ShopKo: doing more with less - ShopKo Stores Inc - Special Supplement: Apparel Merchandising

Discount Store News, April 1, 1996 by Jeffrey Arlen

The transformation of regional retailing is reaching a furious pitch as stores like Bradlees, Venture and Caldor step up their efforts to counter the effects of consumer indifference, Chapter 11 and Wal-Mart's unrelenting pressure.

Changes-in the form of new executives, upgraded assortments, displays an marketing-at these companies have bee dramatic, grabbing industry attention in recent months because of their respective crises. Yet other regionals have been me thodically honing their game plans for years as they attempt to metamorphose into new forms of retailing animals.

Foremost amongst these proactive stores is ShopKo.

"We've gone from thinking of ourselves as a broad-based discount store to thinking of ourselves as a specialty discount store. If we are going to win we have to be dominant in a few categories, and go out of business in the areas we can't dominate," says senior vice president, general merchandise manager Skip Chustz, who is charged with overseeing ShopKo's apparel businesses.

The Green Bay, Wis.-based chain's repositioning efforts began five years ago with its first "Vision 2000" prototype.

"We realized that we couldn't position ourselves as the low-price provider in the marketplace, that someone else owned that position, so we had to take another position," Chustz, a transported department store veteran, told Apparel Merchandising in October 1993, shortly after he joined ShopKo from Baton Rogue, La.-based Maison Blanche.

The strategy of that time was to trade up and attempt to reposition ShopKo as a brand-oriented, opening-price-point department store. A la Kohl's or Mervyn's. But the ShopKo that emerged isn't the one Chustz initially envisioned.

On the trade and consumer levels, "that branded effort didn't get the reaction we had hoped for." explains Chustz. Department store manufacturers were reluctant to sell their labels to ShopKo. fearing the wrath of their core customers. What ave Chustz and company further incentive to adjust the plan was the reaction of ShopKo's customers to the few "upstairs" labels the store was able to corral.

"The brands did not work out; customers didn't respond to the price points," Chustz says.

Despite the branded detour, management at ShopKo still knew that their basic strategic premise of differentiation from Wal-Mart-the dominant retailer now operates in 80% of ShopKo's trading areas-was a tactical imperative.

"The idea is to become experts at selected targets, not just be good at a lot of things," confirms executive vice president William Podany, who joined ShopKo 10 months ago and is a unifying force in ShopKo's battle to reposition.

"Podany", says Jay Van Cleave, first vice president and research analyst at Milwaukee-based Robert W. Baird k Co., "has taken the Vision 2000 and focused it.

What are the targets?

In apparel, ShopKo executives are currently aiming at three megacategories that cross age and gender lines: activewear, knits and denim-friendly casualwear.

"Our big effort for spring is activewear and you'll see it lateralized (sic) across soft lines," says Chustz. as he leads an observer through ShopKo's Ashwaubenon, Wis., store.

In womenswear, intimate apparel and plus sizes are also focus areas.

ShopKo's methodology of category emphasis is executed on three levels. After broad areas are picked for a full-court merchandising, press, subcategories, "power content" departments, and then key items within them are Power displayed in-store.

"In intimate apparel. for instance, we will blow up shapewear and sports bras. Then. items within those areas," Chustz explains.

ShopKo's approach is really just a variation on classic narrow and deep retailing. "We're working at paring down styles. but running them in more sizes and colors," Chustz says.

The result has been a projected boom in key item sales. For example: last year, merchants at the 130-door retailer sold 130,000 misses T-shirts in sizes 14 through 28. This year the business is planned to 690,000 units with the addition of a 30/32 size.

Other areas of growth include:

* Ladies swimwear, which generated $250,000 in January and February of The same period a year ago brought in only $60,000.

* Women's knit bottoms, leggings and stirrups.

* Plus sizes.

* Intimate apparel, which is running 15% ahead of last year.

* Gold jewelry.

But perhaps ShopKo's greatest success to date is in activewear, where the store has been able to convince Nike, Adidas and Reebok that its outlets serve as acceptable environments for its goods. Merchandised in a so-called "Active Arena" section, name-brand activewear is not only "absolutely huge," according to Chustz in terms of sales and margin, but also helps to differentiate the chain from Wal-Mart and function as a destination lure.

The expansion or "distortion" of merchandising areas is at the expense of whole categories of goods that are no longer in ShopKo stores.

Dress shirts, neckwear and even sweaters have been eliminated from the mens-wear mix.

Chustz explains the rational: "We had an $800,000 sweater business. To make it meaningful to our customers in terms of power presentations we'd have to grow it to a S3 million business. Instead we made it go away, because if it's not worth really blowing out, we are not going to have it in the store. We've only got so much space."