Profiles in excellence
Progressive Grocer
New York
Apr 2000
-----------------------------------------------------------------------------Authors:
Michael Friedman
Authors:
Len Lewis
Authors:
Richard Turcsik
Authors:
Barry Janoff
Authors:
Jenny Summerour
Volume:
79
Issue:
4
Pagination:
22-48
ISSN:
00330787
Subject Terms:
Retailing industry
Corporate profiles
Best practice
Manycompanies
Classification Codes:
9190:
9175:
9110:
8390:
Geographic Names:
United States
US
Sweden
United States
Western Europe
Company specific
Retailing industry
Companies:
Company Name: ESPN
NAIC: 513120
Company Name: IKEA AB
DUNS: 35-000-9825
NAIC: 442110
Company Name: Old Navy Clothing Co
NAIC: 448140
Company Name: DLJdirect
NAIC: 514191
NAIC: 523120
Company Name: Sephora
NAIC: 5999
NAIC: 446120
Company Name: United Parcel Service of America
DUNS: 00-699-1681
NAIC: 484110
NAIC: 484121
Company Name: Marriott Hotels Inc
DUNS: 18-554-6207
NAIC: 7011
NAIC: 721110
Company Name: Target Stores Inc
NAIC: 452990
NAIC: 452110
Company Name: Bed Bath & Beyond
Abstract:
ESPN is no longer just a sports channel acronym, but one of the most powerful
brands in the world. Swedish-based IKEA is not simply a furniture retailer,
but a lifestyles company that has created a mass market for products where
none previously existed. UPS' brown army no longer represents just a
transportation company, but a technology company that is changing the nature
of the global supply chain. And Old Navy has added a creative new twist to the
concept of generational marketing - one of the latest issues facing the food
industry. In a continuing look at some of the best practices of some of the
most creative companies in business today, profiles are presented of ESPN,
IKEA, Old Navy, DLJ Direct, Sephora, UPS, Marriott, Target, and Bed Bath &
Beyond. Copyright Progressive Grocer Associates, LLC Apr 2000
Full Text:
Insights from outside the industry
Itrospection, the ability to look inside yourself or your organization
honestly valuate operations, has become an essential agement tool. But
is looking beyond be box, to companies that represent a new generation
American icons-companies for whom hitting the target is only the first
a continuing search for excellence.
and
so too
of
step in
ESPN is no longer just a sports channel acronym, but one of the most powerful
brands in the world. Swedish-based IKEA is not simply a furniture retailer,
but a lifestyles company that has created a mass market for products where
none previously existed. UPS' brown army no longer represents just a
transportation company, but a technology company that is changing the nature
of the global supply chain. And Old Navy has added a creative new twist to the
concept of generational marketing-one of the latest issues facing the food
industry.
This month, Progressive Grocer again brings you Profiles in Excellence, a
continuing look at best practices of some of the most creative companies in
business today what they do and how they translate core competencies into
marketing and merchandising realities. There are valuable lessons to be
learned, and these are some insights from outside the box.
COVER STORY
Columnist George Will, an avid sports fan, has said: "If my cable system took
away all my channels
[IMAGE PHOTOGRAPH]
except ESPN, it might be months before I noticed." Will is not alone. Today,
ESPN is seen in 77 million households and ESPN2 in 67 million.
Few thought that when the Entertainment Sports Programming Network went on the
air on Sept. 7, 1979 from Bristol, Conn., that 20 years later ESPN would
become an American icon, spawning 42 brand extensions in the process. Based on
the company's performance in the 1990s, it's no wonder that ESPN will be one
of the 21 most powerful brands of the 21st century, according to recent
comments by Stuart Elliott, advertising columnist of The New York Times.
The first live sporting event covered that inaugural evening was the Milwaukee
Schlitzes vs. the Kentucky Bourbons in the Professional Slo-Pitch Softball
World Series, sponsored by Budweiser. Today, ESPN's'line-up includes the NFL,
NHL, Major League Baseball, college football/basketball/baseball, tennis,
golf, auto racing, soccer, yachting, and a host of other sports. The company
is 80% owned by ABC Inc., an indirect subsidiary of The Walt Disney Company-no
stronger to the concept of branding.
