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MASS MERCHANDISERS' CHANGING FOCUS ON STORE RENOVATION RATHER THAN EXPANSION

This article was originally published in The Tan Sheet

Executive Summary

MASS MERCHANDISERS' CHANGING FOCUS ON STORE RENOVATION RATHER THAN EXPANSION "is probably more important than any single development in retail," Ike Lagnado, a principal of New York-based consulting firm Tactical Retail Solutions, suggested at a May 25 session of the H&BA '93 Global Expo in New York City. During a session entitled "The Shifting Focus of Retailing," Lagnado observed that "we see capital allocations going two-to-one in favor of renovation as opposed to new store construction." Calling store renovation a "blueprint for success," Kmart buyer Dan Lafferty said that the mass merchandiser has invested $ 3 bil. "to update, expand and modernize every one of our 2,400 Kmart stores in the U.S. and Canada." Over half of Kmart stores in the U.S. have already been renovated, Lafferty noted. In addition to advocating store renovation, Lafferty used "Kmart as an example to demonstrate the changes which we believe retailers must make to ensure long-term competitive success." For example, Lafferty said that Kmart has "invested in the latest technologies and we're applying them to all aspects of our business." Kmart's distribution system, Lafferty maintained, is the "most integrated and highly sophisticated information distribution center system of any retail organization in the world." The system enables "daily delivery from our distribution centers with a 48-hour turnaround time, and in some stores, [a] 24-hour" turnaround. Lafferty noted that "customer demand" inspired the system, which allows "any item of merchandise [to be] ordered at store level at any time of the day or night on any day of the week." Another goal for retailers based on the Kmart strategy should be the creation of "stronger partnerships with our three major constituents -- our customers, our suppliers and the communities in which we serve," Lafferty said. Lafferty explained that Kmart's approach to retailing is necessary for three reasons: (1) competition will "become increasingly fierce with fewer but better well-financed competitors"; (2) consumers are "time-pressured and financially squeezed" and consequently they will "want . . . high quality goods and services" but will "have less money with which to purchase those goods"; and (3) "demographics and [the] economy" will "make consumers more home-centered, more family-oriented and less tolerant of shoddy products, sloppy service and boring stores."

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