Stein Mart Inc.
Address:
1200 Riverplace Boulevard
Jacksonville, Florida 32207
U.S.A.
Telephone: (904) 346-1500
Statistics:
Public Company
Incorporated: 1968
Employees: 7,600
Sales: $616.2 million (1996)
Stock Exchanges: NASDAQ
SICs: 5311 Department Stores
Company Perspectives:
Stein Mart's mission is to "provide customer service that is prompt, friendly, knowledgeable and recognized as being superior in our industry; to provide timely, unique and fashionable selections of quality name-brand merchandise of competitive price and value; to provide a well presented, clean, comfortable shopping environment that is an asset to the community; to provide a pleasant work place for our associates with appreciation and recognition for their efforts in achieving our company's mission."
Company History:
Stein Mart Inc. is an "off-pricer"--a leading retail chain which sells upscale merchandise at 25-60 percent off of department store prices. Founded in 1902 in Greenville, Mississippi, as a general merchandise department store, it later developed into a discount store which purchased cancellations and overproductions from clothing mills. Stein Mart found increased success beginning in 1977, after opening up branches in Memphis and Nashville and has rapidly increased its number of branches since 1984 to a current total of 123 stores, which garnered sales in 1996 of $616 million. Stein Mart stores offer quality merchandise at discounted prices in a department store atmosphere and often serves as an anchor store at shopping malls.
Company Origins
Stein Mart was founded by Sam Stein, a Russian immigrant who opened his first store in Greenville, Mississippi in 1902. Under Stein, the store remained a general merchandise department store, providing basic goods to the residents of Greenville. Upon his death in 1932, Stein's son Jake, took over the store and redirected its focus toward discounted clothing. Jay Stein (Jake's son and head of the company in the 1990s) later recalled that his father Jake "thought that to be a successful merchant, you had to do something special--either have a wider selection, or the prettiest store, or the cheapest price." Jake Stein's specialty would become men's and women's apparel at low prices.
A focus on discounted clothing was certainly timely as the country was at the height of the Great Depression of the 1930s. The original Stein Mart department store withstood the Depression and enjoyed moderate success during the postwar period, when a return to full employment increased the purchasing power of consumers and created a strong demand by consumers for goods.
In fact, the period from 1948 to 1962 has been called the "retail revolution." During this time, retail rapidly expanded due to technological innovations and the growth of the middle class. The resulting marketplace was highly competitive, forcing institutions to innovate or fade away. A key development during this time was the growth of discount merchandising, such as practiced by Stein Mart. The concept had been established in the 1930s with the advent of supermarkets whose inexpensive locations, increased hours of operation, and advertising resulted in low margins; in the late 1940s discounting increased in popularity as consumers' distress over rising prices caused them to seek out bargains. In addition, consumer confidence in the quality of goods had increased thanks to advertising. And while incomes rose in the postwar boom, consumers resisted higher prices caused by inflation.
By purchasing cancellations and overproductions from clothing manufacturers (many of whom were also located in the South), Jake Stein was able to offer quality merchandise to his customers at a price they were able to afford. Stein achieved moderate success with this somewhat revolutionary concept, which rose in popularity throughout the country. However, the company remained a one-store operation in Greenville until Jay Stein took over operations in 1977 and began to pursue a plan of expansion.
Expansion in the 1970s and Onward
While traditional department stores serve as anchors in shopping malls and offer moderate to upscale merchandise at full price, discount clothiers generally offer brand-name merchandise in an informal atmosphere. Following the end of the Korean War, the production of retail goods began to meet or exceed consumer demand, resulting in a buyer's market. While yielding lower margins per item than department stores, discount retailers made up the difference by selling large quantities of merchandise rapidly.
Stein Mart straddled both concepts by offering customers the same ambience as a regular department store with discounted prices. In doing so, it helped to define "off-pricers" as a new category in retail. Stein Mart targeted customers who shopped department stores on a regular basis, inducing them to purchase Stein Mart goods by offering discounts of 25 to 60 percent off of department store prices. By the late 1970s, Stein Mart was the leading retailer of clothing for the family in the Mississippi Delta.
When Stein Mart expanded its original Greenville store during this time, several affluent women from the Greenville area offered to act as sales assistants during the store's liquidation sale of some designer clothing. At that time, Jay Stein noticed the women, "boutique ladies," as they came to be known, were able to provide an extraordinary level of service; they were knowledgeable on these more expensive brands given their own purchasing power and sophisticated taste.
Thus, when Stein Mart expanded into Memphis in 1977, Stein and his wife developed a designer boutique within the store and sought out local shopping mavens to operate it. Stein was quoted in American Demographics as saying "The boutique ladies are our secret weapon." The boutique lady concept would continue as a unique part of Stein Mart's strategy; they would consult with in-store clothing buyers to stock stores and ensure that Stein Mart kept abreast of trends. These women also tipped off friends and acquaintances when key new shipments arrived, ensuring that the merchandise would sell quickly.