Wherever sports are watched, read about, discussed or debated, that's where we
want to be," says Lee Ann Daly, ESPN's senior vice president, marketing. That
mission has turned ESPN into a multinational, multimedia sports entertainment
company, including six domestic and 20 international TV networks, a radio
network, an Internet site, a magazine, and sports-themed dining and
entertainment with the launching of ESPN Zone in Baltimore in July 1998,
followed by the opening of facilities in Chicago, New York and Atlanta. The
fifth ESPN Zone is scheduled to open this month in downtown Washington, D.C.
"These days you see bastardization of a lot of terrific brands," says M. C.
Antil, director of corporate communications. "Lee Ann is our brand cop. We
don't do anything without asking, `what is this going to do to the brand?"'
Notes Daly: "I usually give a Battle Hymn of the Republic speech on what the
brand is and isn't. Our position is that ESPN is not a huge network, but
rather it's a huge sports fan. Everything we do comes from that perspective.
It allows us to have a dialogue with other sports fans and, in turn, creates
an attitude of not wanting to disappoint them. We want to make them better
sports fans by sharing our information and our insights. Everything we do has
to carry that forward. We probably wouldn't do a candy bar. How does that make
you a better sports fan? Unless it has some secret ingredient that makes you
have a better memory."
In 1997, ESPN acquired Classic Sports Network (now ESPN Classic). "Our
extension into classic made sense because it was a way of bringing information
that to a very large extent was lost in history and in archives. We have done
research that reveals that the people who are most interested in Classic are
young. It might be sports fans that have heard about Wilt Chamberlain and Bird
and Magic, but never saw them play. Classic gives them a chance to understand
what all the fuss is about," Daly says.
ESPN The Magazine, launched in March 1998 and the winner of more than 20
awards in its first year, has already hit a circulation of more than 1
million. "The magazine was a way to go more in depth into the lives and
backgrounds of athletes," Daly says.
[IMAGE PHOTOGRAPH] Captioned as: ESPN is parlaying the brand name into a chain
of sports-themed dining and entertainment complexes-ESPN Zone. The first one,
pictured above, opened in Baltimore in 1998.
ESPN foresaw the power of the Internet by launching ESPN SportsZone (now
ESPN.com) in 1995.
The Web site offers a variety of information, including news of the day, indepth analysis, fantasy leagues, as well as columns by ESPN on-camera
personalities, such as Peter Gammons. "We break a lot of stories on ESPN.com
now, and give them the kind of coverage that they might not be able to get by
breaking into regular TV programming," Antil says. The ESPN Store is housed at
ESPN.com. It sells everything from ESPN hats to sports memorabilia.
ESPN Radio, launched Jan. 1, 1992, is the largest sports radio network. It
provides round-the-clock programming to more than 650 affiliates nationwide.
"If you can't be in front of a TV set and you want to hear the NCAA finals,
you can listen on ESPN Radio. It's the same for football and the NBA," Daly
says.
Other ESPN products and businesses include pay-perview subscription packages,
ESPN videos and compact discs, CD-ROMs, ESPN books and a TV/radio sports
marketing, syndication and production company. In recent years, ESPN has
created or acquired events it owns, markets and televises, such as the ESPYs,
X Games and Winter X Games, Skin Games, Par 3 Shootout, B3 (Bikes, Blades and
Boards), Great Outdoor Games and the Great Eight Challenge.
Swedish Takeout
Fifty years ago in the woods of southern Sweden, a minor revolution took place
that has since changed the concept of retailing and created a mass market for
a category where none previously existed.
[IMAGE PHOTOGRAPH] Captioned as: ESPN The
Captioned as: Magazine reached a circulation of 1 million in less than two
years. ESPN SportsCentury provides a recap of the past 100 years.
The catalyst of change was and is IKEA, the Swedishbased furniture retailer
and distributor that virtually invented the idea of self service, takeout
furniture-the purveyor of high quality, reasonably priced and innovatively
designed furniture and home furnishings for a global marketplace, whose loyal
customer base in the United States, along with its stores, is growing at a
steady, albeit slow pace, largely by word of mouth.
The name was registered in Agunnaryd Sweden in 1943 by Ingvar Kamprad-the IK
in the company's name. He entered the furniture market in 1950 and the first
catalog was published in 1951. The first store didn't open until 1958 in
Almhult. It became so incredibly popular that a year later the store had to
add a restaurant for people who were traveling long distances to bet there.
