Boscovs: In a League of Its Own

Boscovs Department Stores is expanding while others are consolidating. Here is the story behind its growth strategy, and the opportunities it presents for apparel brands.

Boscovs Department Stores has not been one to follow the pack in retail. And now its determination to stay the course with its time-tested merchandising strategy is serving as a platform for growth.

The Reading, PA-based retailer, founded in the 1920s by Russian immigrant Solomon Boscov, has grown from 10 stores and $170 million in sales 22 years ago to 40 stores and $1.2 billion in sales today. The company will operate 50 stores by the end of the year. In May, the retailer completed the acquisition of 10 stores from Federated that are expected to open under the Boscovs banner by Thanksgiving.

As an employer, the Boscovs chain, which remains family owned, has grown from 2,000 associates back in the 70s to more than 9,000 associates in six states, including Pennsylvania, New Jersey, Delaware, New York, Virginia and Maryland.

Growth drivers and enablers

Kenneth Lakin, grandson of the founder, became chairman and CEO of Boscovs this past January after the retirement of Boscovs patriarchs Albert Boscov, son of the founder, and Ed Lakin, who is Kenneths father and son-in-law of the founder.

In the past 18 months, Lakin and Boscovs president and chief merchandising officer Burton Krieger have been leading a growth strategy that calls for opening five stores a year. They determined that the companys history of opening one or two stores annually was not good enough to remain competitive in todays retail environment, and that Boscovs needed accelerated growth to leverage greater economies of scale.

With more stores, the firm can optimize and gain greater profitability on its investment in its centralized IT infrastructure, headquarters management and support teams and distribution center. Expansion will help ensure the companys fiscal security in a time of rising health insurance costs, among other core business expenses, says Lakin.

The Boscovs distribution center in Reading also played a key role in the companys decision to pursue growth. After being expanded three times since it opened in the late 70s, the automated DC still is capable of handling twice its current capacity. Boscovs built a second DC about five years ago to handle only big-ticket items, freeing up considerable capacity at the primary DC.

The retailers plan is to open new stores within a 350-mile radius of the Reading DC so that its delivery trucks can reach every Boscovs store daily with replenishment merchandise.

Were all about the merchandise, says Lakin. You have to give the customer a reason to visit you more than anyone else.

The apparel upside

The Boscovs merchandising strategy has been another enabler of its growth. While other department stores and retailers have narrowed their focus and eliminated product lines, departments and services, Boscovs has maintained a diverse product assortment.

Its stores are larger on average than other department stores, with about 185,000 square feet and 35 departments, including a large home dcor section, a patio department, a sporting goods section and an appliances department. From big screen TVs to golf clubs to clothing, consumers can find it at Boscovs.

Boscovs also continues to offer special value-added services to its customers, such as repair service for any products purchased at the company. And the retailer has stayed focused on offering a strong portfolio of national brands, even as its competitors have dramatically cut national brands in favor of more private labels. National brands make up 90 percent of its merchandise mix across all categories.

Krieger says the companys broad merchandise mix helps it make an emotional connection with the consumer that is so important in todays retail world. Boscovs is able to touch its customers lives in many different facets, from their gift shopping needs to their basic home needs, he says.

For the apparel department, this adds up to increased traffic, something Boscovs is planning to capitalize on further as it grows the business. Lakin says the apparel category holds the biggest opportunity for sales growth for Boscovs.

Traditionally known for its casual womens wear, Boscovs is beefing up its ladies career wear selection. In the mens area, the company has a strong foundation in tailored goods, but will be expanding in mens separates, especially in the more fashion-forward, younger styles that are driving mens wear, says Lakin.

Plus-sized fashions and petites have always been an emphasis for Boscovs, and will remain so, despite some competitors moves to eliminate petites. Special sizes are a staple of our business that we believe in very strongly, Lakin says.

Overall, Boscovs expects its soft lines sales to increase to 60 percent of its overall business, up from 57 percent today, while hard lines sales will trend from todays 43 percent to 40 percent.

Branded merchandise accounts for about 85 percent of the womens wear selection, and for about 90 percent in mens wear, 95 percent in childrens wear and 95 percent in athletic apparel.

Brand names will continue to play the dominant role in the retailers apparel departments Brand names are driving the apparel business, says Lakin but the firm also is building on the early success of its relatively small apparel private label program.

The company procures its private label fashions through the Associated Merchandising Corp. (AMC), which provides it with merchandise that is second to none, says Lakin.

The overarching goal at Boscovs is to offer a selection of apparel in brands and private labels that gain and keep the consumers trust with regard to the value of fit, styling and price for the fabrication. We work very hard to build that trust with customers, Lakin says.

Technology to stay sharp

To better understand and meet its customers needs, Boscovs has invested heavily in technology for the past 30 years.

Most recently, the company rolled out a Hyperion solution that has enhanced its insight into merchandising information, says Lakin. A data warehouse system, Hyperion gives the Boscovs merchandising team the ability to track the sale of products by up to 15 user-defined codes. For instance, if a merchant wants to gauge the performance of mens shorts, he or she can look up trends by style (i.e., flat-front vs. pleated), color, brand/vendor, department or other variables.

With Hyperion, the merchants determine which characteristics of a product are most meaningful for them to understand, Lakin says. Then they can quickly and accurately see whats selling and whats not selling, he says.

In the online arena, IBMs WebSphere e-commerce platform has supported annual increases of 20 percent to 30 percent in online sales, which account for $20 million, or 2 percent, of the department stores total revenue. Boscovs expects e-commerce soon to reach 3 percent of sales.

The retailer fulfills online orders directly from stock at its brick-and-mortar stores rather than shipping from inventory at the DC. Online orders are allocated to the store that has inventory on hand to most fully complete the e-tail order, for which the store gets credit.

Boscovs uses solutions from Harte-Hanks for customer database management, along with tools from Siemens and Genesis for CRM. And to ensure it has enough associates on the floor to service customers, Boscovs uses SAPs staff scheduling software, which Lakin says has really helped with customer service.

The results of a recent National Retail Federation and American Express survey would seem to indicate that the investment in customer service is really paying off. Boscovs ranked fifth in the nation for customer service in the survey, which measured the performance of all major U.S. retailers.

Looking to the future, Boscovs is ready and willing to invest in the next generation of technology that will help it take customer service to the next level. The firm is watching innovations in RFID closely, for instance, and Lakin says he wont be surprised if the technology eventually enables consumers to walk out the store door with their purchases without ever having to pay at a register. RFID will alert the retailer to simply bill them later or debit a credit card.

Krieger says such developments will be instrumental in making the shopping experience much easier for a consumer with less and less disposable time. As Lakin and Krieger conclude: Some say the retail business is not rocket science, but it actually is very complex, and it takes a lot of art and science to be successful.

Kathleen DesMarteau is editor in chief of Apparel. She can be reached at 864-627-0276 or [email protected].