There aren’t many discount retailers with the guts to try to outdo Wal-Mart,
but North Kingstown-based Ocean State Job Lot is a scrappy retailer that’s giving
it a try.
As baseball playoffs are in full swing, you’d be tempted to think the sport
is our national pastime. Nope. It’s shopping.
Retail in the United States generates $3.8 trillion in sales annually, making
it the second-largest industry in the country. According to Ernst & Young,
discount retailers account for as much as 15 percent of those sales.
The growing popularity of discount retailers has made Wal-Mart the largest
company in the world. (You read right: With $256 billion in annual sales, Wal-Mart
is the largest corporation on the planet.) Ocean State Job Lot’s success in
attracting Wal-Mart’s bargain-hungry constituency is propelling Job Lot farther
north, into the bustling “ex-urbs” of rapidly developing southern New Hampshire.
Ocean State Job Lot operates 73 stores in four states: Connecticut, Massachusetts,
Rhode Island and, more recently, New Hampshire. Next month, the company will
cut the opening day ribbon on its second New Hampshire store in Walpole, to
accompany its other Granite State outpost in Peterborough.
A typical Job Lot store stocks a kaleidoscopic array of more than 4,000 items.
You name it, and the company sells it: apparel, housewares and décor, pet supplies,
electronic equipment, lawn and garden tools, stationery, specialty foods and
sporting goods.
In late 2003, Job Lot opened a new store in Peterborough as part of its plan
for regional expansion. The company expects to open four to eight new stores
throughout New England in 2005.
But fast growth spawns fresh challenges. To cope with its attenuated supply
chain, the company is constructing a new distribution center in the Quonset
Point industrial park in North Kingstown.
Efficient inventory management is key to Job Lot’s success. The company obtains
merchandise “opportunistically,” retail jargon for closeouts, auctions, label
changes, discontinued product lines and any other occurrence that motivates
vendors to slash prices.
“Customers can get crazy discounts of 50, 80 and even 90 percent,” said John
Conforti, Job Lot’s chief financial officer.
Opportunistic merchandise, though, puts a premium on “just-in-time” inventory.
The new Quonset center will feature state-of-the-art technology to handle the
increasing transportation and inventory pressures created by geographical expansion.
The first phase of construction calls for 500,000 square feet, with a master
plan to expand up to 1.2 million square feet. The center will include a new
60,000-square-foot corporate headquarters.
Conducting business used to be simpler. The company was founded in 1977 with
a single store in North Kingstown. According to company lore, Job Lot traces
its origins to company President Marc Perlman’s initial investment of $500,
to sell merchandise at flea markets. The company has come a long way since then.
It’s now on track to reach annual sales of more than $330 million this year,
an increase of 10 percent over 2003.
Conforti said Job Lot’s sales growth has been a function of new store openings
and increased sales volume. He won’t specify profit figures, but said low overhead
is an inherent component of the company’s business model.
In 2004, Job Lot opened four new stores: in Griswold, Old Saybrook and Bloomfield,
Conn.; and in Somerset, Mass. The Griswold and Somerset stores opened Oct. 7.
The company’s second New Hampshire store in Walpole is scheduled to open in
November.
The privately held company won’t quantify per-store sales figures, but Conforti
did say the Peterborough outlet “received a warm reception and it has been successful.”
The average size of a Job Lot store is 25,000 square feet. The fledgling Peterborough
and Walpole stores are bigger, at 45,000 and 35,000 square feet, respectively.
When a new store opens, it usually hires about 50 people and employment grows
from there, depending on sales volume. The Peterborough store now employs a
staff of about 70. Company-wide employment stands at about 2,700.
When eyeing potential areas for expansion, the company’s top criterion is
finding a real estate bargain. Rather than examine such retail metrics as demographics
and per capita income, Job Lot looks for inexpensive land.
“The same way we look for opportunistic merchandise, we look for opportunistic
real estate,” Conforti said.
