BIRMINGHAM, Ala. — "We’ve been to the dark side, and we didn’t like it," said Rob Gruen, Parisian’s chief executive officer, of his challenge to elevate the chain from a promotion-driven retailer to a specialty store star.

Parisian is now positioned as Saks Inc.’s second most upscale division — below Saks Fifth Avenue, but above all the group’s other department stores. It’s a strategy that has its risks, with some analysts questioning how large such a niche can be — and whether Parisian’s reinvention will be radical enough to jump-start the struggling department store sector.

But after four ceo’s in five years, Parisian had little choice but to change. The retailer was struggling for a clear identity 18 months ago, when George Jones was named ceo of Saks Department Store Group and Gruen was hired as Parisian’s ceo. His mission to reinvent Parisian required more than a quick fix, since everything from product and merchandising to physical renovation and technology needed attention. Under a new tag line — "The Specialty Store Next Door" — Parisian set out to regain its former cachet.

Founded in 1887, Parisian was primarily owned by the Carl Hess family before going public in 1983. It was bought by Proffitt’s Inc. (now Saks Inc.) in 1996. As the Birmingham store, Parisian expanded throughout the Southeast and into the Midwest in the Eighties, with a reputation for superior product and customer service that invoked comparisons to Nordstrom.

But Parisian’s luster became dulled in recent years as a result of constant cutbacks, promotions and banal assortments, the general retail environment Gruen refers to as "the dark side."

"Many retailers thought cost-cutting and reducing sales staff was the way to go," said Jones. "Now we’re hiring back, focusing on service. It’s easy to drive short-term sales, but it can ruin equity. Today, a store has to think long term to become a brand that means something, stands for something."

Brand-building is close to Jones’ and Gruen’s hearts. Most recently, Jones headed Warner Bros.’ $7 billion licensing program, while Gruen handled marketing and retail business development. Before Warner Bros., the two worked together at various retailers, including Target and Roses Department Stores, based in Henderson, N.C.With no near-term plans for significant physical expansion, Parisian will roll out the new strategy in its existing 43 stores. The newest store, opened in September in Rochester Hills, Mich., and a recently renovated 85,000-square-foot store in Birmingham’s Brookwood Mall both reflect the new "prototypical thinking," said Gruen.

Industry experts agree that the entire department store concept needs reinventing. They applaud Parisian’s initial efforts in differentiating product and improving service, but reserved opinion about the ultimate effect of its efforts. Analysts say results on the bottom line remain to be seen, especially with retail subject to the exigencies of the economy, world events and the consumer.

Parisian’s sales for the 2002 calendar year are estimated at $885 million, with comp-store sales flat with 2001, according to Bob Buchanan, vice president, retail industry group leader, A.G. Edwards & Sons. Saks Inc. hasn’t broken out sales by division since 1998, when Parisian reported $691 million in sales. Saks Inc.’s net sales for yearend February 2002 were $6.07 billion, compared with $6.58 billion for 2001. Comp-store sales for the total company for 2002 are projected down 0.5. In addition to Parisian, Saks Inc. operates 244 department stores under the names Proffitt’s, McRae’s, Younkers, Herberger’s, Carson Pirie Scott, Bergner’s and Boston Store. The company also operates Saks Fifth Avenue Enterprises, with 61 Saks Fifth Avenue stores and 52 Off 5th stores.

Buchanan questioned the need for a second-tier upscale store, one above department stores, but below true luxury stores.

"How big, or necessary, is the niche?" he asked. "That position may work in markets with little competition, but will it work in bigger cities that have stores like Nordstrom, with similar price points and customer profiles? It will take two or three years to tell, and it takes a long time to change customer perceptions."

Customer resistance to change became clear to Gruen when he began eliminating coupons last year.

"We were surprised at the consumers’ deep-seated love of coupons," he said. "Retailers have taught customers inappropriate behavior, that they have to wait for sales to buy. We have to retrain them, with differentiated product, with value that becomes more important." Parisian is moving toward a twice-yearly sales event, with the exception of commodity merchandise that is marked down more regularly.As for similarity to Nordstrom, Gruen said that Parisian has adopted "best practices" of many stores, but that product differentiation will create a clear identity.

Defining its primary target customer as a 35- to 54-year-old woman, in households with children, 75 percent of total product is aimed at women, with women’s apparel, excluding shoes, at around 38 percent. Parisian identified six focus categories — shoes, better sportswear, cosmetics, social occasion, special sizes and gift-giving — as its key areas for growth, adding space and allocating more money for buying.