IKEA entered the United States in 1985. A store on San Francisco's East ay is
slated to open later this month and other U.S. stores are on the drawing
board. Although IKEA is global, most of the action takes place in Europe,
which accounts for approximately 85% of the company's $7 billion in sales.
Nearly one-quarter of that comes from stores in Germany, while North American
units account for about $1 billion.
One reason for the relatively slow pace of growth in the United States for
this mega-retailer is that its stores are franchised by Netherlands-based
Inter IKEA Systems B.V, which carefully scrutinizes potential franchiseesindividuals or companies-for strong financial backing and a proven record in
retailing. The IKEA Group, based in Denmark, which operates more than 100
stores, is a group of private companies owned by a charitable foundation in
the Netherlands. The group also develops, purchases, distributes and sells
IKEA products, which are available only to company stores. Items are purchased
from more than 2,400 suppliers in 65 countries and shipped through 14
distribution centers. About half of the items are made in Europe, with an
additional 25% from manufacturers in Nordic countries and 20% from sources in
the Far East. Only a small percentage of goods comes from North America.
An average full-line store carries about 12,000 items. But variety, which is
consistent at states worldwide, is only part of IKEA's story. Despite the high
quality ratings of its items, low price is literally built into the company's
lines. Even catalog prices are guaranteed not to increase for one year.
Furthermore, the ability to pack disassembled items in flat cartons
facilitates storage and distribution. The drive to produce affordable products
inadvertently put IKEA at the forefront of the environmental movement several
decades ago. In addition to lowering costs, minimized materials and packaging
addressed natural resource issues. Environmentalism remains an integral
operational issue at IKEA, affecting everything from product development to
choice of suppliers. Even the company's catalog is completely recyclable and
produced digitally rather than on film.
Special delivery
Its ubiquitous brown trucks have delivered everything from Pokemon to the
giant pandas at Zoo Atlanta. But United Parcel Service is rapidly transforming
itself from delivering just parcels to information technology.
[IMAGE PHOTOGRAPH]
[IMAGE TABLE] Captioned as: Global timeline
"We've invested more than $1 billion a year in information technology for more
than a decade, and we don't plan to quit," says Jim Kelly, chairman and CEO of
Atlanta-based UPS. "We prepared to become a player in e-commerce, and we're
now a part of the dot-com explosion. In fact, UPS delivers the majority of the
items sold over the Internet," he says. Another way UPS has been growing is
through its Business Communications Services subsidiary. In addition to
tracking its own packages, UPS is contracting out its Call Center services to
brick-and-mortar and e-commerce businesses, such as Nike.com. "We had planned
for large capacity Call Centers to track packages, but because so many people
are now checking the routing of their packages online, we have a lot of excess
capacity," says Steve Holmes, a company spokesman. The Call Centers in Mahwah,
N.J., and Alpharetta, Ga., processed more than 3.3 million online tracking
requests in a single day during the 1999 holiday season, and are now averaging
more than 2 million a day.
Revenue from logistics operations has grown 70% in the past two years, and is
expected to grow 35% annually in the next three years. UPS is using its
logistics expertise to benefit itself and its customers, fixing broken
computer monitors for Hewlett-Packard, and stocking and shipping goods for
Nike.com from its Louisville warehouse, for example.
[IMAGE PHOTOGRAPH] Captioned as: UPS has moved rapidly from a transport firm
to an information technology company.
Nonetheless, UPS is far and away the world's largest shipping company,
delivering some 12.9 million packages a day in 200 countries and territoriesthree times as many as Federal Express and even more than the U.S. Postal
Service. An estimated 5% of the Gross Domestic Product moves through UPS every
day. It has 1.7 million shipping customers, 344,000 employees, 149,000
delivery vehicles, and a fleet of 575 aircraft that fly 500 flight segments a
day-il,000 during the Christmas rush. It would rank as the ninth largest
airline. UPS is also the largest customer of the nation's railroads.
At any given moment, UPS computers are storing 73 trillion
information, including all customer signatures that are on
taken every day. "We store those signatures for 18 months,
supply people with information about their supply chain in
a second," Holmes says.
bytes of
file, and new ones
and that is how we
literally less than
"We've made transportation a key ingredient of the total business process-not
just in distribution, but in terms of information that companies use to
analyze and control business processes," Holmes says.
