Demise of a Breed: Jacobson’s Typifies Plight of Regionals

Jackson, Mich.— After a 134-year run, Jacobson’s Stores Inc. is saying goodbye.<br><br>The 27-unit specialty store chain based here, whose elegant stores, sophisticated merchandise and intensely personalized customer service helped it...

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Jackson, Mich.— After a 134-year run, Jacobson’s Stores Inc. is saying goodbye.

This story first appeared in the August 13, 2002 issue of WWD.  Subscribe Today.

The 27-unit specialty store chain based here, whose elegant stores, sophisticated merchandise and intensely personalized customer service helped it become one of the nation’s top regional retail operations, is closing shop by Oct. 1 after the completion of a Chapter 11-mandated liquidation sale that’s now in progress.

Huge red or yellow “Going Out of Business” banners and “20 to 40 Percent Off” signs now drape the tony facades of Jacobson’s 18 remaining stores across the Midwest and Florida. Six stores have been closed since the company’s Jan. 15 bankruptcy filing and Jacobson’s previously closed three stores and a service center in 1997 in an attempt to reduce costs and cut back on less-productive stores. All of the units previously closed were in its Michigan heartland.

The racks and racks of fire-sale merchandise, closing down sale signs and sad customers rifling through the rails are a far cry from Jacobson’s halcyon days in the late Eighties and early Nineties, when wealthy shoppers paid full price for designs from Chanel, Giorgio Armani, St. John Knits, Donna Karan, Celine, Oscar de la Renta and Badgley Mischka, among a long list of others. Jacobson’s at that time was one of the fastest-growing specialty chains in the country. During its heyday, when discounters were in their infancy and shoppers’ desire for designer goods seemed to grow exponentially, Jacobson’s policy of showcasing lavish goods and spoiling shoppers rotten paid off big time.

However, in the year ended Feb. 2, its final full fiscal year in operation, sales declined 12.7 percent to $401.8 million and net loss, just $2.8 million in fiscal 2001, mushroomed to $57.3 million. Sales per square foot contracted conspicuously, to $175 from $196, and same-store sales took an 11.8 percent beating.

Jacobson’s demise also stirs further questions over the long-term viability of regional specialty and department stores at a time when even national department store groups, such as Federated Department Stores and May Co., are losing share to mass merchant megaliths like Wal-Mart, Target Stores and Kohl’s. A generation of regional discounters — such as Venture, Jamesway and Hills — has already succumbed.

As consumers increasingly chase ever-low prices and fast service, the days of genteel chains like Jacobson’s appear to be numbered.

Some regional stalwarts continue to buck the trend, however, and are holding their own, if not thriving. Though they’re more moderate than upscale, store chains such as Gottschalks in California and the Northwest, Belk’s in the Southeast, Elder-Beerman in the Midwest, Beall’s in Florida and Pennsylvania-based Boscov’s are, to varying degrees, playing up service, revamping stores to make shopping faster and easier, differentiating their assortments from those of their larger competitors and continually taking the fashion pulse of their micro-marketplaces in a bid to give customers what they want — and prevent them from defecting to their mass-market competitors.

In fact, York, Pa.-based Bon-Ton department stores, as reported, turned to Federated’s merchandising arm for private brand goods not found elsewhere in its markets. The Madison & Max label, considered an upper moderate-priced career and casual collection, is in all 73 Bon-Ton stores.

Jacobson’s also had the challenge of functioning as something of a hybrid — a specialty store with some department store characteristics. While its Florida stores had footprints ranging from 23,000 to 90,000 square feet, its Midwestern stores fell more into the behemoth category, with stores as large as 179,000 square feet.

The merchandise mix resembled those of such better-known departmentalized specialty stores as Neiman Marcus and Nordstrom’s. Jacobson’s generated seven out of eight sales dollars in apparel as 69.9 percent of sales came from women’s apparel and accessories, 12 percent from men’s wear and 6.8 percent from children’s.

But as analysts continue to speculate over further consolidation in the department and specialty store arena, the question remains: Can the little guy survive in the long term?

