Top Stories » Expert Columns » Profiles & Trends

Department stores aren't the only retailer segment undergoing seismic financial changes. We seem to be on the brink of big developments that will eventually change how retail as we know it looks and operates.
But let's first review just for a moment department store activities. Federated/Macy's $11-billion acquisition of May Company/Marshall Field's will soon dot the landscape with hundreds more Macy's brand stores, which will give Federated truly national coverage. The May Co. purchase virtually filled in the geographical voids where Macy's had not yet penetrated. This relatively clean nonduplication of store locations should mean fewer actual store closings and creation of a truly national company to rival Wal-Mart and Target.
Penney's has been there for years, but somehow the business press fails to award them such lofty status. Maybe Penney's should buy Dillard's and Sak's and take up the battle.

The Landscape
If you think about what has now developed nationwide -- we have The Dollar stores at the low-price and low-quality end, Wal-Mart/Costco in lower-priced solid value, Target at a little higher price and design, Macy's at traditional department store values and pricing, and Bloomingdale's and Nordstrom's/Neiman-Marcus at the higher ends. And Penney's. That pretty much wraps up the national scene. Plenty of room for smartly managed non-nationals surely remains.

Grocery Challenges
Food-oriented retailers seldom see as much printer's ink as do hard good retailers, but their world is evolving, too.
Who is causing the change? The same two guys -- Wal-Mart and Target -- just as in hard goods. Their supercenters are eating lots of lunches, or serving lots of lunches on price, value, service, cleanliness, and top-notch product. Along with Costco, the lower-cost, super food centers are cleaning up in wines, produce, meats, cheeses, seafood, and on-site prepared meals like roasted chickens, shrimp plates, sandwich meat trays, and party hors d'oeuvres.
Winn-Dixie has bitten the dust with a Chapter 11 filing and seems clearly caught between Wal-Mart's lower pricing and Publix's superior quality and service. Potentially, this filing may very well be a forerunner of other filings all festering from the same competitive conditions. Low interest rates that permit cheap borrowing have kept poor performers in the game longer than usual.
Wal-Mart and Target also appear to have supplemental profitable operations within their stores doing nails, pharmacies, eye centers, one-hour photo centers, McDonald's, etc., each taking advantage of the immense continuous traffic.
Albertson's posted lower profits and slightly lower same-store comp sales and clings to questionable discounts for cardholders, while Publix achieved six-percent comp-store increases without deal-pricing favoritism for certain classes of customers. The differences appear to be quality and service.
Kroger's earned an amazing 12-percent same-store sales gain, a super performance considering the environment. Fresh Market is expanding and capturing a chunk of produce business wherever they locate.

Specialty
Specializing seems to work in grocery as in hard goods, so long as execution is superior and customer service, attentiveness, and cleanliness dominate. Price is not necessarily the overriding determinant. Target surely does not have the lowest prices, yet prospers with wide, bright aisles; well-displayed products of good design; and friendly, efficient, checkout personnel.
How does any of this affect specialty? The story is in the analyses. Price dominates only at Wal-Mart, but other customer service areas are also superior -- in-stock product, clerk attentiveness, and cleanliness.
Standing in line to buy food is more trying than standing in line to buy hard goods. You do it more often and you must wait while some prudent shopper counts out coupons or swaps food stamps. These negative shopping experiences perfectly segue into the most imaginative grocery act today, Whole Foods Markets.
Whole Foods Markets (WFMI)
WFMI is a 25-year rollup consisting of some 13 high-end local smaller retailer acquisitions. Today, they have 168 stores nationwide and are growing, while integrating all of these individual smaller pieces.
What should whet financial interests is an $800-plus sales-per-square-foot achievement compared to under $400 for most supermarkets. Store sales appear to run about $2.3 million per store. Store size averages 29,000 square feet -- big, but not immense.
The exciting new twist is the prototype "Food Bazaar," or as one columnist brilliantly called it, "The grocery equivalent of Disney World for food junkies." WFMI has redesigned its aisles and sections into food-centric lands, ala Disney and interactive theater. Fun all the way. Ed Finkelstein, former chair of Macy's and father of the Cellar, used to preach that shopping is entertainment. But he was never able to ramp up visual vendor-paid demos to this level of sophistication.
WFMI's strategic objective is to wow shoppers, have them spend some enjoyable time in the store, and, of course, to buy. Area "Lands," like Candy Island to dip a fresh strawberry into a chocolate fountain, Lamar Street to have an organic salad and a glass of wine, Fifth Avenue to have 150 differing types of fresh seafood for instant eating or take away, etc., delight the eye, pleasure the taste buds, and enrich WFMI's cash register.
The approach seems great. Recall Stu Leonard's who routes shoppers into each succeeding section to ensure you missed or avoided no aisle. WFMI takes things steps further by building fun into the shopping experience, and combining grocery with light dining. Just wait until mom goes home and tells dad about her tough day in the grocery. Yah, salad and chardonnay, oysters on the half shell, and strawberries dipped in chocolate. Tough day, my lady. But you are worth it!

Action Thought
Specialty might respectfully plagiarize the concept by creating a Cookware Village, a Formage County, a Mustard Mountain, or a Pasta Nation -- each presenting something fun and interactive. How you might make some money at day's end is another article's analysis.
Like many men, I do not like to grocery shop, especially during season. The Whole Foods concept would draw me out, loosen up the dust in the pocketbook, and treat my spouse to lunch in the same place we are buying potatoes and meat.

J. M. Eikenberg directs Eikenberg Management Services. Jack can be reached at JMEmgmt@aol.com and by phone at 239-498-0040.