RETAILER OF THE YEAR: BEALLS FLORIDA

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Chairman and grandson of the founder, Bob Beall II, has over the past few decades, fine-tuned a family philosophy that still dominates Bealls’ strategy today: feed the business, don’t take money out of it. This philosophy dates back to 1944 when the Bealls bought back their business from the bank for $40,000; since then, new store growth is funded almost entirely on earnings. A successful privately owned specialty department store now entering its second century is in itself an anomaly. But to also be a maverick in off-price retailing (since 1987), online retailing, lifestyle boutiques, and value-priced fashion indicates the kind of leadership and foresight that’s all too rare these days. For the past century and through four generations, Bealls has quietly beaten the odds against regional department store survival. A low-profile, highly admired retailer with strong vendor partnerships, localized assortments, powerful store brands and incredible customer loyalty, Bealls is an unexpected but inspiring choice for the menswear industry’s 2016 Retailer of the Year.

FAMILY FOCUS: GENERATION FOUR

Although Matt Beall grew up in the family business, he never felt pressured to make it his life’s work. “We didn’t talk about business around the dinner table: my dad was wise; he wanted a balanced life and would never push us. In fact, when I was young, I thought the family business was a single store down the street. But somewhere around age 10, although none of my three older sisters chose retailing, I knew it was my calling. So as a teenager during summer vacations, I’d work in the business: first at the distribution center, then in a stockroom, eventually graduating to cashier and sales associate.”

Asked what he’s learned from his father, Matt (who joined the company fulltime in 2004) is thoughtful. “My dad is the most kind-hearted, gentle, gracious person I know: he’s always been my mentor and a virtual father figure to everyone in the company. That said, he’s not very vocal about giving advice. He’s never told me what to do, but he’s always there for me as a sounding board.”

Matt talks just as fondly about his grandfather, who joined his father in the business in 1940 (while also becoming an officer in the Army Air Corps) and died in 2000. “E.R. Beall was also a man of few words, but when he spoke, it was impactful. (His quotes are posted all over our corporate office.) He was a true entrepreneur, growing the business from just two stores. What I’ve learned from both my father and my grandfather is to treat people fairly and with respect. Also that the business is not guaranteed: you’ve got to keep working hard, keep listening to your customers and constantly evolve. You’ve got to visualize the future, get out in front and stay a step ahead.”

Asked how he personally visualizes the future, Matt doesn’t hesitate. “I see us becoming less of a mid-tier store, less promotional, and more of a Florida-right specialty boutique department store.

“But we are fortunate,” he continues, noting that while the mid-tier sector these days is struggling (less traffic and fewer transactions), Bealls’ overall business is well balanced between department store and outlet divisions. “In a tenuous economy,” he observes, “the outlets generally outperform the department stores.”

When he’s not working, Matt might be found playing football with his boys (9-year-old Drew and 7-year-old Robert), skiing (he just returned from a weekend trip with his dad and two friends), boating, fishing or (maybe twice a year) some golf. Might there be a fifth generation of Bealls ultimately entering the family business? “Who knows?” he responds. “But at the moment, Drew loves math and Robby wants to be an artist.”

A UNIQUE NICHE

Dan Love, president of Bealls department store division, has been with the company for 10 years. His retail career started at Hecht Company; after seven years there he was recruited by Federated to join Rich’s Atlanta as CFO. After 11 years there, Love moved to Maine to direct finances for LL Bean. At Bealls, he oversees both brick-and-mortar and online (currently 10 percent of the business and growing).

“You can’t measure ecommerce solely by volume,” he insists. “The website has a profound impact on how people shop at the store. Plus it’s a critical piece of how we communicate with our customers, so its value goes way beyond sales.”

That said, Love projects that online can ultimately grow to a more sizable portion of their department store business. He also estimates that half of current web business is done outside the state of Florida. “We operate online through multiple channels including Amazon and eBay; while those ratios skew differently, when you analyze it as a whole, about half our web business is done out of state.”

Asked to define Bealls’ niche in the retail world, Love talks about coastal relevance. “Walk the floor and you’ll see colorful branded shops, exclusive store labels, a real sense of our Florida relevance. We see ourselves as a niche business, almost a specialty department store. The Florida coastal lifestyle is evident in our product assortment, our colors, our casual orientation (very little career). We listen to our customers, we live their lifestyle, we truly understand them.”

Love credits much of Bealls’ success to chairman Bob Beall, who moved aggressively into new businesses while reinforcing a century-long corporate culture of caring. “Bob oversaw the real growth phase of this business, the concept and inception of the outlet business, and many of the developments that made us what we are today. He’s a leader with tremendous humility, so he rarely gets the credit he deserves. I know that’s intentional on his part: it’s the foundation of our culture of humility. Fortunately Matt, great-grandson of the founder, is just like his dad. He carries on the legacy of honesty, integrity, humility: it’s woven into everything we do. It’s so important for us to nurture talent, to treat our associates well and have them believe in the vision. A huge advantage is that we don’t have the pressure of quarterly financial demands. This, combined with our history, humility and rich culture, makes Bealls a very unique operation.”