Room for you
Whether it is a $1,200-a-night suite at The Ritz-Canton
Fairfield Inn, chances are Marriott International has a
range. As an operator of everything from vacation clubs
assisted living centers, Marriott offers accommodations
or a $79 room at
hotel in your price
to senior citizen
for all ages.
Established in 1927 as a root beer stand in downtown Washington, D.C., by J.
Willard Marriott and his wife, Marriott has grown to more than 1,800
properties with more than 325,000 rooms. It also operates 113 Marriott Senior
Living Services senior communities, 17 Marriott Conference Centers and 38
Marriott Vacation Clubs International. Plus there's a nationwide network of
food distribution centers, and Marriott does contracting and procurement for
the hospitality industry.
Its stable of formats would make a supermarketer blush. In addition to its
flagship Marriott brand, he company operates hotels under the Ritz-Carlton,
Renaissance, Courtyard by Marriott, Residence Inn, Fairfield Inn, TownPlace
Suites and SpringHill Suites nameplates. Established last year, the newest
brand is SpringHill Suites, an upscale alternative to Fairfield Inn. For $20
or so more a night, visitors to SpringHill Suites get amenities that include
doors on the closet, a mirror in the hall and a larger vestibule.
Washington, D.C.-based Marriott International tends to design its hotels in a
conservative look, rather than opting for the latest trend in design. This way
its properties do not look dated when styles change five years down the road.
As a result, Marriott hotels have a "shelf life" of several decades so that
the company can recoup its initial investment. Rooms are designed with neutral
furnishings and multi-color bed spreads that go with everything and have to be
changed less frequently than solid patterns.
Unlike other operators who often buy unfinfished properties from developers or
simply buy hotels and change nameplates, Marriott builds the bulk of its
properties from the ground up. As a result, its projects generally run from
two to five years from concept to development. During that time the architects
can change the style of a hotel, or even its name. For example, Fairfield Inn
was originally going to be called "Marriottel," but at the last minute
chairman J.W Marriott Jr. decided to name the property after the family farm.
[IMAGE PHOTOGRAPH]
Marriott is the largest hotelier on the Fortune 500 list. It consistently
strives to build sales and quality through innovation. In 1997, it launched
Marriott Rewards-the world's largest multi-brand, frequent-guest program that
allows members to earn and redeem points for free stays at Marriott lodging
brands. Through its Internet site, travelers can make all of their
reservations and check their itineraries and account information from home.
-Richard Turcsik
Reaping beauty
What makes Sephora click with consumers in the United States? "There are a
couple of things," says Howard Meitiner, president of Sephora Americas and
Asia Pacific. "First, it is new and unique, and in the American market,
there's always interest in things that are new and unique. Coupled with the
fact that we really do provide freedom for the customer, which is a beauty
approach that is quite different from traditional prestige environments and
products."
Sephora's parent company, LVMH Moet Hennessy Louis Vuitton SA, Paris, long has
offered the good life to its customers, from champagnes, cognacs and wines
(including Dom Perignon, Moet & Chandon and Hennessy) to high-end fashion and
accessories. Sephora-derived from Sephos, the Greek term for beauty, and the
Biblical name Zipporah, a wife of Moses who was renowned for her beauty-was
founded in 1993 and purchased by its current owners in 1997. One year later,
Sephora opened its first U.S. store, and now has about 50 locations here,
including its flagship store, which opened in Rockefeller Center in New York
City last year and features more than 14,000 items.
The environment can best be described as entertainment retailing, Meitiner
says. "A lot of companies try very hard to entertain their customers. The
great thing about Sephora is that it's self entertainment. People go in there
and they have a good time because they can play and enjoy and not be hassled.
That is perhaps a formula that could work in a lot of different retail
formats, where you let the customer create their own entertainment as opposed
to trying to falsify the process.
Sephora's growth plans are ambitious, but calculated. Although the company may
have as many as 250 locations nationwide within the next few years, not every
U.S. market is targeted for expansion, Meitiner says.
"We're not like Starbucks; there won't be a Sephora on every corner," he says.