Furthermore, when entering a new location, Stein Mart sought references for possible "bou ladies" from its ranks in other areas. The position became a status symbol in some Stein Mart locations, placing interested local women on waiting lists. In addition to the boutique ladies, Stein Mart stores also employed personal shoppers, referred to by the company as "agenda consultants."
Under Jay Stein, Stein Mart pursued a steady expansion program, growing from three stores in 1977 to 40 stores in 1990 and to 123 stores by the end of 1996. The chain first tackled new markets in the Southeast, establishing stores in Alabama, Georgia, Louisiana, and Texas. Later, Stein Marts began cropping up in the Midwest, with stores in Indiana, Ohio, and Missouri. In determining the prime locations for new Stein Mart stores, management targeted cities with populations of 125,000 or more and relied on demographic research regarding income, education, and occupation to help predict whether a community might support a discounter of designer merchandise.
In the 1990s Stein Marts generally served as anchor stores in neighborhood shopping centers. To enhance its image as an upscale clothier, Stein Mart initiated several marketing concepts, including store ambience, quality merchandise, and its "boutique ladies." A typical Stein Mart store averaged approximately 38,000 square feet in size. Plush carpeting, marble flooring, soft lighting and handsome furnishings all contributed to its department store ambience. Stein Mart also limited in-store "sale" signage and used discreet price tags to reduce any trace of the "discount store" appearance. Similarly, while Stein Mart kept costs in check through a centralized checkout system, it did not provide shopping carts. Another marketing tactic of Stein Mart was that their stores displayed merchandise in "lifestyle groupings" such as activewear, career apparel, etc. rather than the traditional size/age departments, believing this encouraged customers to make multiple purchases.
The Stein Mart store of the 1990s carried brand name merchandise including apparel, accessories, hosiery, costume jewelry, glassware, dishes, and cookware. While stores did carry private label merchandise to ensure selection, inventory was focused on designer apparel at discounted prices. Beginning in 1995, Stein Mart leased its shoe and fragrance departments to independent operators in order to provide customers with full-service without taking on additional stock.
The company relied on the efficient handling of inventory through drop shipments to each store rather than incurring the expenses of maintaining a distribution or warehouse center. Moreover, Stein Mart kept advertising costs low by relying primarily on limited print media ads and word-of-mouth to build a customer base. Unlike traditional discounters, who generally responded to unplanned buying opportunities of overstocked or returned merchandise, Stein Mart buyers simply waited about one month later than traditional department stores in order to negotiate lower prices from manufacturers, while still retaining access to a majority of that manufacturer's product line, ensuring that their selections would be timely and fashionable.
Stein Mart went public on NASDAQ in April 1992, and the company's stock doubled in value within 16 months. In the 1990s, Stein Mart stock has proved a good investment, with some fluctuations reflecting general trends in the retail industry. Stein Mart appeared to have been successful in pursuing investors. As of early 1997, company stock was cited as a good purchase by several brokers and received flattering coverage in a number of investor publications.
Stein Mart's Future
According to Stein Mart's early 1997 10K report, the company planned to open between 26 and 28 stores in 1997, some in states new to the company, such as California, Nevada, Iowa, and Wisconsin. After 75 years of existence as a single store, Stein Mart's accelerated growth between 1977 and the 1997 can only be regarded as phenomenal. By creating a new niche between discount and department stores while funding growth internally and keeping costs down, Stein Mart has been extremely successful. With its concept of upscale discounting, Stein Mart was poised to meet an internal goal of 600 stores, according to an article in The Milwaukee Journal Sentinel, by the end of the decade. Given the intense competition and fragmentation in the retail industry, reaching this goal would present a challenge, but Stein Mart has shown that after 75 years, it is never too late to make your presence known.
Further Reading:
Carey, Bill, "Stein Mart's Growth Impressive," Gannett News Service, February 10, 1994.
Griffith, Jill, "Talk of the Town; Marketing Tools," American Demographics, October 1, 1995, p. 76.
Hajewski, Doris "Stein Mart's Lowbrow Name Misleading," The Milwaukee Journal Sentinel, March 18, 1997, p. 1.
Lloyd, Brenda "Stein Mart Takes Fashion/Value Formula On the Road; Florida-Based Retailer Builds 133-Unit Chain in 23 States," Daily News Record, April 21, 1997, p. 16.
Price, Joliene, "'Bou Ladies' Coming to Peachtree City," The Atlanta Journal and Constitution, February 15, 1996, p. M03.
Source: International Directory of Company Histories, Vol. 19. St. James Press, 1998.
