Bigger is better: superstores spur wave of opportunities - home furnishings industry - Special Supplement: HomeMarket Trends - Cover Story

Discount Store News, April 5, 1993 by Michele C. Hollow

A movie mogul would call them blockbusters. Retailers refer to them as superstores, billing them as places to find "all the home furnishings one could ever want under one roof." The some, they even offer an element of theater.

It's no secret that the superstore concept is catching on quickly, particularly among the more affluent, who are often time-stressed, dual-career couples. What's happened in other categories over the past several years is now ready to explode in home fashions particularly if a major retailer such as Kmart adds such a concept to its diversified portfolio of specialty chains. This trend will impact the declining department store industry's market share much the same way as it has in other categories such a toys and electronics. And discounters will continue to compete aggressively and boost market share as more and more upstairs brands become available to them.

Superstore formats like New Jersey-based consumer electronics chain Tops and Massachusetts-based office supply megastore Staples caught that trend early, and have gained loyal customers because of their wide selection of goods and everyday competitive prices. And now the home fashions superstores are quickly realizing the same success. Suppliers as well are the beneficiaries of this trend as they can market more and more products at attractive margins.

"While many of these superstores are the size of a large factory warehouse, they offer customers a wide mix of merchandise set in an almost theatrical environment," said Jim Munro, divisional vp and director of marketing for bedding products, discount division at Fieldcrest Cannon.

Department stores, small specialty stores, and discounters typically display two to five full or partial bedroom ensembles. Superstores like Springfield, N.J.-based bed Bath & Beyond, Clifton, N.J.-based Linens 'n things (a part of Melville Corp.) and Bothell, Wash.-based Pacific Linens, on the other hand, show 30 or more bedroom vignettes. Pacific Linens boasts a store layout that features anywhere from 30 to 50 queen-size beds displaying full pattern/design ensembles including bed, table coverings and window treatments.

"The opportunity for vendors to have more space and displays means that we sell more coordinated merchandise," Munro said. And, coordinated goods command higher margins for both vendors and retailers, a key consideration in these margin-stressed days.

"More floor space equals more sales dollars," Munro added. "The superstores understand the benefits of display. And they realize that to maximize sales and profit per square foot, you don't have to reduce the width of the aisles and make the consumer less comfortable. The convenience of shopping brings you tangible benefits--more shoppers."

"When I walk into a superstore like the new Bed Bath & Beyond in Manhattan, I get the impression that they really want my business," said Dundee Mills executive vice president of sales Dave Blalock. "They want me to know that I don't need to go elsewhere to shop. Everything for the home is right there."

"Shoppers may come in for a fax machine or a camcorder, but they leave with that and more. They won't even go down the street to a competitor, because they're already here," noted a Tops buyer.

The days of comparison shopping are numbered, according to several home fashions superstore executives. "People don't have time to travel from store to store to shop," said a Pacific Linens spokesperson. "Time is a big factor. Consumers compare prices by looking at newspaper ads. Once they are in our store, they see the breadth of merchandise and the sharp pricing. They know they don't have to shop somewhere else."

The superstore phenomenon is so well-established, and so profitable, that traditional market leaders across many categories are closing up their smaller stores and investing in new superstores. Linens 'n things, the nation's largest textiles specialty chain, will convert most of its stores to a superstore format over the next few years, with most units exceeding 20,000 sq. ft., nearly three times the size of traditional Linens 'n things. Change will come as leases for smaller units expire, with 75 smaller stores expected to close over the next few years, and at least as many superstores expected to open.

A quick look at Linens 'n things' recent performance suggests that the move to superstores has enormous potential. In 1988, the company ended the year with 140 stores and had revenues of $180 million, just a bit over $1 million a store. That year, the company had closed 14 stores and opened 10.

The next year, the first superstore was launched, and the company opened three superstores while closing 17 older stores. Store count dropped to 126, but revenues rose to $183 million. That marked the beginning of a remarkable rebirth of the company. In 1990, six stores were closed and 21 superstores opened. Revenues topped $200 million. In 1991, back to 140 stores, revenues skyrocketed to $260 million.

"This is our goal for fashion home textiles and decorative furnishings for the bedroom, bath and kitchen," said Linens |n things president Norman Axelrod. "Everyday low pricing, dominant assortments, and name brand and designer merchandise are integral elements of the specialty chains' future direction."