Local Omaha stores dig in - discount retailers compete in Omaha, Nebraska

Discount Store News, Nov 6, 1995

OMAHA, NEB. -- With Super Target and many national retailers moving here, locally based discounters have been forced to develop strategies to keep their market share and retain customers.

At Omaha-based 1/2 Price stores, president Dennis Reaves said that there is no question that regional chains are facing tremendous competition from the aggressive expansion of national chains, and Omaha's population is "probably not growing at the same rate as the growth of retail square footage construction in the past few years." This means that new players in the market are siphoning market share from existing retailers.

To combat the national retailers, a regional player "first and foremost must have a clearly defined niche," said Reeves. For his 29-store Midwestern chain, the emphasis is on 65% to 70% name-brand apparel at half of department store prices, half of national brands' suggested prices and half the national brands' prices on comparable items of quality and styling.

However, Reeves emphasized that the concept must be well-executed and retailers must provide value to their customers on a consistent basis. At 1/2 Price--a hybrid between a traditional department store and a discount retailer--management has made an effort to survey customers and discover their preferences. Customers want to have shopping carts and central checkout lines for faster shopping than at high-end department stores.

For his chain to remain financially viable, Reaves stressed the importance of expanding and adding new stores. "In today's world, a company must not only expand comp stores, but must also open new stores to gain market share." Last year, the chain opened four new stores and plans to open four or five new stores by the end of this year. A 106,000-sq.-ft. store opened in St. Louis in late September. The chain will continue to expand within 500 miles of Omaha.

At MegaMart--a 1-year-old Omaha-based electronics and computer store--the philosophy remains to only have one store, but to make it the best possible store in the region and attract customers from 2,100 cities in Nebraska and surrounding states, said spokeswoman Ruth McCulley. The company does not worry about competitors stealing its market share because "We tend to be leaders rather than followers, and competition actually makes us stronger." The 102,000-sq.-ft. MegaMart generated $234 million in sales in 1994.

To test MegaMart customers' loyalty, both Best Buy and Circuit City plan to build stores nearby, but McCulley said that the members of the Blumkin family who run MegaMart, the Nebraska Furniture Mart and Mrs. B's Warehouse are not worried. They all spend time walking through the store and assisting customers. "The ownership knows their clientele and can respond to customer needs faster than a national chain with invisible bosses," McCulley said. The complex occupies 63 acres at its 72nd Street location and is called the "Disneyland of furniture" by financier Warren Buffett, who bought an 80% share of Nebraska Furniture Mart for $55 million in 1983.

Pamida, another Omaha-based discount chain, takes a completely different approach to battling the national chains. It builds stores in small towns with populations of 10,000 or less that are not serviced by national chains.

The chain operates 15 stores in Nebraska that are each about 40,000 sq. ft., said Jim Kalhorn, a company spokesman.

No story about Omaha retailing would be complete without a few words on the Old Market section of downtown, the state's No. 1 tourist attraction. The area has trendy restaurants, bars and several upscale retail stores, which are also doing well.

Brad Ashford, a descendant of the founders of the original 100-year-old family-owned Nebraska Clothing Co., which closed in the early 1970s, is owner of the new 2 1/2-year-old boutique of the same name.

In the 1970s, said Ashford, people and businesses abandoned downtown Omaha and it looked like "a bomb had been dropped in the area." Now the area is experiencing a renaissance, and many young professionals are even moving into luxury apartments and condominiums in the area. Ashford is confident that downtown Omaha will be the place for retail development in the coming decade, and Ashford himself has plans to expand his store.