"What we want to do is reach an optimal level, not an over-optimal level.
We'll know a lot more when we reach 150 stores."
[IMAGE PHOTOGRAPH]
Sephora also has plans to open stores aimed at different) consumer audiences,
including one concept that will feature aromatherapy and "inner beauty, piece
of mind" products, and another that will have a "young, small funky feel,"
Meitiner says.
"Too little has changed in the cosmetics business over the last few years,
even though the sophistication of the products has improved greatly" he says.
"Everyone selling beauty products is our competitor. Wal-Mart does a fantastic
job with mass market. But they're not trying to appeal to the customer the
same way that we are. And department stores do a great job. But they have a
jam-it-down-your-throat type approach, which is a very different selling
approach from Sephora."
The company also has made a major commitment to its Web site, which Meitiner
says will work in conjunction with Sephoras brick-and-mortar stores. The
thrust online and instore is to make the merchandise accessible, user friendly
and trendy, while maintaining a sophisticated aura of mystique and
exclusivity.
"At the heart of any new concept is someone with vision and passion that
really is not the norm. There are no other retailers that put together a
lifestyle point of view the way that Sephora does," Meitiner says.
Hitting the bullseye
The name Target is so strong among consumers, suppliers and financial analysts
that Dayton Hudson Corp., Minneapolis, changed the name of its company earlier
this year to Target Corp.
"Target Corp. is a more appropriate name for the company, and is also a more
widely recognized brand name," says Chairman and CEO Bob Ulrich. "While the
Dayton Hudson name served the company well since we adopted it in 1968, the
Target name best reflects our business and our company."
The new company name also reflects the fact that some 900 (and counting)
Target, Target Greatland and SuperTarget stores represent more than 75% of the
corporations revenues and pretax profits, Ulrich says. Target Corp. also
operates more than 300 other stores, including Mervyn's California midrange
department stores, found mainly in the West and Southwest; and Dayton's,
Hudson's, and Marshall Field's upscale department stores in the Midwest.
Ongoing efforts to compete against and to distance itself from its direct
rivals, Wal-Mart Stores Inc., Bentonville, Ark., and Kmart Corp., Troy, Mich.,
have led Target to carve out an ever-expanding niche in general merchandise
retail sales. In 2000, Target Corp. will add about 80 new Target stores,
including 15 SuperTarget stores with significant grocery departments. Twentyfour new stores in 16 states are scheduled to open on July 23 alone.
Target also has committed more than $500 million over the next three years to
remodel existing stores "to keep them fresh and representative of the Target
brand," Ulrich says.
"At Target, `guests' will not only find convenience, hot trends and great
prices, but also a store that strives to strengthen and enrich family life,"
says Gregg Steinhafel, president of Target stores.
That includes integrating the basics for home, work and travel at discount
prices with such upscale and chic products as housewares designed by Michael
Graves, Stiffel lamps, Restore & Restyle home improvement products, and
Calphalon kitchen essentials.
"Our research shows that the higher the income, the better educated and the
higher the employment status, the more `guests' like Target," Steinhafel says.
Numbers seem to bear out Target's target marketing. In the first two months
after the corporation officially changed its name, net retail sales for the
four weeks ended Jan. 29, 2000 increased 11.4% to $2.052 billion from $1.843
billion the previous year, and net retail sales for the four weeks ended Feb.
26, 2000 increased 8.7% to $2.194 billion from $2.019 billion a year ago.
Total company sales were $32.931 billion for the fiscal year.
Targets marketing efforts also have included a major online expansion. In
February, the company formed a new business unit called "Target Direct," which
is responsible for all the company's electronic retailing and direct marketing
efforts.
[IMAGE PHOTOGRAPH] Captioned as: MARKETING
"The Internet and e-commerce are a vital part of Target Corp., and this new
organization will help us leverage the power of all our store brands and
catalogs," says Jerry Storch, president, credit and new businesses. "We are
committed to being a leader in e-commerce and we are continuing to increase
our investment in this area. Target Direct will support all of our storesTarget, Mervyn's California, Dayton's, Marshall Field's and Hudson's-and our
Wireless, Signals and Seasons catalog businesses."
