Pamida refines its hometown strategies - Apparel Merchandising

Discount Store News, Oct 21, 1996 by Jeffrey Arlen

The most memorable dialogue in the now-classic film "The Graduate" takes place when a minor character utters a single word to the movie's protagonist. A bright future will be his, a remarkably youthful Dustin Hoffman is told in a satirical scene, if he pins his future on "plastics."

While the future of Pamida isn't based on one product category, it would not overstate the case to say that a single merchandise group--apparel, not a traditional Pamida strength--will play a crucial role in the success of this rural-American retailer.

"Apparel is critical to our strategy because we are using it to differentiate Pamida from other mass retailers. It has got to be the right assortment because we don't want our customers to not find the kind of clothing they are looking for. If the right ready-to-wear isn't in our stores, customers will get in their cars and drive to the competition," explains chairman and chief executive officer Steven Fishman, and East Coast transplant, who appears to have adapted with aplomb to "Hometown Values" espoused by this Omaha, Neb.-based chain.

Pamida's apparel strategy is predicated on a larger company grand plan. Since Fishman joined Pamida in April 1993, he has been working with his executive staff to reposition the store as a general merchandise chain--not a discounter--serving small-town America--exclusively. By doing business only in markets with populations under 20,000, Fishman reasoned he'd be able to avoid competition from the national retailers; his company's trading areas simply wouldn't have the population density necessary to support the big 100,000-sq.-ft. boxes that rivals typically build.

Fishman took dramatic steps to ensure the execution of this strategy. He shuttered 40 stores this year--more than 20% of his doors--while opening eight new 42,000-sq.-ft. prototypes. As a result, he sliced off "under-performing locations" and faces national competition in only 18% of his doors; three years ago, when Fishman joined the company, Pamida faced the nationals in 40% of its markets. Now, Pamida's store count stands at 148, with 35 prototypical units.

Initially, it was Fishman's intent to build new stores to replace the losers he closed. He veered from that concept when he realized that Pamida needed to invest in its existing store base.

"By closing the stores the way that we did and getting rid of really unprofitable drags on the bottom line, we were able to funnel assets and cash flow into the part of the business that was good and ongoing. We made the decision to bolster the current infrastructure," says Fishman. To this end, point-of-sale scanning systems were installed in all stores, a new distribution center was brought on line and a computer-based inventory management system fired up.

But even the best logistical system can't produce fat bottom-line profits if shoppers aren't essentially satisfied with a retailer's merchandise.

"At one time there was a misconception in the company that if there was no close-by competition, shoppers would buy by default. However, research showed, that if you don't have what the customers want in areas like apparel, and they're in, say, Montana, they'll get in the car and drive 90 miles to get what they want," explains Robert Gordman, a Pamida board member who is currently serving as acting general merchandise manager, presiding over a new team of divisional apparel vice presidents who recently joined Pamida to retailor the store's apparel mix.

When Gordman initially became involved with the apparel effort, soft lines were "underdeveloped and not developed according to a plan that was based on market research."

A series of extensive consumer studies fielded by Pamida had given the company a fairly complete road map of its customer's apparel needs.

"The bottom line was that most of the Pamida customers were spending money at JCPenney. So it became fairly evident what kinds of merchandise our customers wanted," says Gordman.

However, until the last few months, translating the new apparel insights--basically Pamida customers wanted more fashionable merchandise at value, not necessarily lowest, prices--onto the selling floor had been far less than optimal.

Gordman and the divisional vice presidents--Woody Cozart, womenswear; Charles Langenberg, menswear; and Eric Flodberg, children's apparel--realized that because of the limited floor space afforded to apparel in a Pamida store compared to a JCPenney or even a Wal-Mart for that matter, they'd have to take a key category approach. The idea is to make an impactful presentation in fewer apparel classifications "rather than try and replicate a 30,000-sq.-ft. JCPenney's women's department in our store," Gordman says.

This narrow and deep concept has worked well for many other retailers such as The Gap and in the mass market, ShopKo. "You have to have a point of view," Gordman says.

The decision was made to eliminate dresswear and most careerwear from assortments. "We totally exited things like related separates, blazers, skirts, blouses and dress shirts and ties. We wanted to create reasonable expectations in the minds of our customers so that if they are looking for, say, misses denim, and they walk into one of our stores, they are going to find as good an assortment as any competitor. In these areas, the idea is to give the consumer no reason to drive elsewhere for apparel," Gordman says.