NEW YORK — Jack Welch, the hard-driving former chairman and chief executive officer of General Electric, had a saying: “If you don’t have a competitive advantage, don’t compete.” Gary Williams would tend to agree.

This story first appeared in the July 28, 2008 issue of WWD. Subscribe Today.

Williams, the founder of wRatings, an independent research firm that annually ranks the most competitive retail and consumer goods companies, believes a firm’s success rests on its ability to earn a consistent profit and protect it — that’s the competitive advantage.

The 2008 Most Competitive Retail and Consumer Goods Study, sponsored by software provider SAP AG, lists 20 companies in each category. On the retail side, Publix Super Markets Inc. captured the top slot for the second year in a row. Williams suggests the fact that Publix is employee-managed has something to do with the food retailer’s success. “If you’re an employee and you own stock, you’re going to do a better job,” he said, adding this should be incorporated into best practices for many firms. “Why don’t other companies look at giving employees stock? It shows up in their customer service rankings.”

Coach Inc. holds the second spot on the list this year. “Coach has had great economic profit for years,” Williams said. “It keeps getting better. Coach is enormously consumer-oriented and has a huge database of what consumers want and tracks [products] from all over the world. Coach is also very good at introducing products that are attuned to the next generation of things.”

Commenting on the phenomenon that very young consumers are buying Coach, Williams suggested the handbag and accessories retailer take a page from Victoria’s Secret, which created the Pink brand to appeal to younger customers while protecting the sexy image of its core brand.

Evidence of the lackluster economy could be found in the presence of chains such as Family Dollar Stores Inc., which weighs in at number three. Interestingly, everyday-low-priced Wal-Mart Stores Inc. is absent from the 2008 list. “Wal-Mart is doing well,” Williams said, “but Wal-Mart is not a choice that consumers enjoy making. They don’t say, ‘Oh great, I can go to Wal-Mart now.’ Will Wal-Mart do well in 2008? Probably, because they’ve got everyday low prices. If there are other choices, like Family Dollar, consumers will go there. Family Dollar is sort of a Wal-Mart alternative.”

Other apparel retailers on the list are Gap Inc., Ross Stores Inc., Neiman Marcus Inc., American Eagle Outfitters Inc., J. Crew and Nordstrom Inc., (numbers seven, 11, 12, 13, 14 and 16, respectively).

Williams said Gap appears on the list year after year, probably due to high brand recognition. “We keep seeing Gap and they should be doing much better than they’re doing financially,” he said. “They have started to make some headway on the economic side. They’ve turned a corner at Gap. We believe that based on the ratings, they’ll have steady performance for the rest of this year.”

On the consumer goods ranking, Williams notes more cosmetics companies than in previous years. “Estée Lauder moved from number 34 to number nine,” he said.

While there’s little pricing power in apparel, cosmetics is one of the few categories that has it. “It’s a form of a small indulgence,” Williams said. “Revlon [number 16, up from 38 in 2007] typically doesn’t do well financially. Revlon’s really started to come around on the consumer side. They’re in the right category in 2008.”

Another beauty brand, Avon, rose to number 12 this year from 18 in 2007. “Cosmetics every year for the last few years has been a top-ranked industry,” Williams said, adding that it’s not surprising considering companies spend so much money on marketing. �