"Simply put, where there is an opportunity for Target to be different, we
are," Ulrich says. -Barry Janoff
Taking stock
The Internet is accessible to everyone. However, that does not necessarily
mean everyone can access everything on the Internet. This may be especially
true in the area of investing and trading stocks and bonds, where money talks,
time is essential, and information is the engine that drives everything.
DLJdirect Inc., Jersey City, NJ., has built an e-commerce site that combines
these key elements and lets people who have money to talk, walk the investment
and trader walk.
"Retail investors throughout the world are better informed and more
sophisticated as a result of the Internet than at any other time in history,"
says CEO K. Blake Darcy. "We're offering proprietary research and IPOs. You're
hard-pressed to find anything like that on the Web."
Established in 1988 as PC Financial Network the company changed its name in
1997 to DLJdirect to better elect that it was the online brokerage service of
Wall Street giant Donaldson, Lufkin & Jenrette Inc. A change in policy also
occurred, and DLJdirect now lets what it calls "sophisticated, self directed
investors" trade Nasdaq and exchange-listed securities (about 90% of sales),
provides Dow Jones real-time news, and offers market data and research,
portfolio tracking and cash management. It also allows clients to get in on
DLJ-sponsored IPOs.
At press time, the company boasted that it had more than 810,000 customer
accounts representing more than $23.7 billion in assets, and counting. The
company says it handles an average of 30,500 trades per day.
"DLJdirect more than doubled its revenues, client assets, total trades and
average trades per day in 1999," Darcy says. "We accomplished so much while
still maintaining our No. 1 ratings for service and reliability."
DLJdirect is not resting on its laurels in 2000. In February, the company
announced two joint-venture agreements to expand DLJdirect online investment
services worldwide. One was with Hutchison Whampoa Ltd., Hong Kong, to take
DLJdirect throughout Asia to Hong Kong and mainland China, Thailand,
Singapore, Malaysia, the Philippines, Taiwan and Indonesia. The other was the
formation of DLJdirect-eUnion, a partnership established with Capital Union
E.C., Bahrain, to expand into 14 nations throughout the Middle East and North
Africa.
DLJdirect online investment services in Japan and the United Kingdom started
in 1999.
"Investors continue to embrace online investing, and DLJdirect continues to
attract the sophisticated, high-networth, self directed investor," Darcy says.
"Truly, online brokerage represents the empowerment of the self directed
investor.
Evidence of this can be seen in the continuing rise in average customer assets
per active DLJdirect account, which increased to $63,000 at the end of 1999
from $42,000 at the end of 1998, he says. -Barry_ janoff
Ship-shape shopping
Clothing retailer Old Navy has borrowed more than one merchandising idea from
the supermarket-from meat cases stacked with shrink-wrapped T shirts, to retro
refrigerators with hanging sunglasses-to reach value-conscious shoppers of all
ages. The stores hone in on the concept of shopping as entertainment, with
upbeat music blaring, whimsical displays, and employees in headsets busily
walking around stocking or helping customers.
[IMAGE ILLUSTRATION] Captioned as: CONVENIENCE
Old Navy is the brainchild of Millard "Mickey" Drexler, Gap Inc.'s president
and CEO. In 1993, Drexler decided to rename 45 value-priced Gap Warehouse
stores. While on a business trip in Paris, he spotted "Old Navy" written on a
building, and the name stuck. In March 1994, three Old Navy Clothing Co.
stores were opened in the San Francisco suburbs of Colma, San Leandro and
Pittsburg.
Six years later, there are more than 500 Old Navy stores throughout the United
States, which accounted for about 36% of Gap's 1999 sales of $11.6 billion.
Gap expects to open 120 to 130 more Old Navy stores in 2000. And last
December, it announced tentative plans to purchase a distribution site and
building in Ontario, Canada, to support an international expansion of Old Navy
into the Toronto metropolitan area in summer 2001.
Several factors have contributed to Old Navy's success, but one of its key
strengths is its ability to market hip clothing for women, men, children and
babies at low prices. Unlike the Gap and its other divisions, Banana Republic
and GapKids, Old Navy's stores have been strategically placed in shopping
centers, as opposed to shopping malls, to reach middle-class or lower-income
shoppers. Since 1995, the store has showcased an "item of the week" at a
discounted price, often only $10 or $15.
