Specialty Stores: The Right Mix Is the Key

With so many choices and so little time, jaded shoppers are looking for more than the right price.

March 14, 2002

Specialty stores, which offer harried consumers a tightly focused product line and an enticing shopping atmosphere, will continue to lure customers away from department stores and drugstores. After a decade of frenzied consumption that peaked in 2000, shoppers increasingly will turn to stores that will save them time with carefully chosen and displayed merchandise.

Unlike mass merchandisers Wal-Mart and Target, whose major appeal is low prices, specialty stores will draw customers by offering them amenities such as trendy cappuccino bars and child play centers, which can make shopping trips fun and relaxing, says Candace Corlett, a principal with WSL Strategic Retail, a market research firm.

Specialty retailers big and small will benefit from consumers' desire to simplify their shopping habits. Although customers still visit a wide variety of stores, they are shopping less frequently—patronizing only about two stores per week today, compared with about three stores per week in 2000, according to an annual WSL Strategic Retail survey. Meanwhile, the proportion of consumers who say they shop in specialty stores has increased steadily from 2000 to the present, with visits to specialty clothing stores rising almost 20% since 2000 and visits to nonclothing specialty stores climbing about 26%.

Specialty stores such as Illinois-based Ulta are making especially sharp inroads in beauty care sales, a category traditionally dominated by drugstores, mass merchandisers and department stores. Ulta operates nearly 100 stores in 14 states, offering a large selection of beauty and hair care products alongside salons that pamper customers with beauty care services. The fast-growing chain plans to open new stores this year in Southern California, the Lexington, Ky., area and near Pittsburgh. Industry observers credit the convenience of the chain's in-store salons, combined with its reasonable prices and no-pressure, "help yourself" atmosphere for drawing shoppers from department stores.

Ulta and other beauty care retailers also are benefiting from a major shift in the demographic profile of their typical customers as more women age 35 to 54 begin to join the young women (age 18 to 34) who long made up the prime customer base. Store owners are finally realizing the value of targeting their marketing pitches to this 41-million-strong population group. A similar demographic shift will benefit jewelry retailers in the decade ahead when baby boomers swell the ranks of the 45-to-64 population segment, which historically has purchased more jewelry than any other age group.

To thrive in a retail market where consumers face an ever-widening array of stores that offer similar goods at similar prices, specialty store chains will have to resist the temptation to expand their offerings, which could confuse their customers and dilute their brands. Better to grow more slowly and keep an eye firmly on your core market, advises Marshal Cohen, co-president of NPDFashionworld, a leading marketing information provider for the apparel industry.

A case in point: Chico’s FAS Inc., a clothing and accessories chain primarily targeting middle-aged women, which has carved out a strong market niche with 313 stores in 40 states. It provides comfortable, reasonably priced yet fashionable clothes, all bearing its own brand label. Chico's stores that have been open more than a year posted a 17% rise in sales in the chain's 2001 fiscal year. Meanwhile, The Gap's Old Navy stores suffered a 16% plunge in sales in fiscal year 2001. Old Navy, which had carved out a market base a few years back by targeting teenagers, reversed course sharply after expanding its product line to appeal to adults, too. Its teen customers deserted in droves because they didn’t think it was cool to shop in the same store as their parents, Cohen notes.

In addition to finely honing their product lines, successful specialty stores are crafting imaginative displays and offering extra amenities to attract busy shoppers and keep them coming back. David Enloe, senior consultant at WSL Strategic Retail, cites jewelry sales as a category in which even specialty stores turn off potential customers with cold, unwelcoming atmospheres and ho-hum product displays. "Gold and diamonds are highly emotional products—people connect with them and love them," Enloe says.

As an example of a jeweler that's doing it right, Enloe points to Jared – The Galleria of Jewelry, a division of Akron, Ohio-based Sterling Jewelers Inc. Jared is a jewelry superstore—freestanding rather than located in a mall. Besides a huge selection of jewelry ranging from moderately priced to high-end, it offers customers lounges with free cappuccino and pastries, a children’s play area with toys and video games and an on-site design center where jewelers help customers design custom mounts for diamonds and other precious stones. The store stations highly trained sales associates in each department, unlike many mass merchandisers where customers are pretty much left on their own.