Retailers: Discount Versus Department Store Wars

For many years when shoppers have wanted clothing they would go to a department store, and when they needed groceries, they would go to a grocery store. With the advent of discounters like Wal-Mart and Target, consumers were offered more products in one store, thus eliminating the need to travel to multiple stores. This even intensified when these stores became "supercenters" by adding groceries to their inventories. In addition, wholesalers like Costco and Sam's Club furthered competition. Many stores are accusing the other of taking their long-time customers, and are studying the "lures and tactics" of the other to win back their customer.

One of the first Department stores to try to increase business is Sears. They have centralized their checkouts and added shopping carts to their stores ( Richards, 2003 ). In addition, they are offering many sale prices unseen in previous years.These can include offering discounts of up to sixty percent off and more ( Grant, 2002). For example, JC Penney recently had a sale and offered their past season clothing at eighty-percent off regular prices. One must consider, however, if all of these changes are either hurting or helping these department stores. In March's 2003 Retail Trends published report, sales were down ten percent at Sears and two percent at JC Penney (Niemira, 2003). It must be noted, though, that not all department store sales are down. Dillards, which carries such name brands as Tommy Hilfiger and Ralph Lauren, reported a two percent gain in sales during February of this year (Niemira, 2003).

Globally, the competion of the department store versus the discount retailer is a pertinent issue. In Thailand, for example, the country's retail business has changed due to international businesses operating there (Jitpleecheep, 2002). Thai's who once operated local retail shops, must now either close up or export their goods to European nations (Jitpleecheep, 2002). For the Thai's, many of the same reasons Americans like discount stores applies to them: ample parking, air conditioning, food outlets, and mini-bank branches (Jitpleecheep, 2002). In fact, North Carolinian company Food Lion has taken advantage of the change and set up its grocery stores there. Current and future prospects for retailers being able to stay in business mainly rests on the ability to attract and retain a customer base. Therefore, retail outlets are installing banks, movie theaters, and themeparks in hope of attracting customers (Jitpleecheep, 2002).

While some companies are looking overseas to increase profits, many back home are looking at other ways to increase their revenues. Wal-Mart and its sister company Sam's Club are looking at conslidating their buying power to keep their prices low to consumers (Reuters, 2003). In addition, Wal-Mart is going to be adding many name brand items typically found in department stores to its inventory (Reuters, 2003). Such examples are Levi's for children and adults, and Carter's for infants and children (Reuters, 2003). The Levi's initiave is being undertaken by both Wal-Mart and Sam's Club, with each offering a different label and cost, respectively (Reuters, 2003). This joint venture and new offering of products seem to be working for Wal-Mart. As of March 6, 2003, the company's profits are up three percent (Niemira, 2003).

As for now, one cannot assume of these undertakings are a success until enough data has been compiled. A major time for department store retailers is the holiday season, which lasts from Thanksgiving until the end of January. Last year's Christmas season was heavy right after Thanksgiving, but then slacked off (Grant, 2002). Sales of toys and fragrances slipped, while sales of home goods have improved dramitically ( Grant, 2002). The slipping of "non-essential" items can be attribuited to unfavorable economic trends, security alerts, war plans, and harsh winter weather, which eliminates foot traffic for stores (Niemira, 2003). On the other hand, low interest rates, and homeowner refinancing have attribuited to a 2.3% increase in home furnishings sales (Grant, 2002).

So what does all of this mean for department and discount stores? Two words: healthy competition. With merchants offering deep discounts and name brand products being offered at more retailers, the consumer is the one who comes out victorious in this competition. Retailers are doing whatever it takes to earn a shopper's dollar. In the end it may improve business, or on the other hand, deep discounts may make stores in the red, rather than boosting their bottom line. The department versus discount war is just beginning, and only time will tell who wins a consumer's business.

References

1. Richards, Gregory. Department Store Swoon. The Florida Times Union, First Business. Monday, July 7, 2003. p.10-11.

2. Grant, Lorrie. Weekend's Retail Sales Could Characterize Season. December 12, 2002. Retrieved July 20, 2003. http://www.usatoday.com/money/industries/retail/2002_12_ 12_retail-x.htm.

3. Jitpleecheep, Sukanya. Retailing: Survival of the Fittest. Retrieved: July 13, 2003. http://www.bangkokpost.net/midyear2002/retailing.html.

4.Niemira, Michael. February Store Sales Eak Out Small Gain. Retail Trends, Bank of Tokyo- Mitsubishi, Ltd. March 6, 2003. Retrieved: July 16,2003. http://www./btmy.com/reports/research/comment/cs0203.pdf

5. Reuters. Walmart to Take on Apparel Sector. June 27, 2003. Retrieved: July 18, 2003. http://www.xtramasn.co.nz/business/0,,5007-2479804,00.html