New Hampshire, he said, was a calculated risk that is paying off.
“Southern New Hampshire is a hospitable environment for us,” he said. “Having
no sales tax helps. The same customer can buy the same items, but at a lower
price than in the three other states where we operate stores.”
That said, fast growth is stretching the chain’s capabilities. “As we add
more stores, it definitely gets challenging,” he said. “We’re increasing trucking
distances, so we have to put greater emphasis on inventory control, how merchandise
is ordered and how it’s shipped out.”
At the Quonset distribution center, Job Lot will leap to a new level of warehouse
sophistication, with mechanized sorters and conveyers and electronic inventory
control. “This will be the first time we’ve deployed this level of mechanization
for inventory,” he said.
Many items are imported on short notice from overseas suppliers, making it
crucial for the company to implement the latest software for global electronic
inventory.
Job Lot sees itself in a somewhat different market niche than such competitors
as Wal-Mart and Costco.
“Any of the big box retailers are competitive with us,” he said. “We were
concerned about Wal-Mart moving in, years ago, and we worried that it would
hurt our sales. But we’re fine. Wal-Mart has not hurt us, because we’re different.”
Job Lot’s distinguishing feature, he says, is its ability to generate a down-to-earth
atmosphere that enhances the notion that prices are cheap. “Merchandise changes
all the time, so there’s a certain lack of continuity in our stores,” he explained.
“We try to maintain a look of ‘organized chaos.’”
More importantly, Job Lot’s purchase of closeout inventory generates extremely
deep discounts that are hard for any store to beat.
To be sure, retail sales nationwide are slowing down, as consumer confidence
wanes. Oil prices in excess of $50 a barrel, Iraq war jitters, terrorism fears
and a tight presidential race are making shoppers more frugal. Low- to middle-income
shoppers, who are the stalwarts of discount retailing, are particularly spooked
by high prices at the gas pump and weak employment reports from the Labor Department.
This year’s economic climate is more unpredictable than most, but Conforti
says he expects sales growth to hold steady for the rest of the year, as anxious
consumers grow even more keen to find bargains. Not everyone agrees.
Jay McIntosh, Americas director of retail and consumer products at Ernst &
Young, said the next few months are bound to be problematic for discount retailers.
“We foresee a decent holiday season for retailers, but sales will be driven
by higher-end department stores,” McIntosh said. “High gasoline prices have
hurt budget consumers more because they have less disposable income, and that
in turn hurts discounters.”
Nonetheless, Job Lot’s foray into New Hampshire has been a plus for the local
economy and filled a void left by the bankruptcy of the Ames department store
chain.
“Ocean State filled an existing, empty Ames store,” said Ted Leach, executive
director of the Greater Peterborough Chamber of Commerce. “The Ames store had
been an anchor tenant in the mall. Ocean State moving in helped, although their
selection of products is not quite as broad as Ames’ was. Residents certainly
didn’t oppose their arrival. That shopping center with an empty store was like
a smile missing a tooth.”
Peterborough is a scenic, quintessentially New England town with a population
of less than 6,000. Leach admits he didn’t expect the area to attract a chain
like Job Lot.
“Frankly, it was a surprise to me, personally, that a deep discounter would
move in here,” he said. “I just never thought that Peterborough could generate
enough foot traffic to support them.”
However, the Job Lot store in Peterborough is located at the intersection
of major north-south and east-west highways, in the southwestern part of the
state. “That location at an intersection probably ensures good traffic,” Leach
said.
Nancy Bildzok, Job Lot’s director of advertising, says when the company opens
a new store, it’s typically near other Job Lot stores, allowing her to bundle
advertising for several stores into the same publications. “The New Hampshire
openings make that strategy more difficult,” she said.
Indeed, it’s an open question as to whether Job Lot can continue duplicating
its success in northern climes. The company’s next New Hampshire store in Walpole,
located about 30 miles from Peterborough, is near Keene.
John Persinos is a contributing writer to PBN.
