Emperors of cheap

The Baltimore Sun

Shoppers scouring for good buys at bargain magnet C-Mart can see the changes on the sales floor.

Workers replaced handwritten price tags with bar-coded tickets. Computerized machines are in, while old-fashioned cash registers are out. By January, with a click of a mouse, customers should be able buy discount designer clothes and furniture now found only at C-Mart's Joppatowne and Landover stores.

C-Mart's new owners want to build the company into a national retailer. That is a challenging proposition: trying to balance the roots of this paper-and-pencil enterprise against ambitious goals to become a big chain.

The payoff is great if their gamble succeeds, yet these Baltimore entrepreneurs acknowledge that the risks are huge.

After acquiring controlling interest in the family-owned business this summer, C-Mart executives are working to hold on to the culture that made the flea market-like store one of the region's most reliable spots for deeply discounted Kate Spade and Prada handbags.

The executives think that modernizing the operation should provide added power in offering better prices and selections while appealing to more shoppers who expect Internet shopping and other conveniences.

C-Mart seeks out liquidated designer merchandise from department stores and other retailers. The new owners hope to broaden C-Mart's appeal beyond its two stores.

"We're aiming to grow a business and maintain the spirit of what has built this business," said Brad Bondroff, 29, C-Mart's new president. "At the same time, we think there's work to be done in the back office and the Internet to change the business and leave the brand intact."

Bondroff and his partner, Daniel Shuman, say the move is necessary to expand the mom-and-pop retailer online and add more stores in larger markets such as Miami, Las Vegas and New York.

As founders of the Baltimore online liquidator the Asset Store, Shuman and Bondroff plan to bring their technological expertise and success to C-Mart.

But the men are not tinkering with C-Mart's tried-and-true formula: deep discounts, brand-name blowouts and its signature hand-scribbled newspaper advertisements.

They know that any changes at a company that has generated a loyal following for more than 30 years could alienate core customers. And they know that for every Starbucks, there are more businesses that have failed at trying to replicate local success at the national level or maintaining the brand's identity under new owners.

"They need to understand what about the experience at C-Mart brings people back and is it translatable?" said Julie Lenzer Kirk, a Damascus consultant who trains entrepreneurs at the University of Maryland, Baltimore County.

"If they don't connect with the brand and what it is that made them successful and be able to scale that, they run the risk of crash and burn."

C-Mart's new owners recognize the potential landmines they face, but they say the changes will ultimately mean better deals and more products for their customers.

"We're trying to see if we could expand this concept and maximize it without screwing up whatever works," said Jim Dale, a Baltimore marketing consultant hired by the new owners to help with C-Mart's expansion plans. "There are a lot of good things that have been done over the years, and they've made it a successful company and brand."

No-frills reputation

C-Mart built its no-frills reputation more than a quarter of a century ago by promising low prices for designer garb and goods. Customers never see fancy signs, ornate displays or over-the-top decor at the retailer's two Maryland stores.

C-Mart executives have made upgrading inventory and sales systems their first priority. They hired more than three dozen temporary employees to bar code furniture, books, shoes, clothes and knickknacks at the two stores in the past two months. Equipped with rented laptops, the temporary workers finished the task late last month.

The idea is to use inventory and sales databases to help C-Mart track customers' buying habits, including which brands and merchandise are selling and how fast. That system, in turn, will provide information for the retailer's merchandise purchases, benefiting customers through quicker turnaround of inventory, Bondroff said.

The partners think that greater reliance on technology, statistics and numbers to make decisions will allow them to operate the business more efficiently. That results-driven mentality also brings added pressure to meet margins and other targets, they acknowledge.

"It makes us accountable. Our board has a clear view of what we're doing and how quickly we're doing it. That's what drives us. That pressure is good," said Shuman, 30, C-Mart's chief executive officer.

Such automated systems also will allow for a seamless transition about two years from now, when C-Mart plans to begin opening additional stores, he said.

The retailer's more immediate bet, though, involves operating an online business.

Competitors, such as TJ Maxx and Filene's Basement, do not operate electronic commerce sites. But C-Mart thinks it can compete online by offering the same low prices it offers at its stores.

At its Joppatowne store last month, Shuman pointed out a Ralph Lauren men's suit jacket selling for $100 that the retailer can sell more quickly online.

The Internet will allow C-Mart to bid on larger deals without worrying about whether the huge volume of inventory will sell at just two stores, he said.

