Keeping competitive

Discount Store News, Dec 8, 1997

In July, Kmart introduced its new exclusive line of Sesame Street childrenswear with a star-studded fashion show in Manhattan's trendy Fashion Cafe. The event was attended by a large contingent of the New York press, and few at the festivities questioned the ability of Kmart to bring a successful new line of clothing to the public.

But it wouldn't have always been that way. Only within recent years have the national "Marts" become broadly viewed as viable sources of apparel for middle-income, value-oriented consumers.

And while the merchants of Kmart and Wal-Mart should be given kudos for what amounts to Herculean efforts in building their clothing businesses, these chains have been able, in no small part, to succeed in apparel because of retail strategies laid down for from Bentonville, Ark. or Troy, Mich.

During previous decades, when WalMart Kmart were fighting for dominance over a broad field of general merchandise, the regional discounters -- as well as Target -- were in the process of creating apparel departments that made the mass market tier of distribution acceptable in the consumer mind-set.

By utilizing sharp, on-trend apparel presentations, stores in the 80's, such as Target, Caldor, Venture and Bradlees, were able to use their apparel departments to distinguish themselves from the ubiquitous, encroaching national discount retailers, and in the process capitalize on a significant group of consumers who had turned their backs on the designer labels and escalating prices of traditional department stores.

"Somewhere in the late 1970s, people began to understand that we, as regional discounters, could be servicing consumers the same way as department stores," says industry veteran George Needleman, now senior vice president of Kikimo Inc., who earlier in his career served as a softlines buyer for Korvettes and later spent 18 years in merchandising positions at Venture, "We ended up selling consumers merchandise that was trend-directed," he says.

Development apparel came naturally to stores like Venture and Target in part because of their roots in the department business. Kmart and Wal-Mart, on the other hand, started as outgrowths of the hard lines-oriented variety operations.

Regional merchants at the time were able to utilize this orientation as well as their relative small stature to their own advantage.

"With only 80 stores you can do a lot more in terms of quickly responding to your customers than you can if you have 1500 stores. Because we're a small guy, it makes us a little more nimble and quick," Maxine Clark, former executive vice president at Venture, told AM during a 1991 interview.

Needleman, who worked for Clark, adds, "Back then, many of the regionals believed that they were junior department stores in the apparel area. We didn't have big brands, but we had the ability to recognize fashion and trends and act on them."

Merchants at Bradlees had a similar point of view.

"In the old days, around the mid-80s, Bradlees was a high fashion discount store," says a former merchant at the Braintree, Mass.-based chain. "It was upscale, it had better merchandise and was way ahead of companies like Kmart and Wal-Mart." At that time, the executive explains, Kmart and Wal-Mart had opening price-point apparel. "Cheap apparel," she calls it. "And it was not just cheap in price, but cheap in quality." So it makes sense that when armed with better-quality, trend-right merchandise, "the smaller regionals like Bradlees, Venture and Caldor were able to run rings around [the large chains]," she adds.

"The merchandise at regionals became very close -- in terms of quality -- to the department store brands." recalls Regatta ceo Haim Dabah, who was one of the founders of Gitano, a seminal mass market-oriented apparel company. Gitano not only targeted the mass market with coordinated sportswear assortments, but was among the first to further the fashion agenda by bringing merchandise shops to the discount selling floor.

By concentrating on trend as well as basic assortments, regionals bolstered margins and just as importantly began to attract the cross-over shoppers who now feel comfortable purchasing clothing in the mass market.

These events helped set the stage for Wal-Mart and Kmart, which were not asleep at the switch.

"What happened at Wal-Mart is that they made a definite effort to get into that market. They saw billions of dollars available to them in the apparel business because of all the traffic in their stores and I think they made a concerted effort to hire the right people to get into those markets and buy softlines," explains Herb Douglas, the current ceo of Dallas-based Wiener's and a discount store veteran who served as a senior merchant at Bradlees during the 1980s before becoming the ceo of Jamesway prior to that chain's liquidation.

Douglas speaks from experience. The demise of Jamesway, a chain Sam Walton studied as he expanded his empire, is in no small part attributable to encroachment from the national chains.