Byline: David Moin

NEW YORK — Federated Department Stores, long dominant in coastal metropolitan malls, will this week unveil a hope for the future — and it’s in a strip center in Helena, Mont.
That’s where Federated on Thursday will open a new format of The Bon Marche store, which will be smaller with only one floor, a central checkout, shopping carts and a streamlined assortment that exudes brands but excludes furniture. The format is one of the company’s responses to the market-share declines that traditional department stores have experienced.
It’s a move that aims to draw on the successes of Kohl’s. The big difference is that the new Bon Marche will offer a broader assortment of brands, in the moderate to better range, than Kohl’s, which is more moderate.
The Helena prototype could set the path for expansion by other Federated divisions — including Macy’s, Lazarus, Rich’s and Burdines — into smaller communities.
“Our opportunity to grow in traditional malls is very limited and there aren’t a lot of malls being built in the Northwest,” said Dan Edelman, chairman and chief executive officer of Seattle-based Bon Marche. “In a lot of mid-sized cities that Bon Marche doesn’t serve, it doesn’t pay to build a typical Bon Marche.”
For greater Helena, which has a population of 63,742, “we’ve redesigned from the bottom up the whole way we build a store, in sort of a freestanding environment. It costs significantly less — about a third less on a per-square-foot basis,” Edelman said. The savings came mostly in the actual construction, given the reduced size of the store, at about 57,000 square feet of selling and 8,000 nonselling. The company also saved by utilizing common fixturing across categories. Bon Marche stores can range from 60,000 to 250,000 square feet, but these are all in the traditional department store format.
Reportedly, Federated is seeking around $8 million to $10 million in first-year sales in Helena.
“There are a lot of details giving character to the store,” Edelman said. “You know you are in a better upscale department store. There is a lot of opportunity around the country for this format. We are in a mature industry that needs to be constantly reinvented.”
Federated and other traditional department-store operators have sometimes been labeled “industry dinosaurs” because they are losing market share to more efficient formats like Kohl’s, Wal-Mart and Target. Department stores, while offering powerful brand and private label assortments, also have come under fire for not providing sufficient service and being difficult to shop.
However, in Helena, Federated’s presence “is not typical,” Edelman explained. “It’s in a strip center, and because of that, we have one entrance in the front and centralized all cash registers in the front. That’s very different for us.”
Famous Footwear and Target are the other main stores in the center; while in the area, the primary competitors include Dillard’s, J.C. Penney Co., Wal-Mart and Sears, Roebuck & Co. Kohl’s has yet to penetrate the Northwest.
Edelman said the company will track the Helena unit closely and give it six months before reaching a verdict. “We’ll get a read on what the customer likes and doesn’t like pretty quickly,” he said.
According to Edelman, there are plenty of midsize communities around the country not being served by a Federated store, and Bon Marche alone already has identified a half dozen markets in the Northwest that fit the same demographics and competitive landscape as Helena. “This was my vision,” Edelman said. “I was challenged how to grow Bon Marche.”
Asked if Federated was cloning Kohl’s, Edelman replied: “There was no thought process on my part that really had anything to do with Kohl’s.” He added that he started planning the new format four years ago and that the first time he visited a Kohl’s was just three months ago.
“Clearly, there are similarities, but really, our objective is to service communities in the Northwest in a different format.”
Aside from furniture, all other categories are represented in the store, though the assortment is more edited through the planning organization. Better merchandise includes Liz Claiborne, Polo men’s, Polo jeans for women, Nautica, Ralph Lauren in home, and Federated’s private labels I.N.C., Charter Club, Style & Co. Cosmetics feature Estee Lauder, Lancome and Clinique.
There is an emphasis on juniors and a higher penetration of soft home goods, compared to other Federated divisions.
There’s a main aisle down the center of the store and another main, oval-shaped aisle that loops around the store like a racetrack, similar to a Kohl’s layout.
“On a sales-per-square-foot basis, this one will be more productive,” compared to most other stores in The Bon Marche chain, which currently operates 44 stores in Idaho, Montana, Oregon, Washington and Wyoming, Edelman said. “I think customer conversions will be higher because of the simple and efficient environment we have created. The central checkout and shopping carts will make it easier for more multiple purchases.”
Also, all apparel is displayed with rings and strips that make the sizes more visible. There are scanning units to help customers check prices and a communication system with customer call boxes to associates.
In another first for Federated, no staff members are on commission at the store. Everyone is “cross-trained” to do different jobs, Edelman said, whether it’s providing service to customers, working the register, stocking or processing merchandise. Incentives are based on team performance. The store is staffed up for the holiday with 75 employees, but will operate most of the year with 65.
If the experiment works, it could be a big part of Federated’s future. It’s the latest step in a larger Federated corporate strategy toward operating smaller, more manageable stores that was inaugurated by Macy’s East in October 2000. But that was a 100,000-square-foot unit in West Palm Beach, Fla., which has a huge population, and is regarded as a “fill-in” strategy for markets already serviced by full-sized, full-line stores. Federated anticipates volume in the $15 million to $18 million range for West Palm Beach.
Federated’s smaller-store strategy also involves opening furniture stores. Bloomingdale’s is planning home stores in Chicago and Las Vegas and has two home stores operating, in California and Chestnut Hill, Mass. And in another new growth maneuver, Federated recently opened the first freestanding INC shop in Tokyo.
Part from the scaled-down prototypes, Federated unveiled its “store of the future”on Oct. 11, a 240,000-square-foot Lazarus near Columbus, Ohio, that brings together under one roof merchandise concepts that have been successfully tested in a number of Federated units. The store includes new technologies and services such as a lounge, an area to leave kids so parents can shop, a mammography center, price scanners for customers and closed-circuit plasma screens.

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