Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 18, 1993 TAG: 9302180099
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
SOURCE: By SUZANNE BILELLO NEWSDAY
DATELINE: LENGTH: Medium
MIDDLE AMERICA, WHERE ARE YOU?
THE TWO TRADITIONAL retail giants are searching for that elusive goal, profitability, and the quest is taking them back to their roots.
Since the days when retailers ran dry-goods stores, Sears, Roebuck and Co. and J.C. Penney Co. have competed to be the general store for middle America.
The two retail giants, with origins in Minnesota and Wyoming, staked a claim nearly a century ago on the pocketbooks of moderate-income consumers, then followed them to towns, cities and suburbs throughout the country.
They were everywhere there was anybody and were the first to give their customers credit on goods that could just about take them from the cradle to the grave. And for most of the 20th century, they were way ahead of everyone else.
"They were the largest retailers in the United States. They appealed to middle- and lower-middle-class consumers and they carried anything you could imagine," said Joel Evans, co-director of the Retail Management Institute at Hofstra University in Hempstead, N.Y.
But in recent years Sears and Penney's have slipped to third and fourth place, respectively, among the nation's largest general merchandisers, behind discount powerhouses Wal-Mart Stores and Kmart.
The slippage occurred partly because Sears and Penney's experienced corporate identity crises just as the retail industry was exploding with growth. Penney's, which had followed Sears' lead and expanded into hard goods such as appliances and consumer electronics, decided after decades to scale back and focus on its core soft-goods areas - clothing, sheets, towels and the like - and give its aging stores a face lift.
The strategy, along with a move toward lower prices in 1991, has proved successful. Penney's is well-positioned to lead in moderately priced merchandise.
About the same time Penney's scaled down and refocused, Sears expanded into financial services and real estate with the acquisition a decade ago of Dean Witter Reynolds and Coldwell Banker. But critics say it tried to be too many things to too many people. Retail sales faltered.
Now Sears, too, is going through a wringer. It is spinning off Dean Witter and selling all of Coldwell Banker and 20 percent of Allstate Insurance. Last month, Sears announced the most dramatic phase of its restructuring, saying it will eliminate 50,000 jobs by closing 113 unprofitable stores and ending publication of the legendary but money-losing "big book" catalog.
Both moves essentially undid a decade of expansion and redirected Sears to its original calling. As a further step in that direction, Sears is remodeling hundreds of stores, more effectively separating its tires and T-shirts and giving it a chance to win back its traditional middle-class customer.
Sears is the only national department store chain with a significant presence in inner cities.
Retail experts say the radical changes at both companies - first Penney's, then Sears - have set the stage for a fierce battle between the two old rivals. The question is: Can both thrive in an intensely competitive market?
Moderate-income shoppers were virtual refugees looking for a home in the upscale 1980s. Now, in the downscale '90s, those shoppers are the hot market. What's more, the search for value has made it socially acceptable for the status-conscious to shop at Sears and Penney's.
But, while Sears and Penney's may be wooing the same customer, their strategies are not identical. An important part of Sears' fashion program involves so-called knockoffs. Dorrit Bern, national merchandise manager for Sears' women's apparel, travels to European fashion enclaves looking for the newest trends.
"We find $300, $400 sweaters. We take those garments, move them to Asia and without taking anything out of them, change the fabric," Bern said. Thus, a $300 wool cable-knit sweater bought in Paris is made in acrylic, priced at $28 and promoted at $17.99.
At Penney's, "we don't do knockoffs," said Barbara Bierman, spokeswoman for women's and children's apparel. Penney's instead has several successful private labels, such as The Hunt Club line for men and women.
Neither Bern nor Bierman thinks the discounters such as Wal-Mart and Kmart are a threat to their moderate apparel niche. "They are not in the fashion business," Bern said.
Bierman won't even acknowledge Sears as a direct competitor. She said the two chains are frequently compared, but "I think our major competitors in women's apparel are regional department stores."