“The demise of Jacobson’s marks the end of an era of retailers who have had intensely personal and service-oriented relationships with their customers,” said Carol Williams, Jacobson’s president and chief executive officer.

“It’s with a heavy heart that all of us are saying goodbye to each other as associates, friends and community members. I am honored to have been part of such a fine group of extremely talented and dedicated individuals.”

Bud Konheim, chief executive officer of Nicole Miller, said, “I’m not shocked. What seems to be happening is that the top luxury stores, like Saks and Neiman’s, and the mass stores like Wal-Mart, are OK. But in the middle, it’s difficult. Jacobson’s was more high-end, but it couldn’t compete with other top-tier retailers. What we find are the very small niche specialty stores are doing better. Jacobson’s was too much of a generalist and not enough of a specialist.”

A walk-through last week of Jacobson’s units in Ann Arbor and Livonia, Mich., found brisk traffic and quickly shrinking inventories that will be marked down by deeper discounts as the liquidation nears completion. The women’s better and bridge sportswear and outerwear areas, including leather and fur, were the most popular, followed by intimate apparel, shoes, home, beauty, men’s apparel and children’s. Many store fixtures such as lamps, rugs and furniture also are for sale.

“The first weekend of the sale was pretty remarkable, really unbelievable,” said Jim Delaney, a vice president and 29-year veteran at Jacobson’s.

“The ironic thing is that we’re not really doing any more discounts now than before the going-out-of-business banner went up. It’s just the consumer mentality of a liquidation sale that will draw them in seeking a supposed bigger discount. We’re dealing with some resentment among sales associates. They want to know why the customers are coming now and not before when it could have helped save the company from bankruptcy.”

Though the publicly-traded chain had posted modest comp-store gains in recent years and sales hit $460 million in 2001, the increases came at the price of glaring and sharply dwindling profits. Chapter 11 bankruptcy followed after a brutal second half of 2001 marked by the recession, the events of Sept.11 and a dismal holiday season that left stores jammed with merchandise. Until July 25, when Jacobson’s decided to liquidate, the chain held out hope that a buyer would rescue the company from bankruptcy and keep the business alive.

It’s a sad, mundane ending to what had been one of retailing’s most magical success stories, a better-to-designer business that charmed generations of customers with lavish personal touches such as sterling silver gift boxes and impressed vendors with its egalitarian business tenets, family-like corporate culture and inherent good taste.

To better serve its shoppers, Jacobson’s units often had three or four times as many employees as its competitors. As for its employees’ welfare, the chain closed on Sundays until 1991 and didn’t add evening hours until 1997.

Such a genteel and anachronistic approach to retailing, though, began to lose it’s appeal to many time-pressed consumers of the Nineties, who craved quick in-and-out shopping experiences more than formal carriage trade tradition. Upscale shoppers defected to national luxury chains like Neiman Marcus, Saks Fifth Avenue and Nordstrom’s, all of which extol superlative service concepts, carry many of the same designer labels and have methodically encroached on Jacobson’s turf in the Midwest and Florida.

John Pomerantz, chairman of The Leslie Fay Co., said of Jacobson’s liquidation: “What a shame. I personally have done business with them for many years and a lot of the better divisions have. It’s one of the few stores that had really good sales people that could really sell the merchandise. I think they had a loyal customer base and where that customer goes now, I don’t know. It’s been around a long time and we can’t afford to lose stores like that.”

Abbey Doneger, president of The Doneger Group, said: “Jacobson’s represented a very loyal consumer base, had wonderful relationships throughout the years with the wholesale community and it is unfortunate that they perhaps did not attract new customers and fully develop a contemporary business, which maybe would have helped perpetuate the company.

Doneger said the chain had a high respect level on Seventh Avenue and will be a loss to the retail and wholesale community. “The last couple of years they have been trying to fine-tune their operation,” he added. “It was a deterioration of a business on all levels that occurred over a long period of time.”

