In an age of Wal-Mart, warehouse superstores, discount "category killers" and behemoth department stores, is there a profitable cubbyhole for a little local shoe chain? Hess Shoes President George Bernstein thinks so, and he says the company's new strategy will prove him out.
Hess Shoes, which emerged from bankruptcy proceedings last year, wants to reinvent itself as a high-service supermarket of footwear. The Baltimore-based company intends to open larger stores over the next few years with variety and depth far greater than that offered by most independent shoe sellers, Mr. Bernstein said.
The 23-store chain is in the process of converting its first store, in Towson Town Center, to the new format. When finished in August, the venue will have 14,000 square feet of space -- as big as a smallish supermarket -- vs. 3,000 square feet for a typical Hess location now.
The new store will beef up Hess' assortment of brands, brand varieties and sizes, Mr. Bernstein said, carrying three times as much merchandise -- 47,000 shoe pairs -- as its older stores.
"We want to be a destination location, as opposed to a store you walk through when you're going to the mall," he said.
Hess, which takes in about $20 million in annual revenue, plans to convert two more stores next year and more thereafter, Mr. Bernstein said.
The switch represents a reaction by Hess to some hard new realities of retailing -- realities that helped push the company into bankruptcy two years ago.
Department stores have become better at shoe selling, for one thing. Mr. Bernstein acknowledged that Hess' strategy is intended to help the company do better against department store chain Nordstrom Inc., "our No. 1 competitor."
The growth of manufacturers' outlet stores and discounters such as Payless Shoesource also has hurt traditional shoe chains.
And as shoemakers have pushed their brands into chain after chain, it has become much more difficult for independent stores to offer anything unique. "The perception was that the independent shoe store didn't have enough product," said Michael Atmore, associate publisher of Footwear +, a monthly trade publication based in New York. "That's what they [Hess Shoes] are fighting against."
Hess also muddled its focus, Mr. Bernstein said, selling $19 shoes in some stores and $300 shoes in others.
The company had been struggling for several years. When a bank called a loan in 1992, Hess didn't have the cash to meet all its obligations. It sought protection under Chapter 11 of federal bankruptcy law, reorganizing its finances while continuing to operate.
Hess emerged from bankruptcy court last year after restructuring $6.8 million in liabilities. It shrank from 32 stores in 1989 to 23 stores today.
Shoemakers continued to ship to Hess while it was reorganizing, said Mr. Bernstein, 32, a Harvard Law School graduate who came to the company in 1990.
"The company really didn't skip a beat," he said. "This company is extremely healthy."
Sales in stores open for at least a year -- considered a key measure of retail strength -- have risen a substantial 6 percent so far this year, he added. He declined to disclose profitability figures.
The new strategy isn't without risks. Hess' real estate costs will rise, for one thing.
Most of its stores are in malls now, but Mr. Bernstein said Hess may look outside malls if it can't get the space it needs.