Regional differences - regional discount stores compete with large discount chains by playing up their differences - Apparel Merchandising - Interview

Discount Store News, Oct 17, 1994

Competition among mass marketers of apparel has never been stiffer. And discounters are stretching the gray matter to come up with ways to differentiate their stores from the guy down the street's.

Regional merchants are faced with a particularly perplexing predicament; in a business predicated on price, how can a smaller chain perform on the same playing field as WalMart or Kmart with their thousands of units?

Liz Levin, senior vice president, Venture; Bob Greenwald, senior vice president, Jamesway; Denis Lemire, who at the time was president of Stuarts, but has since joined Ames as executive vice president; Bob Luehrs, president, Chic/H.I.S.; and Charlie Nichols, director of marketing for Tultex, addressed the challenges of differentiation at a roundtable session with AM.

AM: What are some of the ways that retailers and manufacturers can differentiate themselves from their competitors? When you assess your business, where is the starting point?

Lemire: You definitely look at your strengths first and at the big guys' weaknesses. They all have weaknesses, even if it's the big W or Kmart. We looked at our business and it was obvious to us that our strength was apparel. Soft goods represent a little over 50 percent of our business today, and with soft home it would be 62 percent. We are looking to build that business.

We look at the Wal-Marts and the Kmarts of the world, and if they have a weakness, it's in apparel. It's obvious to the people that their assortments are really not focused. Forget about the hard goods--they are just going to kill you on price. We just tried to make apparel and home goods much stronger. Our new business, Stuarts Too, seems like it is really going to work. We're devolving it back to somewhere between an off-price and a standard discount store.

Being small has some advantages. You can change a company relatively quickly and turn relatively quickly. You better be able to turn relatively quickly.

Luehrs: This is a favorite subject of mine. I feel that the only area where a discounter tries to differentiate from another discounter is through price. I feel as though there is no real effort on the part of any of the discounters to stress brands. I don't think that discounters let their customers know that they are getting more and more brands into their stores. When I first started selling discounters like Kmart or whoever, they said: "We won't advertise your brand. We'll sort of hide it so that it doesn't hurt your department store business." I think that same feeling is still prevalent. I don't think any buyers in discount stores really believe that brands are that important. There's no real effort on the part of the store to display or get across to this woman who has two kids and her husband works in the factory that she recognizes brands. We're not doing enough to get across the message. The displays we fund are for the most part horrendous--not just our brands, but others that are in the stores.

Liz Levin: I think that is somewhat simplistic. I know that our strategy is to do as much name brand business as we can. But that has to be balanced with the competitive nature of name brands because it is actually the name brands that drive pricing down because the name is more recognized by the consumer than private label.

So the mix of business obviously affects the margin. But it also affects the footsteps, because I don't think any retailer believes that their private label draws as many footsteps as does a name brand. So there is always that question of balance.

Most retailers have driven their prices down. Department stores have dramatically driven their prices down. So when you talk about differentiation, it's even harder to differentiate who you used to compare yourself to to show how good your prices are. Now it's a couple of dollars difference. It's become an incredibly price-sensitive business. Combine that with the competitiveness of the discount market and the power of the big chains; it becomes: one, hard to differentiate, and two, hard to balance with the name brands business and the private label business.

Luehrs: I'm not really saying that your companies should carry more brands. I think there should be more shouting about the brands that you have--rather than just on a Sunday morning circular with the price connected to it. I'm really upset that our jeans are sold at such low prices, A., because the markup is so low, and B., because the consumer thinks it's a cheap product. It's just as good as any jeans out there, whether they're sold with Guess? or Girbaud labels. But if a retailer came to me and said: "What can we do in the store to elevate the image in terms of graphics, pictures, display banners?" it's the best dollar I could invest. Yet the stores don't get it up. You can't improve your service over the other guys because you don't have sales clerks; they cost too much money. The only area where a store can differentiate is in presentation.

Lemire: We are trying to shout out "brand" more and slap it in the customer's face a little more. Not that we are going to play the brand game like a Marshalls and say: "brand names for less." But you have a lot of decent brands in the store and you might as well tell the customers.