and intends to open 12 to 15 a year starting in 1994.

Key to Herman's new merchandising approach is to focus on the two or three top brands and the best-selling items from those vendors, he said. Herman's has dropped its private labels and third tier brands, he said.

Nonetheless, about 9% of Herman's top brand offerings are special makeups exclusive to the chain, such as a Prime Controller II tennis racket frame, unstrung, for $99.99.

Another important facet of Herman's new approach is to merchandise each store according to market demographics around distinct sporting goods categories: ski, tennis, licensed apparel, footwear, exercise, active team, great outdoors, water, camping, biking and hiking, and kids.

Herman's merchandises apparel next to the corresponding equipment.

Herman's also brought fishing back to 20 stores, including the remodeled Woodbridge, N.J., unit, said new executive vp and chief merchandising officer Stuart H. Kessler, a former Ames executive.

Herman's determined that 30% of those walking past the new Manhattan store are tourists, and so positioned licensed apparel on the street level and equipment and athletic apparel on the basement level. In ambience, the first floor resembles a sports apparel boutique. TV screens blaring sporis highlights abound.

The new store costs $1.5 million out of the $5 million the bankruptcy creditor committee approved for new stores and remodels in 1993, Fasola said.

The chain will use its nonconformity to help it merchandise to market. The 72nd Street store in Manhattan, for example, features tennis.

The 57th Street store covers 11,000 sq. ft., 10% above the average of 10,000. Service innovations include:

* Delivery for such services as bringing a newly strung tennis racket to Manhattan offices for a nominal fee;

* Home delivery in the New York area, within 24 hours, for a $20 fee;

* Special orders for out-of-stocks on 20% of its skills, with free delivery;

* A gift registry.

Herman's hopes its more selective approach will raise the average ticket to at least the $37 level of 1991, Fasola said. It will remain a promotional chain, with an expected 30% of its sales made on ad.

Of its ad budget of 4% of sales, or about $25 million, Herman's is resuming TV advertising, with spots that emphasize brands and end with the emphasize Are Sports" tagline.

It also is getting into radio advertising for the first time, and cutting the number of newspaper inserts.

Herman's expects to turn an operating profit of $6 million in 1993 on sales of $325 million, Fasola said, compared to a '92 operating loss of $30 million.

Herman's raised $80 million from going-out-of-business sales for the 132 stores it closed and slashed expenses by $28.6 million, he said. It expects to file its plans to emerge from bankruptcy by mid-October, Fasola said, and gain approval during the first quarter of '94.