Small But Mighty
June 8, 2016,
By Maureen Azzato
Boscov’s Department Stores operates in a niche that most other retailers long ago abandoned, yet the family-owned chain—which blends old world merchandising and marketing with a neighborhood-store culture—is thriving where others have failed, literally.
It’s not unusual for the retailer to take over shuttered Sears and J.C. Penney stores that it guts and remerchandises to its customers’ needs. Interestingly, 55 percent of Boscov’s 44 stores are co-located in malls with Macy’s and 40 percent with J.C. Penney stores. Clearly it does not shy from the competition.
While the nimble retailer with a heavy home assortment is performing well these days, it has known harder times, and perhaps that is one of the things that makes it so resilient. After becoming highly leveraged in 2006, the company was forced into Chapter 11 bankruptcy protection in August 2008. About a month later the retailer announced it was selling to private equity firm Versa Capital Management Inc. Then, in less than 30 days, retired chairman and CEO Albert Boscov and his brother-in-law Edwin Lakin marched in and reaquired the beleaguered company.
Today, it’s not unusual to see Albert Boscov, 86, doing store checks and visiting with customers. “When Albert comes to the stores he is treated like a rock star. Customers love him,” said Richard Coleman, vice president/divisional merchandise manager.
Community outreach is an ongoing and vital component of the company’s success. “We have more store traffic because we have more personality and connection with customers,” Jim Boscov said.
Slow and Steady Growth
Over the past eight years, Reading, Pa.-based Boscov’s has opened six stores and plans to open another one in Utica, N.Y. in October. It is also scoping two sites in Ohio. All of the growth these days is organic rather than through acquisition, and all are completely self-funded. The goal is to open one or two stores annually. “We don’t need outside money,” Jim Boscov said. “Hedge funds and private equity companies squeeze every dollar out of a business. We have shareholders—our family— to whom we have to show a reasonable return.”
Since 2009 when sales were $865 million with 39 stores, the company has steadily grown that base and expects to hit $1.1 billion in sales this year, according to Jim Boscov, who declined to share profit figures but affirmed the upward trajectory has been consistent and proportionate with sales growth. “I can tell you that 2015 ranked as one of our most profitable years despite a warm winter,” he noted.
The Price is Right
Year-to-date same-store sales are up 6 percent, which the company said it is achieving by staying focused on its strategy of providing excellent customer service and offering a broad assortment that is “honestly priced,” Jim Boscov said. By that, he explained, prices are the same in the physical store as they are online, and the company does not use coupons and “phony mark downs and mark ups that aggravate and insult the customer.” The company’s pricing strategy is to be “low or very low,” he said sheepishly, noting the Crazy Pricing signs and labels throughout the store.
But Boscov’s is careful not to offer aggressive pricing at the expense of its vendors. Fair negotiations are a cornerstone of the business, Jim Boscov said. “We all have to make money for it to work. I learned that from my family.”
But everyday honest pricing doesn’t mean Boscov’s does not engage in fun and creative promotions. It’s one of the retailer’s hallmarks. The four-week Did You Boscov Today promotion around Easter invites customers to visit the store three times per week to get their Boscov calendar validated with a stamp—with no purchase necessary—to earn rewards and discounts. “But our job is to entice them to find something to buy before they leave,” Jim Boscov said. “It’s our chance to make friends and create loyal customers.”
Bringing it Home
At the 180,000-square-foot Meriden store, home categories dominate most of the second floor of the two-story location, which is spacious and open with low-profile merchandisers that provide a near 360-degree view of the floor. Call outs on the structural columns make it easy to locate departments, from textiles, tabletop, furniture and patio to housewares and home décor. All told, home represents approximately 26 percent of total company sales with textiles leading at 8.1 percent of total sales, followed by furniture and bedding (6.9 percent) and housewares (6.6 percent).
Across most home categories, private label is very important, but plays a smaller role in the brand-dominated housewares and tabletop categories. Through its private label, Boscov’s offers consumers more value choices and delivers the retailer a higher margin. In housewares, Boscov’s has two strong private label brands—Healthy Living and Kitchen Works, which drive about 35 percent of category sales. Kitchen electrics, which accounts for 33 percent of housewares sales, is the one segment the retailer has no private label because it is so national-brand centric. Where it can’t necessarily offer private label value, however, Boscov’s delivers wide assortment. For example, it typically carries 10 to 16 coffeemaker brands and styles.
Boscov’s other top housewares segments are cookware, coming in at 16.6 percent of housewares sales, followed by cleaning and floor care (12.6 percent), gadgets and kitchen accessories (9.3 percent) and bakeware (4.8 percent). The top housewares brands at Boscov’s in rank order are Keurig/Green Mountain, Select Home (the umbrella banner of Boscov’s Kitchen Works and Healthy Living private label brands), Hoover, Cuisinart, Farberware and Hamilton Beach.
In the past, Boscov’s textiles department offered no private label, but now represents 50 percent of top-of-bed sales and 35 percent of towels and sheets sales. At store entry points Boscov’s typically leads with top brands as a draw, which in textiles includes Calvin Klein, Waverly, Izod (new to Boscov’s) and Ellen Tracy, which makes a top-of-bed collection exclusively for Boscov’s.
“Buying today is perpetual. We are seeking what’s new all the time and we’re very focused on seasonal items, especially in textiles,” Coleman said.
The textiles department at Boscov’s is more ample than most department stores, and its curtain department is likely bigger than any retail store in the country. It carries 100 kitchen curtain SKUs alone, and has 100-plus display windows in each store using eight-sided merchandisers. All curtains are packaged to sell, number coded and uniquely merchandised in a self-serve room for convenient customer access. Sales support is always on hand to help customers, Coleman noted.
Gary Boyer showcases one of the retailer’s top As Seen on TV products. The category posts the largest sales per square foot.
Sets account for 70 percent of Boscov’s tabletop sales, dominated by Gibson and Sango. The retailer is focusing more on open stock with its merchandising of brands such as Lenox, Fiesta ware and Zrike, to name a few.
“We’ve redone our bridal section with whole-story merchandising to show customers what flatware and glassware might look best with their china purchases to inspire them,” McGrath said. “While this is not new, it is new to our customer.” China at Boscov’s sells on average for $129 for a five-piece set.
Furniture and Bedding
Surprisingly, Boscov’s has a strong furniture, bedding and outdoor patio business, categories that comparable retailers have de-emphasized or reduced dramatically over the years. Sofas, chairs and recliners—especially powerlift recliners—sell well as do dining table sets, which are entirely ready to assemble. “We got out of major appliances and consumer electronics three years ago, which made way for furniture, and it’s paid off,” said Jim Boscov. “RTA is very big for us.”
For patio, Boscov’s trades up a bit to offer more durable outdoor furniture, gazebos, fire pits, grills, décor and waterfall fountains. The grill business is highly competitive and the stores operate on very tight margins “but its necessary to [offer them to] make an outdoor living statement,” he said. “Every time you eliminate a department you give customers a reason to go somewhere else.”
The stores also do an impressive mattress business (merchandising about 25 beds on the floor), utilizing the Boscov’s Dreamweaver pressure mapping system to help customers select mattresses best suited to their body type and favorite sleep positions.
Executive management concedes Boscov’s is not good at everything, but they strive to be true to their brand. “We focus on what we are good at, and do it better and better,” Jim Boscov said. “We have to improve every year. If we do the same things, we’re going to do the same sales, and we can’t afford that.”
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