Rockbottom's future embraces family, change

Drug Store News, Sept 7, 1992 by Bruce Buckley

"We had a choice: To sell or to change," Richard Otto was saying in his office in Rockbottom's Port Washington headquarters recently. Richard, chairman and ceo, is the second in the generational line of Ottos at the helm of this dynamic, but little publicized, New York deep discounter.

Although there had been offers to buy the company, Rockbottom chose to change. And change has meant moving away from the entrepreneurial style that has taken the chain from a single discount store in Brooklyn 59 years ago to an aggressive low-price operation whose 32 outlets average $8 million each. Though Richard remains chief executive, it's obvious that the focal point of the change to a more professionally managed operating style has shifted to include a third generation of Ottos in the person of Jonathan, the 35-year-old son of Richard and now president and chief operations officer.

From around the country, Richard and Jon have attracted top managers in operations, marketing and MIS to add to the veteran team already in place, and have begun to plot a course to strengthen their regional presence, but within the limits of their resources.

No possibility of a Phar-Mor situation here. The Ottos - grandfather Sam, son Richard and grandson Jon - are careful, close-to-the-vest players who, as Richard said - referring back to his grandfather's investment style - like to buy only stocks that go up. His father, Sam, 93 years old and still alert to the dynamics of the business he founded in 1933, told me that over six decades the company has an unblemished record in selecting profitable sites.

Jon said that the reason is his family's long history in the market: It's the way people growing up in a town or neighborhood know all the personalities and politics. "We know this market," he said. "We know the volumes of the supermarkets and the histories."

That knowledge is the reason for the sharp site selection. In the quest for high-traffic winners, Rockbottom has not only leased traditional retail locations but also bowling alleys, movie theaters and skating rinks.

Rockbottom is making other changes as well. It has begun to shift its buying strategy from a deep discounter's reliance on deals, to a low-cost operator's focus on everyday-low prices. Richard and Jon said Rockbottom will still "buy long" when it comes to really special deals, but will move more toward contract buying to assure smoother inventory flow and lower carrying costs. Automated buying and POS systems, soon to be added, will speed inventory turnover, as will a smaller prototype. Savings will go to expansion.

Heightened pharmacy presence is another part of the growth strategy. While Rockbottom is a brilliant discount logo, it doesn't convey the professional image that the Ottos are looking to establish, given long-term health care trends. The company is searching for a pharmacy director to help change the image.

But it all finally comes down to offering value, and there is where Rockbottom has its edge.

"Everybody knows us," Jon Otto says about the Rockbottom's reputation for low pricing. "All we have to do is open our doors."