In the past, Shuman said, C-Mart had to pass on larger deals - an entire department store chain going out of business, for example - knowing that it couldn't sell the merchandise fast enough in this region.

"It would take us two years to sell at the Baltimore and Landover stores," Shuman said. Now, "we'll take 50 percent of them and [the products] will sell in the stores in three months and take the rest online."

Bondroff said C-Mart customers in Maryland will not lose out on good buys to other locations and online as the company expands.

"It's taking the time to recognize what's gotten us to this point and allocating proportionally our inventory and our deals to each channel," he said.

Since taking over C-Mart, the two childhood friends from Baltimore County have worked to assure the 150 employees and to "communicate to customers that the C-Mart that they love isn't going to become a Wal-Mart," Shuman said.

"We're not some big financial institution coming in here to squeeze every dollar of profit and change everything and make it systematic and cookie-cutter," he said.

C-Mart's origin is anything but corporate.

E. Douglas Carton opened C-Mart at an old Harford County five-and-dime store in the 1970s, when discount shopping was a new idea. The retailer buys merchandise from insurance company salvage lots, which collect items from stores hit by a natural disaster or a fire, as well as sample sales and liquidations.

Carton, who had become less involved in the business in recent years, is on C-Mart's board of directors under the ownership change.

Carton never had any interest in expanding, but a new generation of the family brought a different direction.

Keith Silberg, Carton's nephew, joined the family business 11 years ago and has run the day-to-day operation since C-Mart opened a home store in 2003. (The longtime Forest Hill store was eventually consolidated into the 107,000- square-foot Joppatowne location.) He oversaw the opening of C-Mart's Landover store.

Silberg, who bought merchandise for the two stores, will now exclusively focus on snagging the latest name-brand deals.

Key to next level

"The key to taking it to the next level is advancing the systems that we use to sell stuff while keeping the character of the store the same," Silberg said. "The tricky part, but what we hope to accomplish, is when we have 50 stores all over the country, you have 50 little gems in each town, and everyone is like, 'Shh, don't tell anybody.' "

Bargains change week to week, a business model that has built a loyal clientele - and sometimes a frenzy over exclusive finds - in recent years. And it's a concept that is universal regardless of location, Silberg said.

It can be Juicy Couture sunglasses one week, Cole Haan shoes another. Or Prada, Gucci, Hermes and Chanel.

"Their current brand imagery is about the lowest price retailer in the market," said Roger Gray, chairman and chief executive of the Baltimore advertising and marketing firm gkv Communications. "The imagery of the brand fits with the experience of the store. It's a big warehouse. They buy in bulk. You have an expectation of their brand when you walk in. They don't disappoint."

C-Mart has a good shot at marketing itself nationally if the retailer uses its fun attitude to attract young customers, Gray said. But technology has not been C-Mart's strength, he said, pointing to the retailer's Web site.

"There's an opportunity to continue that funkiness to attract the younger audience," he said. "But in order to do that, they need to change their technology. Young people are tech savvy."

For frequent C-Mart shoppers such as Rachel Smith, bargains are all that matters.

Smith, 29, of Churchville said she keeps an eye out for certain brands, such as the Betsy Johnson cardigan she was holding on a recent shopping trip.

"I always come for whatever designer they've bought out," Smith said. "They always have great shoes for kids and good quality."

C-Mart's open-market feel draws Vickie Wallis, whose shopping cart was filled with shoes, bedsheets and other purchases.

"When I come, ... I'm on a hunt like a hound dog, sniffing out something someone doesn't have," said Wallis, 47, of White Marsh.

Wallis isn't sure whether she wants to share C-Mart with the rest of the country.

"It's nice to tell my family in the West Coast I got this fantastic such and such at C-Mart," she said. "They say, 'Ah, man.' It's nice to rub it in."

hanah.cho@baltsun.com

C-Mart history

1975:

Founder E. Douglas Carton opens C-Mart in an old five-and-dime store in Bel Air.

1980s:

Store moves to Forest Hill location.

2003:

C-Mart opens home store in Joppatowne to sell furniture and other wares.

2005:

Retailer merges Forest Hill operation with its discount furniture store.

February 2007:

C-Mart opens its second store in Landover.

July 2007:

Entrepreneurs Daniel Shuman and Brad Bondroff buy controlling interest in the family-owned enterprise.

[Source: Sun archives]

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