Once troubled by decreasing market share, Mervyn's has turned its fortunes around by focusing on a new, tougher and less-loyal consumer, according to the company's chief executive officer.
Walter T. Rossi told Brigham Young University students that market changes forced the department store's management to rethink its position and strategy."Retail expansion in the last four or five years has outpaced population growth," he said. "The country is definitely over-stored. The most immediate consequence of this condition is that price has become a significant part of the value equation."
Although women are still the most common shoppers, it is more likely that they will be working women with little time to shop.
"Suddenly we're confronted with a pretty demanding customer. I would characterize that customer as downright tough," he said. "Not only does the customer want value, she also wants service."
As a result, major retail chains are undertaking cost-cutting strategies, designed to improve the value of goods and services, making productivity a large issue.
Rossi said some companies have cut costs through acquisitions, consolidations and mergers, which have little effect on value to customers but does reduce costs to store owners.
Another recent change is the emergence of specialty and warehouse stores.
These market changes forced existing companies to reidentify a target market, and address all marketing efforts to that niche.
Today's customer is less loyal than in the past, he said.
Stores have had to concentrate more on service and merchandise quality, because the customer is more likely to go elsewhere if unsatisfied with a store's products or service.
Mervyn's addressed its falling market share in 1986. So the company went through changes that caused short-term losses but were designed to provide long-term success. Results in 1988 appeared to justify the changes, one of which was a renewed emphasis on making the store an upscale discounter.
Other changes included cutting the size of company's national headquarters; providing incentive programs for its employees, a program tested in Utah; and changing the appearance of the stores. Mervyn's also cut down check-out time by upgrading technology within each store, increasing sales staff and boosting inventory.
The company also adopted a new strategy for its television advertisements to be more in line with print ads.
The overall picture, according to Rossi, was that Mervyn's found an environment suitable to its niche market. "The greater part of our budget should be used to communicate our entire merchandising plan and to build to the future.
"You can't say one thing and do another. The customer will not tolerate that. I don't think we would tolerate that."