Despite the relevance of this sector of retailing, especially for upscale retailers, very little is understood about the unique competitive characteristics of off-price retailers or how they compare to other types of retailers. This note compares customer perceptions of off-price and upscale off-price retailers with four major groups of retailers: 1) discount department store retailers, 2) moderate department store retailers, 3) department store retailers, and 4) specialty department store retailers.
Data Collection and Procedure
The data for this study were collected by a prominent marketing research firm using a random, representative sample drawn from four primary metropolitan cities in the United States. A total of 2,761 telephone interviews were conducted in Boston (n = 756), Chicago (n = 601), New York City (n = 704) and Washington D.C. (n = 700).
Respondents were asked about their awareness (aided and unaided) and general familiarity with many different major retailers selling men’s/women’s apparel and accessories. These questions were followed by measures about the specific retailers that respondents’ actually patronized within the previous six months. Next, respondents were asked about the specific retailer they shopped most often across a variety of shopping occasions including casual clothing, dress clothing, accessories, children’s clothing, special occasions, and home furnishings.
Respondents were then presented with a battery of measures that asked them to rate the importance of various store attributes and their personal shopping motivations. Nineteen items were used to assess the six dimensions of store attribute importance which included merchandise selection, fashion apparel merchandise, classic/everyday apparel merchandise, price/value, convenience, and service.
Following these measures, respondents were then asked to name the specific retailer that they believed was best known for having a prestigious reputation, designer name brands, quality brands, convenience, competitive prices, ease of locating merchandise, trouble-free return policy, personalized service, knowledgeable employees, and others. Finally, demographic information was also requested.
For some of our analysis, it was important to categorize these 62 specific retailers into seven groups. Groups were formed to reduce the number of specific retailers named by respondents and simplify the analysis. The specific retailers were placed into groups based on an existing categorization of retailers developed by Kopp, Eng and Tigert (1989). The final set of retailers and corresponding retail groups are presented in Table 1.
The second variable used extensively in our study was store attribute importance. Measures for this variable were based on existing and frequently used measures from Bellinger, Robertson and Greenberg (1977) and adapted for an apparel and accessory context. A total of nineteen items were used to assess store attribute importance. Multiple items were used to assess the six dimensions of store attribute importance. The dimensions focused on various characteristics of a retailer such as merchandise selection, fashion apparel merchandise, classic/everyday apparel merchandise, price/value, convenience, and service. The specific items used to measure each dimension of store attribute importance are presented in Appendix A.
Analysis and Results
We chose to use a multivariate data analysis technique known as discriminant analysis for this study because it is best suited for the reduction or grouping of data.
We performed a series of discriminant analyses for this study and perceptual maps were derived for each discriminant analysis performed and shown in Figures 1-7. The specific location of each retailer or retail group on the perceptual maps was derived by plotting the corresponding mean scores on both the horizontal and vertical axes. For example, in Figure 1, Target (designated as M) scored -0.342 on the horizontal axis (function 1) and -0.142 on the vertical axis (function 2), placing it in the upper left quadrant of the map. Meanwhile, Nordstrom (designated as V), scored 0.857 and -0.117 on the horizontal and vertical axes, respectively, is positioned in the lower right quadrant in Figure 1. In the next several sections, we present the detailed results of several discriminant analyses along with the corresponding perceptual maps.
All Retailers and All Attributes
Figure 1 presents a perceptual map of these two discriminant functions along with the locations of all of the retailers. Each of the 62 retailers, identified by the nomenclature listed in Table 1 (see letters and numbers to the left of the retailer name), was also plotted on this map.
Figure 1 displays both the store attribute importance and the specific retailer centroids on the first two discriminant functions. Specifically, the horizontal dimension contrasts low price and large assortment on the left and personal service, prestigious upscale reputation and classic apparel on the right, while the vertical dimension distinguishes unique, designer fashions, and best brand discounts on the top and conservative, everyday fashions, and ease of finding and coordinating outfits on the bottom. Overall, this perceptual map provides a fairly comprehensive view of the retailing market ‘space’.
Several important observations can be made about Figure 1. The groups of retailers listed in Table 1, are generally positioned within a similar quadrant in Figure 1. For example, all of the upscale off-price retailers are positioned in the upper left quadrant of the map (see A, B and C). Furthermore, all but one of the discount department stores are located in the lower left quadrant (see N, O, P, Q and R). The outlier is Target (M) which occupies a unique position in the upper left quadrant of the map. This is not entirely surprising given Target’s well-established image of providing relatively fashion forward apparel at discount prices.
In addition, the specialty store group did exhibit greater dispersion than originally expected as shown in Figure 1. One explanation for this dispersion may be due to the very wide variety of retailers included in this group. Another explanation may be that some of the less popular retailers had very low sample sizes which can produce less stable centroid scores. Taken together, Figure 1 provides a fairly comprehensive positioning of most of the major retail chains currently competing in the U.S. Thus, it is quite useful for simultaneously comparing the images of a multitude of retail chains.
