By Barbara Thau
It’s earthy, bohemian, global and a bit iconoclastic—and that’s exactly what it wants to be.
As it celebrates its 50th anniversary, Cost Plus World Market is wrapping up a merchandising overhaul that has made the 299-unit chain more like its very first store at San Francisco’s Fisherman’s Wharf, Barry Feld, chief executive officer, told HFN.
Feld kicked off a three-year turnaround plan two years ago pegged to returning the $1.03 billion chain to its roots as a store merchandised with the flavor of an authentic, international bazaar, led by offbeat merchants with a passion for travel.
Cost Plus used to mine more than 50 countries for products with an eye toward unearthing idiosyncratic finds. “We were the first to have Bodum presses, Altoids [mints], Australian wines,” Feld said.
By 2004, Cost Plus was in “serious trouble,” and had “lost its way,” Feld said. The chain had strayed dramatically from its niche as the Trader Joe’s of home decor, Feld said. By 2006, the chain’s missteps resulted in bottom line losses and store traffic declines.
Rather than lining its shelves with fare from places from flung like South America, India and Europe, Cost Plus was increasingly becoming a destination for products from mainstream, domestic manufacturers. “We turned a very unique business concept into a pedestrian me-too concept, going to showrooms and buying what everyone else was buying,” Feld said.
In addition to raising price points, Cost Plus over expanded its furniture mix.
“We went from being an eclectic provider of home entertaining and some home decor products to a home furniture and decorating store with some things for home entertaining,” Feld said.
As a result, “we were at risk like all the other furniture retailers when the housing boom stopped,” Feld said. “We were right up to the edge of the cliff. We feel very good about the fact that we started re-merchandising in 2006. If we had not, who knows where we’d be today. We could have suffered the same fate as other furniture retailers.”
Indeed, furniture chains Bombay, Domain, Levitz and Wickes all closed shop for good this year.
Feld’s fix-it plan included boldly pruning the furniture mix; boosting the overall assortment of lower-priced, high-volume goods; and moving from a high-low promotional pricing model to an everyday low price strategy.
Feld also cut Cost Plus’ work force by 10 percent—which is expected to save it $8 million in fiscal 2008—and has closed 17 underperforming stores.
Furniture was whittled down to less than 20 percent of the mix, and 85 percent of the merchandise is now priced $20 or less.
In addition, Feld made “sweeping changes” to the merchandising team.
He brought in people like George Whitney, a former Macy’s and QVC merchant, who lived in Asia and “has a deep experience with manufacturing on a global basis.”
Cost Plus is today a merchant that is “willing to be eclectic and irreverent the way other retailers are not,” Feld said.
That irreverence is partly born out of its distinct corporate culture.
“We are a company steeped in diversity and global travel,” Feld said. “If you visited our corporate offices (in Oakland, Calif.), you would find a very bohemian and eclectic mix of people that don’t fit the standard corporate mold.”
Today, shoppers will find eccentric fare like pig-shaped terra cotta grills from Bali and Tiffen lunch boxes from India.
“While the vast majority of retailers’ SKUs come from China, because of our sourcing diversity, less than 15 percent of our merchandise comes from China.”
The changes seem to have started paying off, Feld said.
Cost Plus generated comp-store sales growth in the last two quarters, and “the first positive customer traffic quarter that it has seen in many years,” he said.
The retailer is now sharpening its focus on its core shopper, what it calls “the cultural consumer.”
Like Trader Joe’s demographic, Cost Plus’ shopper is “highly educated and on a budget.”
Cost Plus made headlines this summer when it rebuffed an acquisition offer from Pier 1 Imports. It said the proposed acquisition belied the best interest of its shareholders.
“Our management team had been working around the clock for over two years to get the business repositioned, and just when we were getting traction, these guys came out of nowhere and tried to do a hostile takeover of the company,” Feld said. “We fought it off with everything we had. We are an independent public company and plan to remain that way.”
Over the years, Cost Plus and Pier 1 have invited endless comparisons from industry types, Feld said.
On the surface, they are similar: they both sell imported home decor. But that’s where the similarities end, Feld said.
“It’s clear that when you go to a Cost Plus store, it’s as much about wine and gourmet food as it is a home entertaining store with some furniture,” Feld said.
Despite the gloomy outlook for retailers for the make-or-break fourth quarter, Feld is optimistic. “I never subscribe to the theory that the holidays don’t come,” he said.
With shoppers looking for deals like never before, Feld is looking to “do everything I can” to offer affordable and unique gift giving and holiday entertaining goods.
“When you walk into a Cost Plus World Market store, you should find it hard to believe as a consumer, that we’re a chain,” he said.
The thought should be, “This is just a giant specialty store.”