Four companies, four models for retail success
If you believe the hype, you’re probably convinced no one goes to stores anymore.
Toys R Us has filed for bankruptcy protection. Macy’s continues to shutter stores, and Sears is trying to figure out how to juggle its debts.
But while many of retail’s most iconic companies struggle, others are thriving — from T.J. Maxx, which lures fashionistas with the thrill of discovering a designer item with a discounted price, to Ulta, where customers can get their brows done, a new haircut and a basket full of cosmetics, all under one roof.
At a time when more Americans are shopping online, the most successful retailers are offering experiences and conveniences that appeal to customers whether they are browsing their websites or making a trip to an actual store.
“They are aligned with what consumers want and are executing well,” says Neil Saunders, managing director of Global Data Retail.
Some out front in the retail race:
TJX
The parent company of Marshalls, HomeGoods and T.J. Maxx is a favorite with Millennials and other shoppers who enjoy sifting through their racks for low-cost, high-end brands.
“Merchandise constantly changes, and people love the treasure-hunt nature of the shops,” Saunders says. “They visit regularly as they don’t know what they will find.”
All three TJX brands are opening new locations, and the company launched Homesense, a new home goods chain, in the U.S. in August.
“They are growing square footage anywhere from 4% to 5% per year,” says Brian Yarbrough, an analyst at Edward Jones. “There are not a lot of retailers left growing square footage.”
Ulta Beauty
The beauty chain opened 100 new stores last year, and that’s just the start of its plan to branch out in new, smaller markets and cities along with its typical suburban locations.
“We can continue rolling out roughly 100 stores per year for the next few years,’’ says Dave Kimbell, Ulta Beauty’s chief merchandising and marketing officer, adding that the company predicts it will ultimately have a total of 1,400 to 1,700 stores. Last year, beauty was the fastest growing retail category according to GlobalData Retail.
Ulta has benefited from the same passion for beauty products that is also bolstering the bottom line of its rival Sephora. But Ulta stands out for its mix of premium as well as lower-cost cosmetic brands and salon services that draw customers away from their laptops and into an actual store.
“They offer prestige and mass products,” Yarbrough says. “You can also get your hair done. You can get your brows done. So it’s kind of all things in one.’’
The company, which will have
1,074 retail stores by the end of the current fiscal year, has a popular loyalty program: It’s more than
26 million members are responsible for more than 90% of Ulta’s sales.
IKEA
Like many retailers, the furniture store company is trying to make shopping more convenient, starting last year to offer customers the option to buy products online and then
pick them up at 31 of its 47 U.S. stores.
With customers clamoring for home delivery and low-cost shipping in the wake of Amazon’s rise, IKEA debuted lower shipping and delivery prices in the Northeast on Jan. 10 and says it will eventually offer the same options across the country.
IKEA also opened four new locations in 2017, along with a center to help fulfill online orders. It’s planning to open at least three more storefronts this year and in 2019 and is currently building two more customer fulfillment facilities.
“In the U.S., we are committed to expanding our ... shopping experience with new retail locations, enhanced technology and greater accessibility for customers,” Lars Petersson, president of IKEA U.S., said in an emailed statement.
Dollar Tree
The dollar store sector is experiencing brisk sales growth as shoppers flock to the discount chains for their convenience and low prices.
Dollar Tree, where gift bags, paper towels and other items literally cost a buck, continues to dramatically expand its footprint in the wake of buying competitor Family Dollar for $8.5 billion in 2014. By early February, it expects to have opened roughly 620 new locations in the previous 12 months, and “we will certainly open hundreds of new Dollar Tree and hundreds of new Family Dollar stores” in the next year, says Randy Guiler, Dollar Tree’s vice-president, investor relations.
In its most recent earnings report, the retailer said earnings rose 40.3% to
$1.01 per diluted share as compared to
72 cents during the same three-month period the previous year.
The ability to quickly get what you need while saving money is a key draw, Yarbrough says.
“That’s what drives that customer,” he says. “To get the same thing at a Walmart, it’s going to probably take 20 minutes to park, walk, go in, get it, check out ... whereas at a Dollar Tree you can be in and out in five minutes.”