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Commerce Bank: The Newest Power Retailer

BY Deena Amato-mccoy

Companies such as Best Buy, Circuit City, Food Lion, Hannaford Bros. and H.E. Butt are proving that a consumer-centric strategy can build customer loyalty and increase bottom-line profits. And the industry grows more interested in this concept as more retail companies try their hand at this innovative culture change.

While attending the A.G. Edwards Retailing 2007 conference in Coral Gables, Fla., in January, I came upon one of retail’s newest consumer-centric brands—Commerce Bancorp, Cherry Hill, N.J.

I know what many of you are thinking: Commerce Bank is not a retailer, let alone a consumer-centric one. I had a similar opinion. After listening to a presentation delivered by Vernon Hill, Commerce Bank’s chairman and president, however, I changed my mind.

According to Hill, a powerhouse retailer has many attributes to live up to. This retailer re-defines service delivery, and successfully changes the customer experience. It constantly crushes its competition, and it consistently produces predictable financial results. Interestingly, Commerce Bank embodies all of these attributes.

Yet Hill doesn’t take all of the credit. Rather, Hill openly admitted that he created “a growth company in a no-growth business” by modeling his format around those of successful retailers.

“These companies build loyalty by providing a superior customer experience, not low prices,” he said at the conference. “We followed the same approach. It turns out our core customers are interested in the best experience, not the best rate.”

And Commerce Bank successfully fulfills its consumer-centric strategy by always keeping the needs of its “shopper” top of mind. Targeting the time-starved consumer, Commerce Bank is open seven days a week, and shoppers can bank up until 8 p.m. in some locations.

Each “store” offers self-service technology such as a coin-counting kiosk (free to consumers and non- consumers alike), and online banking. And in keeping with its consumer-centric strategy, “in-store” associates cater to shoppers with children by handing out crayons, coloring books, toy banks and lollipops.

If some readers are still questioning how they can twist this model into their own retail operation, here is a hint: Dig into Hill’s core philosophy and build a brand based on the customer’s needs.

“Creating memorable experiences, tapping emotions and delivering on your business promise is what creates fans and builds legendary brands,” he said.

If you are still not convinced, consider this: Hill opened his first location in 1973. By focusing on this retail-inspired business model, Vernon had 30 “stores” in 1990. Today, the fast-growing business has 440 stores across metropolitan markets, including New York, Philadelphia and Washington D.C., and southeast Florida, and has more than $45 billion in assets. (This unorthodox chain is also on target to have 900 locations by 2011.)

What if more retailers took a lesson from Hill? To me, the worst-case scenario is they would create a brand that delivers merchandise, customer-facing technologies and experiences that create satisfied, loyal customers.

If Commerce Bank’s unprecedented successes are any indication, the worst-case scenario doesn’t seem so bad. Any takers?

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Home Depot Projects Lower Profit in 2007

BY CSA STAFF

Atlanta, The Home Depot Inc. said Wednesday it will pump $2.2 billion into improving its business this year even as it expects lower earnings and slim sales growth. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in comp-store sales in the middle single digit percentages and an earnings per share decline of 4% to 9%.

Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.

CEO Frank Blake told investors at Wednesday’s conference that like last year, “2007 also will be a difficult year.” But he said it will be a year of focus on Home Depot’s priorities and a year with “hopefully less noise.”

The “noise” was apparently a reference to the investor furor over former CEO Bob Nardelli’s hefty compensation in light of the company’s lagging stock price. Nardelli resigned in early January after six years at the helm of the company. He took with him a severance package valued at $210 million.

To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities, including the opening of 115 stores. The investment includes $1.6 billion in capital spending and $600 million in expense.

Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service, and redesign employee compensation and reward plans. It also will invest in new merchandise and review its pricing strategies. Additionally, the chain will spend money on customer loyalty programs, direct-ship programs, credit programs and other specialty sales initiatives.

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Federated Plans Name Change

BY CSA STAFF

New York City, Federated Department Stores on Tuesday said it would ask shareholders to approve changing the company’s corporate name to Macy’s Group Inc. A vote to amend the corporation’s charter to accommodate the new name will be held in conjunction with Federated’s annual meeting on May 18. If approved, the company will be known as Macy’s Group Inc., effective June 1. The move comes on the heels of the company changing most of its store nameplates to Macy’s.

“Macy’s Group is the appropriate name for our company, given that about 90% of our sales involve the Macy’s brand. That said, Bloomingdale’s is—and will remain—a very important part of our company,” said Terry J. Lundgren, Federated’s chief executive. Federated Department Stores also said stronger sales at established stores and lower costs drove a 5% rise in fourth-quarter earnings. For the quarter ended Feb. 3, net income rose to $733 million from $699 million the prior-year period. Sales fell 4% to $9.16 billion from $9.57 billion, as the company shuttered 80 “duplicative” store locations. Comp-store sales rose 6.1% in the quarter.

During the quarter, Federated lowered its selling, general and administrative costs 11% to $2.31 billion.

The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.

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