Belk’s Reinvention

John R. Belk, President and COO, Belk, Inc.

Regional retailers are typically defined by geography, but Charlotte, N.C.-based Belk is a bit different than most. Distinguished by its signature Southern hospitality, the nation’s largest privately held department store chain has a dominant presence throughout the South and a footprint as far west as Oklahoma and north through Maryland. But its reach extends even farther, as Canadians and Californians alike shop its e-commerce site. 

With 301 stores in 16 states, Belk recently completed its 10th consecutive quarter of comp-store sales growth and appears on target to top $4 billion in revenues this fiscal year. In 2010, the company launched a transformation to brand itself as a fashion-forward leader of modern style and an ambassador of the modern Southern lifestyle.

John R. Belk, president and COO, talked with Chain Store Age contributing editor Connie Gentry about the company reinvention and its investments in the future.

Belk recently announced a $600 million investment over a five-year period. What are the key components?

It began with our “Modern. Southern. Style.” campaign, which launched in October 2010. Within months we changed all the Belk logos to present a consistent image to our customers. And then we began investing in our stores to make them more relevant to costumers.

With this new brand, I always get the question: “Does that mean you’ll never expand out of the South?” The answer is no. Our intention is to be the best at satisfying the Southern lifestyle, wherever our customer happens to be. The Southern lifestyle is not locked into a geographic place; it’s about being friendly, colorful and energetic.

For now, we are focused primarily on our existing stores rather than developing new stores. We are investing around $250 million over the next three years to update the stores so they are more modern and fashion-forward. We are also repositioning some stores in existing markets, and expanding and remodeling stores when there is an opportunity to create a better merchandise flow and update departments to be more consistent with the brand. Every year, we update fixture programs to better present merchandise. This year we’ve put new fixtures in the kids’ area and added fixtures to our home store that better organizes “smart” home products and luggage. 

With rebranding, have you seen a shift in the demographic profile of shoppers in your stores?

Yes. The customer base in our markets is growing more diverse, and our shoppers tend to be younger with more fashion-forward tastes. We follow our credit card data (almost 50% of purchases are made with Belk’s private-label credit card), and we see that the average age of our shopper has been decreasing by about a year each year. We also conduct a customer survey every two years. The results we just got back showed there is significant growth in our customer base of people who prefer fashion that we classify as modern, as opposed to classic or traditional. 

Are there shifts in sales?

We have begun to see growth in our home store, and we’ve had a lot of success in kitchen electronics and with modern soft-home assortments that are relevant to our customers’ lifestyles. Also, we are seeing a resurgence of status brands, so we are allocating more space to those categories.

Are online sales growing as well?

Absolutely. In each of the last two years, online sales have grown by about 100%, and we think dramatic growth will continue going forward. To support it, we’re investing heavily in e-commerce, building better functionality, adding brands to the website and enhancing the fulfillment capability. 

Our universe has grown beyond our geographic footprint. In fact, 22% of our e-commerce sales come from outside our 16-state footprint. Because of this, part of our branding campaign has embraced things that are national in scope. We sponsor the Belk Bowl, a college football bowl in Charlotte. We’ve begun to embrace more national advertising.

Do you track zip codes of customers to determine where to open stores?

We do, and we’ve begun a relationship with a third party that has a sophisticated model for identifying markets with the type of customer base we are looking for and that also analyzes the competitive situation in those markets. They’ve identified several markets across the U.S. where we could successfully open a store. Obviously we want to grow first in contiguous markets and through infill opportunities, but we’re certainly open to considering new markets. Within our 16-state footprint, most of our core business comes from seven or eight states. So we’ve got a lot of room to grow in states like Texas, Oklahoma, Louisiana, Maryland and Kentucky.

Are you looking at acquisitions?

Not now, but there could be some in our future. Again, we are really focused on growing and strengthening our existing store base.

Each Belk store is merchandised for its locale. How do you accomplish this?

Historically we had a buyer in every store, but that’s changed. Now we are investing in IT systems and tools that will give our merchants and planners better information about what is happening at the local level. We also have done a lot of process and strategy work with Kurt Salmon, and the genesis of that is a consistent process that the merchant and planning teams go through each season. Before, our merchants worked separate from our planners; now they sit together and operate as a team. We also added 41 positions, primarily in the planning world, that bring more science into the process of understanding what happens on a local level. We receive ongoing feedback from stores that tell us how we can grow the business.

Are there other strategic initiatives under way in store operations?

We have a strategic, multi-year program under the heading of Service Excellence that Deloitte has been helping us with. It started with a reorganization of all the task work that happened within a store. We weren’t doing the best job of getting merchandise out to the floor in a timely manner, so we’ve put best practices in place, and we’re doing a better job organizing merchandise for our customer.

Also, we changed the organizational structure within the stores, separated the selling teams from the support teams, and changed the compensation plan in the stores to make sure we have appropriate individual incentives in place. We added team incentives to make sure there is balance. Now we are working on the heart of the program, which is a five-step model that focuses on the behaviors and interactions the associate has with the customer. It encompasses everything from getting ready for the customer to closing the sale and then doing recovery work within the department. We expect to complete this rollout by the beginning of November.

Next year our major effort will be behind scheduling appropriately and automating task management. All of these key initiatives will continue to propel our growth.

Why does Belk maintain the unique position of being privately held but publicly reported?

People always wonder why a company would want to deal with the Securities and Exchange Commission but not have access to public equity markets. We believe this is a great place to be because it allows us to focus on the long term and invest for the long term even when we don’t necessarily get a quarterly payback. It also puts pressure on us to generate funds from operations so that we can invest significantly to change the company. Public reporting adds a lot of transparency and puts all the controls in place that any public company would follow. That’s the true DNA of our company: We want to run it as professionally as a publicly held company but invest with the long-term vision of a private, family-based business.

What is the Belk vision for the next five years?

We will continue to meet our brand message and be the retailer of choice for the Southern lifestyle, and to expand strategies around localization and personalization. We are focused on building our omni-channel presence, and we are investing significantly in technology to recognize our customer wherever she chooses to shop — by smartphone, at home, in-store. 

There are plans to change our POS equipment, increase mobile applications in stores, build the capability to buy online and pick up in store, put WiFi capability in the stores, and maintain a common customer database.

In our vision, the customer is being elevated. The Internet has driven information to the customer, and we want to better satisfy what she is looking for. Developing long-range plans is exciting, scary and energizing. Change presents uncertainty, but it also presents opportunity to do an even better job of fulfilling our mission and vision.

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