For more than 50 years, Family Dollar Stores Inc. has been a neighborhood destination for low-cost value and convenience. Founded in 1959, when 21-year-old Leon Levine opened the first location in Charlotte, N.C., the store originally sold primarily fabrics and apparel.
Levine spent much of his childhood in his family’s retail store and absorbed many of its merchandising and customer relationship-building lessons. He thought he could create his own retail model offering high quality merchandise for less than $2. Levine developed a general floor plan that allowed customers to find things easily. Stores were uniformly laid out and stocked, and store managers were able to focus on providing good customer service.
It was a successful formula, and while the merchandise long ago expanded far beyond fabrics and apparel to include seasonal holiday decorations, cleaning products, food, toys, pet products and health and beauty — and the store base exploded to more than 6,800 stores and growing, in 44 states — Family Dollar has retained its focus on providing good value at low cost to its customers.
Goodbye, discretionary income
This was never more crucial than in recent years, as the struggling economy took a particularly tough toll on Family Dollar’s low- to middle-income shopper. In fact, basket analysis in 2007 of what was selling and what wasn’t fairly telegraphed the recession to come; this demographic is typically the first to feel the pains (and last to recover from them) when good times turn bad. Customers were more focused on basic needs and had less money for the retailer’s more discretionary items, such as apparel.
To keep pace with its customers’ changing needs, Family Dollar began to increase the number of commodity products it carried. Laws of physics prevailing, this increase required something else to give in the store’s 7000-square-foot-space, and that turned out to be apparel and footwear, which, as the product mix shifted, saw its share of store footprint shrink.
This created a particularly arduous task for the merchandisers, who now had even less room for the bulky rounders and four-ways that to begin with didn’t allow apparel to be displayed in a visually appealing manner. Now, those bulky fixtures were allotted even less room. Packed more closely together, the possibility that a fashion tee perched at the end of a four-way would grab the eye of a shopper headed for dishwashing detergent was even more remote.
Revamping the stores
Fortunately, it was at about this same time, says Tim Matz, vice president, general merchandise manager, as part of its wider business strategy, that Family Dollar was taking a fresh look at its stores — as Levine had done decades earlier — with an eye toward improving the customer experience by creating a more aesthetically pleasing and convenient environment while continuing to refine its product offerings.
The end result was the initiation of a massive store-wide renovation process, currently ongoing. Family Dollar undertook to develop a new store layout that would not add square footage but would make the most of its current footprint, realigning space to make the store easier to navigate while better displaying merchandise, and accommodating for best sellers. For example, noting the popularity of its refrigerated foods section, the retailer added five to 10 coolers per store.
Josh Braverman, the company’s manager of public relations, says the new layout, which to date has been rolled out to a few hundred stores, is “more intuitive, with clean lines of sight,” new checkout lanes and more lifestyle-oriented displays that are designed to generate impulse purchases, particularly in the apparel category.
Driving better sales from smaller quarters
Indeed, as it turned out, the coinciding circumstances of a shrinking space for apparel with a comprehensive remodel turned out to be the perfect storm relative to rejuvenating apparel — both the product itself and its in-store merchandising. To be sure, rounders and four-ways constituted a poor use of space, but the shrunken space now forced the issue; it was mandatory to find a new way to drive the same or better sales in smaller quarters.
The four ways and the rounders had to go. In addition to being cumbersome, they merely held the merchandise without displaying it — much less providing for a lifestyle type of presentation. Fashion sweatpants hung on one rack, the matching sweatshirts on another. Together, it may have been a compelling outfit, but customers couldn’t see the fashion aspect of it, says Braverman.
Family Dollar created a completely new look for the department, with new fixtures that are more vertical, efficient and flexible, and which allow the apparel to be displayed in a more appealing way. New racks put emphasis on front-facing endcaps where outfits can be displayed and accessorized, while overall new store layouts permit the apparel to be visible from the moment a customer walks into the store.
Getting apparel right
The makeover hasn’t been limited just to the presentation. Apparel hit what Matz calls a “tilting point.”
“We felt that we could become very relevant to our customers in this category, but to do so we needed to make some changes, and leverage our technical infrastructure to help find answers,” he says.
One of those changes included an intense focus on the quality and fit of its apparel. Feedback from market research that included customer surveys, customer testing at its visual merchandising facility in Charlotte and other outreach efforts revealed that customers were unhappy with sizing inconsistencies and some quality issues, including stitching.
Meanwhile, in crunching the numbers — the company uses SAS for a wide variety of intelligence gathering and analysis — Family Dollar found that even as discretionary income plummeted, mothers were unwilling to sacrifice when it came to buying apparel for their kids — a trend seen not just at Family Dollar but across the children’s wear marketplace.
It also found that its kids’ brands, including “kidgets,” were becoming exceedingly popular, but also identified some significant discrepancies between sales of boys’ and girls’ clothes in some of its children’s wear for older kids, which it attributed in part to the fact that it employed separate buyers for each. “To capitalize on these and other insights, we streamlined our buying responsibilities with an eye toward how the consumer shops, in an effort to drive productivity improvements and faster decision making. This was done in more than one area,” says Matz.
As part of its restructuring plans, the company also narrowed the number of brands in its portfolio while putting a deeper focus on each, says Matz.
Early results of its apparel reshuffle are quite promising, says Braverman, citing sales figures of apparel and accessories up more than five percent for the first quarter year over year. The company is still deep in the process of rolling out its new layout to stores, which it expects will be complete in the next four years, but already it has its eye on next steps.
The popularity of its kids’ brands make them perfect vehicles for extension opportunities, and Matz says he sees great possibilities for Family Dollar to expand these brands into areas such as bibs, diapers and footwear, while also focusing more attention on growing its men’s and women’s apparel brands.
Matz says much of the company’s ability to further refine and build its offerings will come from the customer intelligence that it continues to analyze and leverage across its enterprise. The company is using its BI solution to dig deeper, to create store clusters, for example, that reflect customer buying patterns (for instance, some stores may sell more fashion apparel, while others are heavy on socks), or that reflect particular apparel attributes and their relationship to certain stores or customers.
Family Dollar is working to stay connected with its customers, too. In 2010 it began featuring in-store signage that directs shoppers to sign up for the company’s family savings e-mail program by texting a number via their mobile phones. It is also “just sticking its toe into” digital marketing, with expectations to grow its capabilities there this year as well, says Braverman.
Last month, Family Dollar hired Paul White, former president, CEO, and director of Goody’s, to the new position of senior vice president of apparel, home and seasonal — just one more indication of its goals to grow its offerings of discretionary merchandise with dynamic assortments that complement its consumables and to create a dynamic and fun shopping customer experience.
“If you haven’t seen our apparel assortment recently,” says Braverman, “it might be time to take a second look.”
Jordan K. Speer is editor in chief of Apparel. She can be reached at firstname.lastname@example.org.
systems at a glance
• Merchandising and Assortment Planning: SAS
• Merchandising: Oracle RMS
• PLM: Tradestone