Price-Less stays true to deep discount origins - Price Less Drug Stores

Discount Store News, Nov 2, 1992 by Don Longo

ROSEVILLE, Calif. -- "I love discounting," said retail veteran and entrepreneur George Jeffers, on the eve of the opening of his fourth Price-Less drugstore here last month.

Price-Less is a deep discount operation more similar to the early barebones concept developed by Bernie Shulman than the huge product line expansive units operated by the now-troubled Phar-Mor (see story, below).

Jeffers began his retail career with Walgreens in Sacramento, and his experience includes top management jobs at Skagg's, Cook United, and Mexico's Sanborn's upscale mass market department store chain. He returned to Sacramento to create Price-Less, which opened its first store in Rancho Cordova on Labor Day in 1984.

In a few short years, Jeffers' small privately held chain has become a force in the market. That first 20,000-sq.-ft. store rang up $9.75 million in sales last year and is running a bit better than that this year. Store No. 2, which opened in Carmichael, Calif., in 1988, is up to 4.5 from 9.5 million in sales last year. The third store, which is in the newer, less populated area north of the city called Elverta, celebrates first anniversary this month.

The newest store, in the growing Roseville area northeast of the city, will likely surpass $10 million in sales its first year. Customers jammed the discounter's parking lot on grand opening day for hot-air balloon rides, free hot dogs and a cup of Pepsi (with a sales receipt) and bargains galore on Price-Less' mix of health & beauty care, household goods, seasonal candy, cosmetics, snacks, soft drinks, prescription and over-the-counter drugs, and stationery.

Total sales break out to 20% in prescription business, 10% cosmetics, about 4% for greeting card, and the rest household goods, health & beauty aids and other assorted hard lines merchandise.

A tight focus on item merchandising, specially close-out buying of high-demand products, and a near-fanatic effort to eliminate unnecessary expenses is what allows Price-Less to operate at gross profit margins lower than most any retailer today, with the exception of membership warehouse clubs.

"If you want customers to keep coming back, the store has to be exciting--and you do that with a constant flow of new items," said Jeffers, who personally buys about 40% of the stores' merchandise. "We keep looking for an item with a very wide appeal that we can sell at a price significantly less than elsewhere."

A walk through a Price-Less store will reveal any number of "hot" products that fulfill Jeffers' criteria. For example, reference books are hot, with warehouse clubs offering the only significant competition as a book discounter. Price-Less doesn't carry Rubbermaid housewares ("It's too common."), but does a terrific job with an item like Rubbermaid's Action Packer storage container. Similarly, the store doesn't have an automotives department, but sells 3,000 car windowshades a month.

Another hot item, a Webster telescope-handled dusting tool, is sold at $5, compared to $7.95 elsewhere. We've never sold less than 200, sometimes more than 400, a month," noted Jeffers.

The chain buys all its merchandise directly, with the exception of prescription drugs which it purchases through McKesson. Price-Less managers are constantly faced with the problem of finding space for the huge minimum quantities of goods that Jeffers, and merchandise managers Joanne Veeck and Lee Weinstein must buy. For example, companies like Brach's and Leaf required minimum purchases of 1,000 pounds of their candy products. Fortunately, once the merchandise is placed on the sales floor, Price-Less so far has bad little trouble selling it.

Deal buying is particularly evident in a category like traffic appliances. Price-Less carries Black & Decker traffic appliances, but only purchases them on deal. Vidal Sasson is its sole vendor in personal care appliances, while phones are limited to Conair, with the exception of a recent closeout buy of AT&T phones.

The chain does no advertising. Window signs, which are changed every six weeks, announce special buys and allow the retailer to claim manufacturer co-op ad dollars.

Despite the chain's penchant for deal buying, continuity is also of extreme importance. "We always want to be in stock with a hot item like Glade plugin refills. If it's on deal in January, we need t figure out when will we have to buy out more . . . That part of continuity is tough. We always have to have a pretty good selection of shampoos, including the top 15 to 20 skus. Even though we try to buy from deal-to-deal, we never want to be "out of Suave, White Rain, Head & Shoulders or Pert Plus. "

Price-Less devotes about 60 running feet to shampoos, carrying always the leading brands, but not necessarily the same brands all the time. This strategy has led to the retailer's achievement of about seven turns overall on its inventor.

Price-Less particularly likes to take expensive items that are rarely discounted and sell them at a lower price. Examples include Russ Trolls, Neutrogena products, Gundelshein pickles ("If we concentrate on high-priced, gourmet food specialities, we can do a tremendous business."), upscale Lady Jayne gift stationery, and department store brand cosmetics and fragrances, bought through diverters.