After slumbering through past decades, the 1980s were a rude awakening for Utah's department stores.
A host of out-of-state chains moved into the state and aggressively snatched away market share from some snoozing, old-line institutions. The invasion caused some casualties - Auerbachs, Castletons, etc. - while the survivors have had to scrambled to hold their ground and make some bold moves to recapture what was lost."We saw a very competitive marketplace get more competitive," says Scott E. Sandberg, senior vice president of Impact Resources, a Columbus, Ohio, consumer market research company, which regularly surveys Salt Lake and other metropolitan markets.
"When one player moves into the market, they have to steal from someone else. It's the zero sum game, and (the Wasatch Front) has had some good thieves."
While this struggle has shaken up retailers, it has also resulted in better service, selection, quality and prices for Utah consumers. And the situation for shoppers can only improve as store owners continue to fight for position and survive another 10 years.
A glimpse of who is winning this competitive contest is revealed in an Impact Resources survey of the Salt Lake market during the past three years. The survey (see chart) asks 6,000 consumers which stores they prefer and indicates which stores have been hustling to attract business.
The hustlers, Sandberg said, are those that recognize their strengths (see chart on M2) and focus on them to secure that share of the market attracted to those qualities.
A good example of this is Nordstrom, he said, whose reputation for customer service and quality merchandise has become legendary. Sandberg also notes ZCMI, which has adopted a new concept of building smaller stores that cater to a targeted geographical market.
"Retailers need to dominate a segment, not the entire market," Sandberg said. "If you don't know your market position you are sunk."
So, with that in mind, it's not surprising that most department stores in the state spent this final year of the decade fine-tuning their strengths and carving out a secure, profitable niche for the 1990s.
Here is what transpired in the past 10 months for the state's major department store chains and how they see their future:
ZCMI is the granddaddy of Utah retail establishments - and says it is America's first full-line department store. Based on its 120-year presence and numerous locations, ZCMI remains, by a long shot, the most preferred department store among Utahns. But throughout the 1980s it has seen its commanding position gradually slip away to competitors.
Finally in August 1988 ZCMI slammed the brakes on its rapidly vanishing market share by introducing its smaller ZCMI II stores in Foothill Village and Fashion Place Mall. Chief financial officer Keith Saunders said the new stores have made a significant contribution to the company's improved earnings this year.
The company announced last summer plans to open two of the smaller 25,000-square-foot stores in the Phoenix area and one in Provo next year.
That doesn't mean the traditional, large full-line stores are extinct. Remodeling is also taking place at ZCMI's downtown flagship store, and a 40,000-square-foot full-line operation will open next year in St. George.
The company is examining Boise to see whether a full-line or ZCMI II outlet would best serve that city. Another new market ZCMI is exploring is Nevada. "The expansion is to keep the company moving along and make it more profitable. We are moving into market niches that provide for a good return," Saunders said.
Weinstocks, as a full-line department store, competes directly with ZCMI and is considered a competitor with Nordstrom in high-priced ready-to-wear apparel. But perceptions are that Weinstocks trails woefully behind the competition and has contemplated pulling out of the Beehive State.
Not true, says Utah regional manager Wendell Demaray. "Our surveys show just the opposite. We are here because we want to be here. We believe in Utah," he said.
An indication that Weinstocks plans to stay is the appointment of Demaray, who arrived last May after 11 years at corporate headquarters in Sacramento. Another interesting development was hiring away three top managers from Nordstrom. But Demaray insists that wasn't a direct move against Nordstrom.
This past year Weinstocks has made "nice progress" toward its goal of becoming the department store of choice among Utahns, he said. "But we haven't achieved what we deserve. We have the capacity and the people to do better."
Fine-tuning and repositioning to better serve its customer base continues. But Demaray doesn't expect changes in merchandising or presentation, and if the sales momentum of this year continues into 1990 he will be satisfied.
But in addition to making a profit, Demaray said Weinstocks will continue to become more high profile as a "good corporate citizen" by contributing to the arts and other local causes.
Rumors surface every so often that Nordstrom isn't happy with the performance of its Utah stores either. That irks Utah general manager Bob Middlemas. "We're nothing like Washington, D.C., or California, but based on the size of the state (Utah) we are very healthy. If not, we wouldn't be here. We have been known to close a store," he said.
So, with that settled, Middlemas explains that 1989 has been a "turnaround year" for Nordstrom's three Utah stores with internal changes - he arrived a year ago this month - to enable swifter reactions to market changes. The store had an increase in charge account customers.
Middlemas said the company is comfortable with three stores in Utah, and expansion would be unlikely. "Business in Utah is very good right now. There is an upbeat spirit in the community, and we feel it will continue into the Christmas season. We are very bullish about this Christmas season," he said.
ShopKo made a memorable entry into the Utah market last year with seven new stores along with Wasatch Front. Although the chain, which is based in Green Bay, Wisc., doesn't disclose sales figures or future plans on a state-by-state basis, its debut in Utah apparently was profitable - this year ShopKo opened two more stores and announced plans for three others.
