A Retailer Not Named Wal-Mart Brings Low Prices to Chicago
Kids love the sneakers and clothes it sells. Parents love knowing that those very shoes (most sold for $10 or less) and clothes are often priced lower than comparable items sold by Wal-Mart.
The retailer that kids and their parents love is Steve & Barry’s and the company is looking to Chicagoland as a market with tremendous growth potential.
Andy Todd, president of Steve & Barry’s, told the Chicago Sun-Times, “We see room for several stores in the city and 30 more in the suburbs… We would like to open one store in the city in the next year and another one after that. We are hoping to be on State Street in the next two years.”
Steve & Barry’s currently operates 11 stores in Illinois, including six in the Chicagoland area. It plans to open two more 60,000 square-foot stores by the end of the year.
The chain’s success has become widespread and yet it still enjoys a cult-like following among its faithful customers.
“Our shoppers are like early Macintosh [computer] users. We’re like the best-kept secret you’ve stumbled across. You are ‘cool’ if you’re in the know,” said Mr. Todd.
The company’s business model relies on cutting costs with what the Sun-Times describes as “an obsessive zeal.” The company foregoes expensive advertising campaigns, instead focusing on creating an exciting and entertaining environment with deals made with music companies and Hollywood allowing the retailer to play video trailers and new music in its stores.
Steve & Barry’s growth plans go well beyond Chicago. In the past year, the chain has doubled its number of stores to 143 in 32 states. It plans to have 568 in operation around the country by 2008.
“Eventually we should have thousands of stores,” said Mr. Todd.
Discussion Questions: What makes Steve & Barry’s successful? What do you see as the challenges facing the company as it tries to go from its current
143 stores to the “thousands of stores” predicted by Andy Todd? Will it be able to hold onto its “best-kept secret” aura as it grows?
Steve and Barry’s have cool stores. They are the “Trader Joe’s” of retail team and athletic apparel.
For now, with malls and strip centers looking for the unusual as well as the merchant that drives up mall and center traffic, Steve and Barry’s will grow.
The fear is that it will stretch itself out too thin with much more retail space and a potential for merchandise shortages and limited in-stock inventory. With upstarts like Five Below and Rugged Wearhouse as well as dd’s discounts, A.J. Wright and Forman Mills, there are plenty of competitors out there who are capitalizing on cheap clothing and shoe imports from China.
I’ve had my eye on Steve & Barry’s for a while and I see few obstacles to its success.
The aggressive deals they strike with hungry-for-footprints mall operators, lack of advertising and no-games pricing in a category in which price-gouging and captive-audience impulse buys were the order of the day…. They are killing one oddly overlooked category — teamwear/athletic wear — that was more than ripe for the killing.
Steve & Barry’s commitment to “low cost culture” should be applauded. They will also get plenty of positive press (and more importantly, sales) out of initiatives like the “Starbury sneaker” retailing for $14.98. It’s a great traffic driver into their stores as well as a great positioning tool.
But back to that “low cost culture” and how to maintain it during the planned rapid expansion…S&B will want to take on enough expense to build a strong infrastructure to support all that growth. They also need a great real estate strategy; high-traffic mall locations may not be as cost-effective as power centers etc. unless they can pick up sites at bargain prices during this period of anchor consolidation.
A relentless obsession with cutting costs sounds familiar? And making the shopping experience fun and entertaining at the same time? And cool? If a group of loyal consumers enjoys the experience and finds the products to be at a good price, Steve and Barry’s may have a group of loyal consumers! Since Wal-Mart appears to be moving slightly away from this approach by targeting higher-end consumers and providing more difference across stores while experiencing higher operating costs, Steve and Barry’s may find a niche for themselves.
You’ve got to love the retail industry. There is always room for a new entrant breathing life and energy into the old and tested formats. Steve and Barry’s has jumped in with deep discounts and great sense of consumer value. It’s much like Sam Walton did forty years ago. This time the target is the underserved urban shopper.
Fast forward forty years. If Steve and Barry’s prospers, they’ll be taking on a designer home line just like Wal-Mart did last week and tuning their product mix for the upscale shopper.
Offer a specific group of contemporary consumers a limited category of items that they desire at the lowest prices around and they will patronize your store. Wal-Mart uses that same methodology but on a gigantic scale with low-low prices while Steve and Barry’s does it with a limited, sharply focused assortment.
I assume the Eyes of Wal-Mart are watching Steve and Barry’s very closely and analyzing its approach carefully to determine if it is an additional expansion format for the retail brutes from Bentonville.
Steve & Barry’s great appeal: a look at a price. As long as they keep the assortment attractive and focused, along with great prices, they’ll be fine. If their assortment gets too wide, with too many categories, they risk losing dominance. It’s always neat to see a successful retail concept that relies on simplicity. Perhaps simplicity and success reinforce each other?
Steve and Barry’s should enjoy this period of giddy business growth while it lasts. They have a great positioning and a well-deserved growing reputation, but the key question for me is: Will it (can it) scale?
That’s not meant as a knock, by any means. As several BrainTruster’s note above, it’s great to see this kind of fresh innovation in retail. (Just when you thought it was all consolidating…)
But cool off-price concepts always come up against the problem of sufficient supply (think Loehman’s and others). It gets harder to find enough quality goods to fill the multi-store pipeline. Once manufacturers start running off cheaper goods to supply those stores, the concept tends to get diluted.
And the wheel keeps turning….