Undergoing a Facelift Inside and Out, Belk Takes its 125th Birthday in Stride

3/12/2013
This week kicks off a 125-day celebration to mark the 125-year anniversary of Belk, founded by William Henry Belk in 1888. The occasion will be celebrated with 125 days of prizes and 125 days of giving — employees will be given work time to volunteer with local schools and charities — not to mention the launch of more than 125 exclusive designs.

This year also falls midway through a major $600 million reinvestment in the business that will touch everything from branding and service excellence, to technology, to store remodels and expansions. Recently, Apparel editor in chief Jordan Speer had the opportunity to sit down at Belk HQ with Tim Belk, chairman and CEO (and grandson of the founder), and Kathryn Bufano, president and chief merchandising officer, to find out more about Belk's major overhaul, exporting the southern state of mind and just how Panthers quarterback Cam Newton fits into the picture.

Apparel: Congratulations on 125 years! They don't seem to be slowing Belk down. Speaking earlier this year at NRF you said that while you "haven't mastered omni-channel, and are still in the trenches," you're working diligently toward that goal, given that you receive three to 10 times more business from your customers that shop all channels.

Belk: Yes, we found that our customers who shop only online spend an average of just $100 annually and that our customers who shop only in-store spend an average of $352 per year, but that our customers that shop both in-store and online spend an average of $1,064 per year! That showed us how much synergy is created between the channels and how important it is to get omni-channel right.

Apparel: You also mentioned your sponsorship of the Belk Bowl last year and how the national exposure on ESPN combined with your social media efforts in support of it, produced an immediate uptick in sales from outside the region. Obviously there is a great opportunity to engage with customers in locations beyond your current physical footprint. Do you have plans to take Belk outside of its comfort zone with stores in other regions of the country?

Belk: We have a growth plan: We aspire to be a $6 billion company; we think we can get there in four to five years; and we think that $6 billion number is achievable from within our 16-state footprint, plus possible expansion into some areas that are contiguous to our current footprint. For example, we're already in Texas, but we have a significant opportunity to grow our business there. New Braunfels, Texas, is a new market for us, and we've also announced a flagship store in Dallas.

There's opportunity for us to fill in in our current physical footprint, and there's also opportunity to grow our digital business, which is the fastest-growing part of our business and which has no limits when it comes to geography. Outside of our physical footprint, we're a pure play. It was interesting to see our online sales from outside our region grow from 9 percent to 19 percent in the past year. Part of that is due to the Belk Bowl and part is due to shifting more dollars to paid search, Google, social media.

Bufano: [According to the recent Census], the USA grew by 23.5 million people, and more than half of that growth — 13 million — took place in the 16-state region where Belk has stores. The South is becoming a huge influence. It's really our time. People are eating Southern food and listening to Southern music. Bright vibrant colors, a hallmark of the South, are becoming a huge fashion trend. Florals in print is a huge fashion trend. We can own that position. We work hard every day to satisfy our customer and show her that she can count on Belk to satisfy her lifestyle.

Two and a half years ago we did research and asked our customers: "How does Belk differentiate itself?" Focus groups, market research, and other findings show that our involvement in the community was a key differentiator — whether in small towns where there's no competition or very competitive markets where there's plenty to choose from. We also found that 'modern' is how women define themselves. "Southern" is a state of mind. "Style" is the unique way that each woman expresses herself. "Modern. Southern. Style." is not just a slogan. Our logo, our values and commitment to the community all registered whether the customer was new to the South or longtime shopper.

Belk: It is interesting to see how much business we're doing outside our footprint. Perhaps we can export the southern state of mind without having to open a store. There are so many opportunities, and reasons, to engage with us from elsewhere. There are college students who come south, while their parents are still at home outside of the South, and looking for a local store from which to send them gifts. There is migration to the South. And it happens in reverse. Somebody moves to another part of the country, but they want to buy a wedding gift from a Belk registry, and they can do that online. We want our customer to think of us first because of our assortments. That's how we are going to define ourselves.

Apparel: Where do you think the most significant growth will occur in the company in the next five years, and what strategies are you putting in place to harness those opportunities?

Bufano: Right now we're placing a big focus on our flagship strategy. These stores are large volume stores with premium brand assortments. We currently have 14 flagship stores, and are opening two new flagship stores next year — one in Dallas' Galleria Mall, where we will be converting an old Saks location from top to bottom, and one in Huntsville, Ala. This is a huge influencer in terms of Belk's strategy in the marketplace. We still strongly believe in the bricks.

Another big piece of our strategy centers around our e-commerce business. We think in the next five years our e-commerce will achieve 10 percent penetration of total business. But beyond the online sales, there's a significant upside in the real synergy we are seeing between stores and online. As we move forward, mobile and tablet will be next to deliver that seamless experience the customer wants, when and where she wants it, and CRM will play a big role in how we harness all of the information about our customers in an actionable way to deliver a more personalized communication with our customer.

Apparel: From a technology perspective, how will you harness all of that data more effectively to provide that improved experience to the customer?

Bufano: With all of these goals in mind, we're re-platforming our e-commerce site, we're investing in mobile technologies and becoming wifi-enabled in terms of store locations and the whole selling model of how we deliver service excellence. We want to deliver that southern touchpoint that we're known for but also enable our customers to engage with us in a digital way. Our customers are using their mobile phones and tablets — and I think one of the advantages of our 125 years as a department store is that we've adapted to 125 years of growth right along with the customer! We started in small towns and expanded to major cities and now we're moving to meet the digitally-enabled customer.

Belk: CRM is a big conversation, and it's part of a larger plan called Project SMART. We're investing $263 million in technology as part of that plan, which we initiated to support all of the growth we saw coming. Previously, our technology was point to point and not scalable. So part of that investment is going into replacing our IT infrastructure, and the other part is for replacing our merchandising and planning systems, which will give new capabilities to our buyers.

We're 18 months into a 27-month engagement. Oracle ERP is part of our new merchandise system and represents the largest chunk. We've also implemented several pieces from SAS, including demand forecasting, merchandise financial planning, size optimization and size pack. These tools work with a proprietary assortment planning tool we developed about three years ago.

We've also implemented DOM [Distributed Order Management] from Manhattan Associates in our DC, and we're about to start the pilot process for the implementation of a workforce management system from Reflexis.

Apparel: You were quoted in a Wall Street Journal article recently as saying that Belk has definitely benefitted from the troubles at J.C. Penney. What is your strategy when it comes to holding on to these shoppers so that, even if J.C. Penney rights its course, they'll not abandon your store?

Belk: The strategy is just building our brand, and the things that shape Belk, such as our assortment. The No. 1 reason a person shops at our store is because they want to buy something from us. Assortment is crucial, as are our service levels — you can think about that as southern hospitality. If we can get a customer to shop with us once, whether they come from Penney or any other retailer, we all work hard to retain them and create loyal customers.

Apparel: What sort of events or new launches should we expect this year to commemorate the 125th anniversary of Belk?

Bufano: We are launching MADE by Cam Newton and Cynthia by Cynthia Rowley, and we're launching more than 125 exclusive designs from current vendors including Ralph Lauren, Michael Kors, Vince Camuto and Jessica Simpson that have been designed exclusively for our 125-year anniversary. We'll also be delivering the merchandise this month from the 15 winners of our 2012 Southern Design Showcase. This year we will hold the second edition of that competition, with winners to be announced in June.

Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].
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