Retail Groups and All Attributes
Retail Groups and Six Attribute Importance Variables
A perceptual map of this analysis is presented in Figure 3. This map indicates that the positions of the retail groups are quite consistent as those shown in Figure 2. Specifically, the upscale off-price and off-price groups once again jointly occupy the upper left quadrant of the map, with the upscale group scoring higher on both fashion apparel and price/value. Most noteworthy, both of the off-price groups were perceived as offering the highest value on apparel, surpassing even the discount department store group by a wide margin. Another interesting observation, the upscale off-price group is perceived as offering apparel that is considered somewhat more fashionable than the department store group while offering it at a significantly better price/value. Only the specialty department store group is perceived as offering more fashionable apparel than the upscale off-price group.
For the next set of analyses, we begin to directly compare the off-price groups with other retail groups. We begin by examining differences among the off-price, upscale off-price, and discount department store groups.
Off-Price Versus Discount Department Store Groups
The upscale off-price group is clearly positioned on the far right of the map, strongly associated with three very important store attributes – fashionable merchandise, merchandise selection and price/value. The off-price group is also located on the right side but scores much lower on all these attributes than the upscale off-price group. In contrast, the discount group is perceived as highly convenient but not offering a wide selection of fashion apparel or good value. It is quite clear from this map that both off-price groups score occupy a dominant position versus discount department stores on fashion, selection and price/value.
Taken together, our results indicate that if discount department store retailers wish to better compete with off-price retailers in the men’s and woman’s fashion apparel and accessories categories, they need to significantly improve the selection, price, and fashion offerings. Strides should be made by discount department stores to enhance the selection and fashionability of their merchandise and improve the perceived value of this merchandise.
Off-Price Versus Moderate Department Store Groups
Off-Price Versus Department Store Groups
Off-Price Versus Upscale Department Store Groups
Contributions to Management Practice
Although it is unclear whether these shopping behaviors will continue, it is likely that customers will be at least cautious about future expenditures even when the economy fully recovers. A recent survey, for example, shows that customers will continue to be strongly motivated by aggressive discounting of full-price merchandise and merchandise offering a compelling value-orientation. As such, the retailer of choice will “have a strong value proposition, including a positive price-quality-fashion equation” (Retail Forward April 2010).
If a strong value-orientation remains a strong driver of retail choice, it is imperative that management identifies the retailers that are well positioned for such an environment. Our findings consistently show that the off-price and upscale off-price retailers are very well aligned with the price/value continuum. Specifically, when all retail groups were included in the discriminant analysis (Figure 3), both the off-price and upscale off-price groups were positioned at extreme points along the price/value continuum, signifying the strongest value-orientation among the other retail groups. Following the off-price retailers by a sizable distance were the discount and moderate department store retailers. Although both the discount and moderate discount groups have attempted to offer a strong value-orientation in apparel, our findings indicate that customers may think otherwise, at least when compared with off-price retailers.
Likewise, our results also indicated that neither the discount nor the moderate department store groups were well positioned in terms of fashion. Both of these retail groups can best be described as “anti-fashion” based upon their positions in Figure 3. More emphasis must be given to offering customers significantly more fashionable apparel to remain competitive. One exception was Target, which was the only discount department store retailer perceived as at least somewhat fashionable. Indeed, as shown in Figure 1, Target (see ‘M’) has begun to distance itself from all of the other discount retailers (e.g., Wal-Mart, K-Mart, Value City, Costco and Sam’s Club). In fact, Target was perceived very similarly to two off-price retailers, Marshall’s (‘E’) and A.J. Wright (‘H’), both operated by TJX Companies. Obviously, Target’s efforts to attract new and highly respected designers to produce fashionable apparel with a strong value-orientation have clearly paid off.
List of Retailers Shopped Most Often
Perceptual Map of Retail Groups & All Store Importance Attributes (19)
Perceptual Map of Off-Price Versus Upscale Department Store Groups
Measures of Store Attribute Importance Ratings
• How important is having a prestigious, upscale reputation?
• How important is carrying top American and European designer brand names?
• How important is carrying quality, popular brand names?
• How important is offering the most unique fashion merchandise?
• How important is carrying the most current, up-to-date fashions?
• How important is making it easy to get in and out of the store quickly?
• How important is making it easy to find what you are looking for?
• How important is providing a clean, uncluttered shopping atmosphere?
• How important is offering an easy return policy?
• How important is offering competitive prices?
• How important is offering the best value on merchandise?
• How important is offering the lowest prices?
• How important is offering the best discounts on top American and European designer brand names?
• How important is offering personal service/helpful sales clerks?
• How important is having knowledgeable sales clerks?
• How important is having the largest overall apparel merchandise assortment/selection?
• How important is having the ability to buy coordinated outfits at the same store?
- How important is carrying classic apparel and accessories?
- How important is carrying conservative, everyday fashions?