rue21 in Expansion Mode
rue21 has found its groove. The teen-apparel retailer is on the fast track, with 110 stores on tap for 2011. It will open its 700th store this summer and sees the potential to eventually expand to more than 1,000 locations nationwide.
Focusing on speed to market capabilities, rue21 offers the very latest trends in fashions for teens at value prices. Floor sets are updated regularly. Most of the merchandise, all of which is exclusive to rue21, is priced below $35.00.
But trendy, inexpensive threads are only part of the story. The Warrendale, Pa.-based chain credits its flexible real estate strategy and sourcing model as crucial to its recent success.
rue 21 has many stores in rural markets, in locales where it is often the only game in town for fashion. But it has an across-the-board appeal that works well in other types of communities, even urban settings. It also is not bound by location type — strip centers, outlet centers and malls all figure into its portfolio.
On the sourcing side, the retailer purchases its goods from a network of third-party vendors, utilizing more than 450 domestic-based suppliers and importers (the majority of whom source overseas).
The chain believes its lack of reliance on any one vendor and use of domestic importers enhances its flexibility, minimizes its product risk, and gives it the ability to maneuver around sourcing issues. Also, a small portion of its merchandise is manufactured domestically, which allows it to maximize its speed to market on key fashion items.
But trendy threads for teens are not the chain’s only draw. Five years ago, it introduced a new and larger format, called rue21 etc!, to highlight its expanded selection of accessories. The mix encompasses five categories — footwear, fragrance/beauty, jewelry, intimate apparel/sleepwear, and accessories. The categories are merchandised together in an approximate 1,000-sq.-ft. shop-in-store layout. Stores average around 5,000 sq. ft.
The rue21 etc! layout has been incorporated into new locations and remodels, allowing the retailer to offer an increased proportion of these higher-margin accessories categories, while making its stores even more of a destination for its core demographic. The chain promotes itself as offering customers the ability to create an entire look, from head to toe, a key selling point in rural markets.
To date, more than 70% of the store base has been converted to the etc! layout.
“All the new locations we open will be etc! stores,” said a rue21 spokesperson, who added the company will continue to convert existing locations to the new format, space allowing. Thirty-five stores are scheduled for conversion this year.
Playing up accessories proved an astute move. In 2010, rue21’s first full year as a public company, net sales rose 20.8% to $634.7 million, and net income increased 37.4% to $30.2 million.
“In 2010, accessories were our fastest-growing category of business, and we continue to see significant opportunities across this category going forward,” said president and CEO Bob Fisch in March 2011 on a conference call with analysts.
Fisch added that the five different segments of the etc! accessories business have been “huge” in driving incremental sales. “This is a high-margin business with great potential for us at rue,” he emphasized.
The investment in the converted stores has also paid off. Historically, the conversions have increased store profitability and generate return on investment in excess of 30% over a 12-month period, according to the company.
As to ongoing economic concerns and the raw-material cost increases that have swept through the industry, Fisch believes rue21 is well positioned to withstand the impact of both.
“Our business model gives us the flexibility to maneuver around cost inflation and will give us a competitive advantage when some of our peers may be forced to raise prices,” he told analysts. “Right now, approximately 25% of our business is from the etc! category, which is mainly a non-cotton business.”
Ahead of the Curve
Building and maintaining a mobile retail site can be a challenge — but it’s one that only the most foolhardy retailers would ignore, as consumers increasingly use handheld devices to complement the shopping experience and make purchases.
Indeed, consumers are buying a range of items — from movie tickets to apparel to motorcycle tires — via mobile devices. According to a recent study by mobile advertising firm JiWire, half of mobile owners said they would feel comfortable spending $100 or more on a purchase made on a smartphone.
To keep up with this growing trend, many retailers are turning to third-party solution providers to help them build and maintain dynamic mobile sites. That’s exactly what Motorcycle Superstore did when it noticed an uptick in shoppers accessing its site via mobile devices.
The Medford, Ohio-based online retailer, which sells motorcycle apparel and accessories, realized it wasn’t very mobile-ready — shoppers had difficulty navigating and browsing the site — and it also realized it was missing out on a very real opportunity to bring in more sales.
