Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 15, 1990 TAG: 9007130790
SECTION: BUSINESS PAGE: B1 EDITION: METRO
SOURCE: DEBORAH EVANS BUSINESS WRITER
DATELINE: LENGTH: Long
The chain this week is opening stores at Roanoke's Valley View Mall and River Ridge Mall in Lynchburg. Ward is intent on earning a share of the region's consumer spending, but others say the company's entry could not have come at a less opportune time.
Analysts describe the Roanoke Valley as "over-malled," saying there are too few shoppers to fill available shopping space.
But perhaps the retailer's toughest challenge is fighting a growing reluctance of consumers to part with their money. Recent economic surveys show consumer confidence is at its lowest level in 2 1/2 years. A national index monitoring consumers' willingness to spend money dropped by 4.5 percent between May and June.
That could be the single most-critical factor that tests Montgomery Ward's chances of success, said William Lundstrom, a marketing professor at Old Dominion University in Norfolk.
"There is not much you can do to stimulate sales when people are in a down mood," Lundstrom said. "You can hold sales until you're blue in the face and people are not going to buy.
"When you have uncertainty about the economy, people are worried about losing their jobs," he said.
Instead of spending, as they have done freely for nearly a decade, "people are trying to pay down some of their debt" and have started saving more money, he said.
"Consumer savings rates have gone up 6 percent - one of the highest levels in four years," Lundstrom said.
To entice consumers to spend, Roanoke Valley retailers, like others in the country, may end up engaging in "competitive blood lust," said Kenneth Gassman, a retail analyst with Wheat First Securities Inc. in Richmond.
"Across the United States, shopping square footage per person has increased faster than the number of shoppers has increased and Roanoke certainly contributed to that trend," Gassman said.
"Everybody is scrambling for a piece of a market that is not growing as fast as a few years ago - more people are chasing the same dollar, making it more difficult for everyone," he said.
Montgomery Ward managers acknowledge they'll have to fight for customers for the approximately 150,000 square feet of shopping space the company is taking in Roanoke and Lynchburg.
But they are counting on the 118-year-old firm's reputation and its five-year-old "value-driven, speciality-store concept" of retailing to pave its success here, said Malvin Pavik, a Wards executive vice president who manages the chain's district that includes Virginia.
"Nationally, retailing is over-stored and Roanoke is no different," he said. "We believe we can compete in the market with the merchandise and pricing we can offer the customers and they will respond to that."
Montgomery Ward, he said, will succeed where others have not.
Pavik said his optimism is based on the results of a major revamping of Ward's stores and operating philosophy begun in 1985. In an attempt to shed some of its old image as a catalog merchant selling staple but not fashionable household goods, Montgomery Ward reorganized its outlets into a cluster of speciality stores.
Each shop within the store has its own name, intended to readily identify the kind of merchandise sold there.
Despite the contemporary decor and new monikers for its retailing departments, Lundstrom said Montgomery Ward has not been able to shake its dowdy image completely. It's apparel department remains a problem area for the company, he said.
The chain still is "lingering under the image of being a cataloger or a store that caters to working class individuals or the lower-middle class," he said. That's despite Montgomery Ward's having discontinued its catalog operations during the 1985 reorganization.
Also, prior to 1985, Ward's was known as a largely private-label store, but by year-end 1988, nearly half of its sales were in brand name merchandise, according to Montgomery Ward brochures.
Still, some aspects of its merchandising - neon lights, metal hangers and tile floors - are throwbacks to an old way of doing business, according to Lundstrom.
"I don't want to offend anyone, but it is like going to a K mart," he said.
Stores attempting to attract upscale customers now tend to go for incandescent lighting, softer hues and wood fixtures, he said.
However, Montgomery Ward President Bernard Brennan said his company has been successful in attracting "middle-America" families who have median incomes of $25,000 and he plans to continue that in Roanoke and Lynchburg.
JoAnn Francis, manager of Ward's Valley View store, said she intends to make the outlet a "market force," winning customers with superior customer service, name brand merchandise and value prices - phrases that are bywords among the chain's management.
Yet Gassman warned that bargain-hunting consumers ought not expect Ward's entry to set off a long-term price war among Roanoke retailers.
"When you start cutting prices you are cutting into profits and then you're cutting into customer service," he said.
"Competition is always there and we're just another player," said Pavik. "I don't see a major price war," he said.
Brennan said, "The average customer should not have to pay higher prices in department stores if they can find the same merchandise in Montgomery Ward."
The new stores will compete with 85 stores at River Ridge Mall, and 130 merchants at Valley View Mall. Besides Ward's, both centers are anchored by Sears, Roebuck & Co.; Leggett; Thalhimers and J.C. Penney Co. outlets
Other Valley View merchants, however, say they're not concerned about doing business next to Montgomery Ward. Rather, some are counting on the national chain to draw more customers to the mall.
Marie Compton, manager of the Fink's Jewelers store, said she is not familiar with Montgomery Ward's jewelry shop line, Gold `N Gems, but expects the new store should "bring more traffic and all kinds of customers" to the mall.
"Competition always kind of helps you," she said.
Leggett manager Sidney Miller said Montgomery Ward's arrival "will help this mall, no doubt about that." It represents an opportunity to attract more customers from greater distances, he said.
Sears, Roebuck & Co., generally cited as Ward's most direct competitor, is looking forward to some "friendly" competition, said J.M. Sears, its Valley View manager. The 800-plus store Sears chain is headed by Bernard Brennan's brother, Edward.
Sears said the stores offer comparable merchandise at comparable prices and tend to attract similar customers. The major difference is that while Montgomery Ward gave up its catalog business five years ago, the catalog generates significant sales for Sears. J.S. Sears said he could not release details about how well his company's catalog business is doing.
Valley View, which also is adding a new Brendle's Inc. outlet, will be better able to serve its middle-income market because of Montgomery Ward, said marketing director Scott Ashcraft.
Despite their caveats, the analysts conceded that Montgomery Ward's new outlets are not in any immediate danger.
Gassman said Montgomery Ward's decision to put the new stores in high-traffic malls may heighten its chances of success.
"If you're going to do it and can strike the right deal in the right location, you can make it," he said.
Montgomery Ward is not in any danger of going belly up because the chain is not debt-strapped like some others, particularly those involved in leveraged buyouts, Lundstrom said.
"Ward's is going to be around," he said.
by CNB