Tom Spoestra, senior vice president and merchandise manager, has been with Jacobson’s over 25 years. “We edited our merchandise mix so that the clothes required a high level of customer service and interaction with the sales associate,” said Spoestra. “We could never be everything to everyone and we didn’t try to be. Our customers were very elegant, upscale and discerning and lived a certain exclusive lifestyle. We did best in areas that sometimes were most difficult for some retailers, whether it was expensive designer apparel, furs or fine jewelry.”

Spoestra said many of the chain’s buyers had started with the company as sales associates and were familiar with shoppers’ lifestyles and interests. And buyers were expected to spend time on the sales floor interacting with customers as well as sales associates to stay attuned to changing merchandising needs and wants.

“We tailored our advertising to be fun, friendly and totally in tune with our shoppers’ lifestyles. We portrayed fashion and a sense of style and self confidence,” said Kit Spoestra, a 30-year veteran of Jacobson’s and now vice president of sales promotion. She is the wife of Tom Spoestra.

Every Jacobson’s associate interviewed praised the company’s family-like corporate culture, which eschews big egos in favor of humility and team work.

“It started with the recruitment process,” said Susan Price, vice president of training and recruitment at Jacobson’s. “I would always look for a sense of graciousness, drive for excellence and real knowledge of fashion. We always wanted to be someone the customer could trust.”

“You can’t train compassion and legislate kindness,” added Delaney. ” So we sought it out in the team members we hired. Our sales associates had unique relationships with the customers. They knew them as friends and knew their needs.”

Evelyn Anastos, president of the Rimini division of The Leslie Fay Co., said: “We are very sad because they are the last true specialty stores remaining and they had customer service at the same level of a Nordstrom. When we planned a collection, they were always a big part of coming in and discussing trends and were a part of our business. They were true merchants. They truly cared about the product and that was the bottom line with them. A lot of people are just playing numbers games.”

Tom Cavanaugh, a men’s wear sales associate at Jacobson’s at Briarcreek Mall in Ann Arbor, last year was the highest sales volume producer in the chain, with nearly $1.5 million in annual sales.

“The management at Jacobson’s is nothing short of incredible,” he said. “They give sales associates lots of freedom and encourage us to customize our customer-service approach. I open at 9 a.m. on Sunday mornings to accommodate busy executives who normally hate to shop. This time slot gives them nearly the whole store to themselves, and I’m there to help them. I’m very frustrated by the decision to liquidate. The closing is going to create a retail void that I don’t think can ever be filled. I’ve been in retailing 23 years and have never seen anything like the way Jacobson’s does business.”

Consumers and vendors also are lamenting the chain’s demise, which was founded by Abram Jacobson in 1868 as a women’s apparel store in Reed City, Mich. The company remained a family affair until 1939, when it was purchased by Nathan Rosenfeld, who laid the foundation for an aggressive expansion that eventually lead to stores in Ohio, Kansas, Indiana and Kentucky. Rosenfeld died in 1982 before his dream was realized in all those states, however. In 1972, the chain went public, shortly after it expanded into Florida after Rosenfeld grew bored of semi-retirement and opened a branch in Sarasota, Fla., near his home in Winter Park, Fla. The wealthy snow-bird population embraced the store, and 10 more units eventually opened across the state.

“I’ve shopped at Jacobson’s for 33 years,” said Martha Fleury of Detroit. “The quality and customer service can’t be beat. I’m originally from Vienna, Austria, and Jacobson’s knows about Old World service and a commitment to making the customer happy. It’s what has kept me coming back all these years. My daughter and son-in-law are both medical doctors and live in Seattle. When they come to Detroit they bought much of their wardrobe at Jacobson’s.”

Carrie Cessa of Ann Arbor, wears plus sizes and praised Jacobson’s ongoing commitment to the category. “I’m very sad and disappointed that they’re closing. It’s so difficult to find a flattering dress in a larger size.”

“Jacobson’s is a retailing icon and has been a part of my life as long as I can remember,” said Jolie Guttcowski, also of Ann Arbor. “No one can take their place.”

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