ShopKo's discount pricing and wide selection bought it instant popularity last year and put downward pressure on prices throughout the market for toys and other gift items during Christmas.
But ShopKo hopes to somewhat shed its reputation of offering cheap, low-quality merchandise. Last month it introduced its Gitano Shops, offering ladies name-brand fashions. "Our objective is to appeal to fashion conscious women who are on a budget," spokeswoman Jane Kresin said.
According to Sandberg, ShopKo didn't actually steal away customers from other stores. It merely picked up what Fred Meyer and K mart left behind when both those chains up-scaled their stores and merchandise the year before.
Fred Myer retargeted its market in its upscaling effort and continued to fine-tune this year with internal restructuring of management. One aspect that has set Fred Meyer apart from all other department stores is its tending service for shoppers with children. It introduced the service last Christmas, and the positive feedback made it stay, said Terry Richards, regional sales and merchandising supervisor.
"We've had people tell us that (the tending service) is why they shop at Fred Meyer," he said.
Although its stores look much the same as they did 10 years ago, K mart has been changing its inventory to reflect more "lifestyle" products, such as clothing, bedding and sports equipment. A company spokeswoman in Detroit said the marketing move is to appeal to the growing number of families that spend more time at home.
When Fred Meyer refocused its market niche, Sandberg said, it stole away customers from Mervyn's - although the chain still attracts a good share of Utahns.
But Mervyn's, with six stores and a distribution center in Utah, claims 1988 was one of its best years and 1989 is continuing that trend. "Anytime new competition comes in, you can feel some dollars coming out of the pie, but 1989 was not a rebuilding year," said Dave Erickson, manager of the Valley Fair Mall store in West Valley City.
Changes did occur, however. Erickson said four stores completed remodeling this year and the other two are scheduled for next year to brighten and freshen up the interiors.
"We are updating (our stores) to be able to show our merchandise better," he said. "We're setting up our merchandise to show customers our depth of stock in key items."
Complementing the display changes in the store, Mervyn's has also upgraded its printed advertising tabloids from drawings to color photographs to better illustrate merchandise.
Sears hadn't changed much in Utah during the 1980s until last spring when it fired back at discounters by offering "everyday low pricing" across the country.
Corporate spokesman Gordon Jones said restructuring has become a way of life for Sears since it embarked this year on long-term plans to become a competitive retailer. A significant change Utah shoppers will notice next year is selected departments becoming individual stores within the store.
The first prototype of this development - called "power formats" by Sears - is the home appliance and electronics department.
Jones said the idea is to have each department compete with other providers of those same product lines in the marketplace, rather than with other departments in the store.
Sears' four Utah stores will have the new home appliance and electronics "power formats" by mid-1990. Other departments will remain the same, however. Jones noted that some markets simply aren't large enough to justify "power formats" for all departments in a store.
J.C. Penney was unavailable for comment. One change this year for the locally popular retailer was placing a catalog store at South Towne Center in Sandy. Many observers believe - and Penney's hasn't ruled out the possibility - the location will develop into a full-line anchor store serving the southern end of Salt Lake Valley.
(CHART #1)
First choice department stores
SALT LAKE CITY
SURVEY QUESTION: When you thoink of department store shopping, what is your first choice?
RETAILER 1988
Fred Meyer.....8.2 percent
J.C. Penney.....8.2 percent
K mart.....8 percent
Mervyn's.....12.1 percent
Nordstrom.....10.1 percent
Sears.....7.8 percent
ShopKo.....5 percent
Weinstocks.....3.4 percent
ZCMI.....29 percent
Other.....8.2 percent
No preference.....34 percent
SOURCE: Impact Resources
NOTE: See microfilm for 1986 and 1987 figures.
*****
(CHART #2)
Why shoppers prefer department stores
RETAILER PRICE SELECTION LOCATION QUALITY SERVICE
J.C. Penney 47.3% 42.9% 42.9% 35.8% 26.1%
Nordstrom 17.3% 54.9% 54.9% 61.7% 50.9%
Weinstocks 29.3% 44.2% 44.2% 41.7% 30.3%
ZCMI 24.9% 41.4% 41.4% 41.6% 28.3%
Fred Meyer 50.3% 50.5% 50.5% 22.1% 18.8%
K mart 54.4% 38.8% 38.8% 15.5% 15.4%
Sears 36.7% 36.7% 36.7% 36.7% 25.1%
ShopKo 67.1% 47.7% 47.7% 30.1% 25.5%
Among traditional department stores in Salt Lake City, Nordstrom has an advantage over the competition, including Weinstock's, on selection, quality and service. ZCMI's advantage is its multiple locations, while J.C. Penney still is the store of choice because of price.
Among the price-first retailers, ShopKo is preferred by consumers because of price and service, while Fred Meyer has an edge over the competition when it comes to selection and location. Sear's advantage over the competition in this market is quality merchandise.
SOURCE: Impact Resources