“We knew mobile was a growing channel and wanted to stay ahead of the curve, so we sought a vendor to help us get ready for the wave,” said Jason Miller, chief technology officer of Motorcycle Superstore.
In October 2010, Motorcycle Superstore turned to SLI Systems, San Jose, Calif., a search and navigation solutions provider that the e-commerce site was already working with to help its Web search capabilities. The retailer implemented SLI Mobile, a full-service solution that helps retailers and other online businesses get their mobile-optimized websites fully operational in a short time frame.
The merchant saw big results soon after implementing the solution. Although Miller expected shoppers to research product information and make better-informed purchasing decisions, he wasn’t anticipating the influx of sales, too.
“We were surprised how popular our mobile site was from both a browsing and purchasing standpoint,” Miller said. “We thought shoppers would mostly be interested in learning about and looking through products, but so much more happened. Our mobile site is on track to bring in over $2 million in sales in 2011.”
About 4% to 6% of Motorcycle Superstore’s overall site traffic now comes from mobile device users, and about 2% to 3% of its daily revenue comes from mobile.
People don’t just dash and leave either; they spend an average of nine minutes on the site.
“To engage mobile shoppers and turn them into repeat customers, you need a well-designed mobile site that doesn’t slow down the searching and shopping process,” Miller said.
The amount of time shoppers stay on Motorcycle Superstore’s mobile commerce site also speaks to the site’s ease of use, he added.
“Overall, it’s been a big success so far,” Miller said, “and we certainly plan to grow and expand our mobile presence as the m-commerce industry grows and expands as well.”
Utility expenses are Shari’s Restaurants’ third biggest operating expense, behind food and labor. In 2008, the 24-hour, family-dining chain began to take a closer look at how to minimize its utility costs.
“We knew we couldn’t control the price of our utilities, but we could control the usage,” said Jodenne Scott, energy efficiency manager, Shari’s Restaurants, Beaverton, Ore., which operates 104 locations, primarily in the Pacific Northwest (all are corporate-owned).
Scott subsequently launched a comprehensive program of water, energy and waste reduction. The initiative, called S.W.E.E.P. (Shari’s Water and Energy Efficiency Program), returned dollars to the chain’s operating budget, reducing energy usage from 2008 to 2010 by 22%. It expects to save an additional 5% this year.
Most recently, Scott has focused on water efficiency. In 2010, she piloted a “smart” water management solution (HydroPoint Data System’s WeatherTRAK). The system, which utilizes irrigation controllers, rain sensors and irrigation system technologies, is designed to eliminate landscape overwatering and the problems it can cause, from soil erosion to foundation damage.
“The WeatherTRAK technology easily integrates with any existing irrigation system to optimize operational efficiencies and landscape health,” said Jeff Welch, VP business development, H20 Designs LLC, Battle Ground, Wash. The water management company brought the technology to Scott’s attention.
The pilot application, at Shari’s Salem, Ore., location, ran from May until October 2010 (the conclusion of Shari’s irrigation period).
“We reduced out outdoor water usage by 75%, which is astounding,” Scott said.
The decreased water usage also translates into reduced energy. Both add up to utility savings, Scott added.
There are other benefits as well. The WeatherTRAK solution has a smart controller that automatically adjusts watering schedules based on landscape needs, moisture levels and local weather conditions.
“We don’t want our restaurant managers micro-managing their site’s water system,” Scott said. “With this system, the manager doesn’t have to worry about a thing when it comes to landscape irrigation. It’s all automatic, and we get the reports at headquarters. The controller is dialed into a weather satellite system. If it’s going to rain, the grounds are not watered.”
Scott is equally pleased with the ROI of WeatherTRAK.
“It’s about a one-year investment, which is great,” she said.
Based on the positive results of the pilot, Shari’s is installing the system at 10 additional sites.
“We are trying it in different climates to see if we realize the same type of savings,” Scott said. “If we do, we will roll it out.”
In 2011, Shari’s is focused on reducing water use by 20% across its entire property portfolio.