Merchandising is its other forte. Many of its T shirts advertise the store
name, and Old Navy has created staples for many teenagers' wardrobes, such as
its cargo pants and sporty caps. In addition to clothing, Old Navy sells
journals, picture frames, chocolate bars and other novelty items. Its flagship
stores-those considered top of the line, with city or climate-specific
clothing-are now testing diner-style, fast-food restaurants called Torpedo
Joe's, featuring fresh sandwiches and smoothies, and Old Navy's signature '50s
decor. An in house visual merchandising team select the music played in the
stores, which is also available on Old Navy's CD compilations. The flagship
store in Manhattan on 34th Street and Broadway has kiosks that let shoppers be
the store DJ, make their own compilation CDs, or visit oldnavy.com. Although
online shopping is not available, Old Navy's deb site says that it will be
sometime this year. Meanwhile, you can purchase a gift certificate over the
Internet.
Some of Old Navy's store openings have become gala events-the flagship store
in Manhattan at 18th Street and 6th Avenue featured a performance from Chris
Isaak at its grand opening party in November 1995. On its first Saturday, the
store made the largest single-day sales performance in Gap Inc.'s 26-year
history.
It is the "Beyond" in Bed Bath & Beyond that has helped catapult the Union,
NJ.-based company into the largest retailer of domestics merchandise and home
furnishings, with sales closing in on $2 billion.
[IMAGE PHOTOGRAPH] Captioned as: GENERATIONAL SELLIN
The stores, averaging 42,000 square feet, group related product lines in
distinct areas, creating an appearance of several individual specialty storesa true store-within-a-store format that makes stores easier to shop and
reinforces the perception of a broad selection.
Stores are now diversifying "beyond" hardgoods and domestics into food
products that are given a prime location near the front of the store. The food
secfor is stocked with an impressive array of upscale, natural and organic
products, including nectars, sparkling beverages, sodas, biscotti, pie
fillings, chips, vegetable mixes, truffles, snack foods, chocolate, pasta,
pasta sauces, barbecue sauces, spices, biscuits, teas, coffees, dips, soups,
bottled water, salsas, mustards, oils, jams, jellies, cookies and candy.
Brands represented include Looza, Lorina, Boylan, Ghirardelli, Newman's Own,
The Spice Hunter, Carr's, Rao's, Twinings, Medaglia D'Oro, Colavita,
Stauffer's, Evian, Knorr, Terra, Haypress Gourmet, Tazo, as well as several
spices and sauces from famed chef Jean-Georges Vongerichten.
The exotic nature of the food products is reflected in items such as banana
ketchup and a fine of mixes with infused vinegar under the Cuisine Classic
banner.
A highlight of the chain's recently opened store in Elmsford, N.Y, is
escalators going up and coming down, exclusively for shopping carts, that are
positioned next to the escalators serving the customers. There is also an
elevator.
Large signs at the checkouts declare: "Our guarantee: We will not be
undersold! If you find a lower price anywhere, we will meet that price! We are
thrilled to accept competitors' coupons!"
Store managers decide how much of the chains approximately 30,000 items to
stock. With no central warehouse, product is shipped directly to the stores.
Forbes has reported that 85% of a Bed Bath & Beyond is selling space,
contributing to sales per square foot of $208, 17% higher than its nearest
competitor.
Bed Bath & Beyond opened 51 superstores and expanded four existing stores in
the fiscal nine months ended Nov. 27, 1999. The company expected to open five
additional superstores in its fiscal fourth quarter. As of Nov. 27, 1999,
there were 237 stores operating in 38 states, including a record 36
superstores opened in the fiscal third quarter. The prior record was 26
superstores opened in the corresponding year-earlier quarter.
Total store space increased to approximeately 9,696,000 square feet at the end
on the November-ending fiscal quarter, a gain of 2,043,000 square feet or
26.7% over total store space of 7,653,000' square feet occupied by 185 stores
in 34 states that were operating as of Nov 28, 1998.
In early March, Deutsche Banc Alex. Brown called Bed Bath & Beyond, which was
selling for approximately $27 a share, a "strong buy," setting a price target
of $38 per share.
-Michael Friedman
[IMAGE PHOTOGRAPH] Captioned as: PRODUCT VARIETY
Reproduced with permission of the copyright owner.
Further reproduction or distribution is prohibited without permission.