All three upscale apparel to varying degrees

Discount Store News, Dec 14, 1987

All Three Upscale Apparel to Varying Degrees

While the apparel business strategies of the Big Three chains-- K mart, Wal-Mart and Target --differ markedly, they all have been successful to date by becoming more sophisticated in the way they each tackle this high-margin segment of the market.

The critical importance of apparel at these discounters is buttressed by a study conducted this fall for DSN by Leo J. Shapiro & Associates, Chicago. The study, among other key findings, revealed that customers who say that they buy mainly apparel at the three discounters spend substantially more annually than customers who mainly purchase other kinds of goods.

In an attempt to attract more of their affluent customers to their apparel departments, these three giant discounters over the last several years have--to varying degrees --upscaled their apparel merchandise mix. Also spurring these discounters to upgrade is more widespread consumer knowledge and demand for more fashionable apparel.

K mart, the only one of the three that blankets the entire country with some 2,200 units, has remained with its traditional low apparel price points, but has steadily been adding more and more fashion-forward, higher-priced merchandise to its mix, while it is also upgrading its apparel fixturing and displays.

Wal-Mart Focuses on Basics

The aggressively expanding Wal-Mart, which has supplanted K mart in the markets in which they compete as the everyday-low-price leader, has also been upgrading its apparel selection, although Wal-Mart's apparel departments are still very much "narrow and deep," carrying far more of the basics than K mart, or any other major discounter.

Target, with significantly larger units (100,000 square feet on average) allowing for more apparel floor space compared to either K mart or Wal-Mart, has positioned itself as the leading fashion-oriented discounter, with its upgraded units having more of a department store feel than those of most discount stores.

As Wal-Mart and Target expand beyond their current markets, the big question is whether the two chains can remain focused on what they do best in their respective apparel businesses. Will they be able to attract that same customer type in new markets as successfully as they have in established markets, or will either or both chains have to tinker with their current strategies in order to succeed on a more national level?

The concomitant challenge for K mart is obvious: with Wal-Mart and Target expanding into more markets, will K mart's apparel business be squeezed between Wal-Mart on the low end and Target on the high end?

In response, K mart will have to develop even greater customer loyalty through emphasis on value and uniqueness. Putting together solid, attractive private label programs is one means to that end, since customers can't get that merchandise anywhere but in a K mart. The chain has been very successful to date in its apparel private label push.

Analysts, suppliers and other industry observers also say, not surprisingly, that in going forward, the Big Three will continue to rely on their respective apparel strengths.

K mart will continue to upgrade its merchandise mix and, several observers noted, will be going after the more upscale Sears customer. The immediate challenge for the Troy, Mich.-based chain will be to remain price-sensitive with respect to its core customer base while increasingly addressing the needs of a more fashion-minded customer.

Wal-Mart, observers say, will be continuing to expand so rapidly that it will have difficulty upscaling its apparel areas to any significant degree.

Analysts, retail consultants and manufacturers who sell to Wal-Mart also said that the Bentonville, Ark.-based discounter --which is the most price-sensitive of the three, regularly taking shorter markups in most apparel categories and lines compared to K mart and Target--would have to be very careful in any upscaling attempts.

They point out that, in many instances, today's Wal-Mart customer fits a similar profile as a K mart customer six to ten years ago, and that that customer--the least likely to be interested in fashion looks--is very price-sensitive.

Still others said that Wal-Mart has no intention right now to further upscale its apparel business. The emphasis, these observers say, will be on doing exactly what it is doing now on a national basis.

There are two schools of thought concerning Target. One is that the Minneapolis-based giant had overshot its core customer base in its aggressive focus on more and more fashion-forward apparel, and that it is retrenching and will not be increasing its fashion vs. its basic mix for the near term. This camp also mentions that, strategically, Target of late isn't being run as effectively as it could be. They point to Dayton Hudson's (Target's parent) upper management's distraction over recent takeover attempts, and the drain from its struggling sister chain, Mervyn's, as possible reasons for recent sluggishness.

The other school points out that Target, strategically, is right on "target," and that it does what it sets out to do as well as anyone.