Throughout these categories, exclusive product is the key to Parisian’s rebirth, said Gruen. Exclusive merchandise not found in other department stores has grown from 26 percent to one-third of total product this year, with more than 200 resources added — often smaller, specialty store-oriented lines. By comparison, the percentage of exclusive product in SDSG’s other stores is 11 to 12 percent.

Parisian is also growing private label to 15 percent of total product from 10 percent now, moving from opening price commodity merchandise to higher price points. In addition, it has acquired licensed brands, such as Laura Ashley, launched in stores August 2002, and Ruff Hewn for women and men, which will make its debut in fall 2003. The latest addition, the license for a Jane Seymour line of lifestyle home products and children’s apparel and accessories, was announced in September to launch in fall 2003.

Bridge and contemporary lines, now in selected stores, are expanding to more stores, where appropriate, including Nicole Miller and Dana Buchman and St. John Sport, and contemporary resources Laundry, Max Studio, Studio M and ABS. Traditional lines, such as David Dart and Tyler Boe have also performed well. In special occasion, Carmen Marc Valvo, Vera Wang and Kay Unger are key resources. Parisian is developing a special-order business to grow bridesmaids and social-occasion areas.

Rather than centralized buying, Parisian tailors assortments to regions and stores. Buying in less depth and more breadth gives consumers a clear selection, avoiding the "sea of racks" atmosphere often found in big department stores. Including more vendors calls for better partnerships that break through today’s often adversarial climate between retailers and manufacturers, said Jones."As retailers, we have to have more respect for brands," he said. "We need to waive restrictions, such as minimums, work with partners on chargebacks and be more compatible and accommodating."

One example of its new lines — Misook, a bridge-priced separates and dresses line based in New York — began selling to Parisian last fall. Sales doubled this year, with petite and large sizes added three months ago. Company president Misook Doolittle prefers specialty-oriented stores, such as Parisian, to department stores.

"Presentation is very important in bridge, and Parisian takes care of the merchandise," she said. "Buyers are seasoned, experienced and they know customer needs in different regions, rather than just buying product for all stores."

Another area where Parisian has tried to differentiate itself is accessories, where lines include Kate Spade, Donald Pliner and Icon. Brighton has a signature shop of handbags, shoes and small leather goods in all stores. Fashion jewelry, virtually neglected before, said Gruen, is now almost entirely comprised of exclusive lines. Under signage "Unique at Parisian," regional and local artisans are often contributors. Birmingham’s Brookwood store has a Swarovski crystal shop, with items such as a handheld crystal mask, priced at $395. Three sold at Halloween this year.

Despite product differentiation, Parisian has not abandoned widely distributed lines. Two-thirds of product is still represented by Liz Claiborne, Tommy Hilfiger, Nautica and other well-known brands, but in a more carefully edited presentation.

Karen Kane, a Los Angeles-based better sportswear vendor, has sold Parisian for 15 years, along with other department stores including Federated and Dillard’s. Tiffany Bowe, Kane’s vice president of sales, said business at Parisian has steadily improved this year. For third-quarter 2002, Parisian, which carries Karen Kane in 38 doors, was one of Kane’s largest-volume retailers.

"They’re going back to their roots — eliminating coupons and providing a pleasant experience for the customer," she said. "Buying in less depth makes it easier to shop, and if customers have a better experience, margins automatically improve. We wish more stores would do this." Retail strategist Robin Lewis, president, Robin Lewis Inc., a New York retail consulting firm, said Parisian is heading in the right direction, especially in brand-building, product and service, but may not go far enough."Department stores have been losing market share for 15 years," he said. "They are at a point similar to General Motors, when they had to transform to compete with the smaller, Japanese cars. It took billions of dollars and four years to reinvest and transform. Department stores need radical surgery, beyond cosmetic improvements, for the long term. Somebody has to have the guts to do it, or they will die."

Gruen and Jones admit that breaking the mold in today’s retail climate is a work in progress, one that will take time. However, they agree that reinvention, no matter how gradual, is a do-or-die proposition.

"The retail landscape is littered with stores that did things ‘pretty well.’" said Jones. "Stores can no longer just exist geographically. Today, you have to put a stake in the ground, and try to stand for something."

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