In terms of challenges, Love talks about the pace of change. “It’s overwhelming, and no one’s quite figured out exactly where we are. The whole concept of shopping is in transition and virtually all department stores are suffering in a significant way. And if anything, the pace of change is picking up, not slowing down.”

Discussing specific problems, Love singles out two common threads: the shift to ecommerce, and the shift in consumer spending patterns—away from apparel in favor of travel, experiences, and big ticket purchases, especially among young people. He then adds a few more: less newness in apparel now than in previous cycles; and an excess of retail space. “Retailers no longer need the square footage they’re stuck with,” he maintains. “With so many department stores closing doors at a rapid pace, the problem is widespread. For us, recognizing that we need to focus on productivity, we are working on downsizing some locations, and in others, on re-modeling and re-imagining how to use our existing space in new ways. We’re investing heavily to keep our space vital and exciting and to make the stores more productive, more customer-friendly and more differentiated from our mid-tier competition.

“Today’s challenges simply underscore the importance of our unique focus on our customers and on their coastal lifestyle. In addition to bringing in lots of new brands, we’re doing everything we can to improve the shopping experience.”

COMPETING WITH THE BIG GUYS

Acknowledging that Bealls publicly-traded national competition has more capital to invest in product, promotion, stores and technology, CEO Steve Knopik describes Bealls’ goal as “to differentiate and inspire. Our shareholders want us to invest with a view to the future, rather than for short-term profits.”

Knopik grew up in Sarasota and worked at a Big 4 CPA firm for about eight years before becoming Bealls’ director of finance in 1984. He oversees the department stores, the outlets, and Bunulu (a new upscale lifestyle store concept) as well as Bealls Inc.’s shared services: IT, HR, finance and distribution.

Asked for a job description, Knopik says he spends a fair amount of time planning with leaders at both businesses, and also dealing with the board, keeping the chairman updated on strategy, and working with family shareholders. “I’ve got the best job in the world,” Knopik insists. “I deal with so many talented people: this is a company of 12,000 employees who truly want to work hard and accomplish goals together.”

Knopik is quick to give credit where credit is due: “The key here is leadership: Matt’s dad is brilliant, intellectually curious, totally driven but one of the most humble, thoughtful people you’ll ever meet. If he ever gets angry, he does a great job of hiding it. (Editor’s note: Matt claims he’s seen his dad lose his temper only once: when he was about six years old and dared to talk back to his mom.) Instead of reprimanding when something goes wrong, Bob jumps right to ‘So how do we go about fixing it? What’s the next step?’ He has such a great way of making people feel comfortable and appreciated. It’s a work environment where people feel part of a team and respected for who they are. And that’s what gets them fired up, even more than the paycheck.”

MERCHANDISING MENSWEAR

A degree in literature and philosophy from the University of Colorado somehow led Troy Hedgecock, Bealls DVP of men’s and kids, to a career in retailing. “Sometimes retailing chooses us,” he quips, philosophically. After gaining experience at May Company, Target and an outdoor specialty operation, Hedgecock joined Bealls in 2012. “My kids were grown, I’d been landlocked for years, and I was intrigued by the golf lifestyle. I’d heard good things about Bealls and it seemed like a great opportunity. As it turns out, with my five terrific buyers, we’re doing a lot of unique and exciting things in menswear.”

Without giving away secrets, he talks about Bealls’ strong focus on outdoors, golf, activewear and a new emphasis on young men’s surf. “Outdoor coastal is a key component in everything we do: it shows up in our styling, our prints, our designs. Although business overall was tough for everyone fourth quarter, from a productive inventory standpoint, we’re in very good shape. We obviously don’t have big coldweather businesses; we weren’t sitting on millions of dollars of sweaters, gloves and coats. And since we’re a private company, we can be very nimble, building quickly on the successes of the businesses we’re in.”

Asked about promotional strategy, Hedgecock says a key goal is to showcase value on an everyday basis. “We certainly use coupons to drive traffic, but our basic in-stock programs are on replenishment so we have no pre-set schedule for markdowns. Of course, we hit clearance cadence end-season, but turnover and managing receipt flow are the critical goals these days. Most importantly, when the brand and style are right, price is not the deciding factor. For example, we carry golf shorts from Under Armour at $65 retail that sell at ticket price right next to promotional shorts at $24.99 and $19.99. Maybe they sell at 8-10 percent a week rather than 15 percent, but when an item is right, you don’t need markdowns to move it.

“This is why we’re always seeking out great brands that are not in the national chains. And we’re always testing, looking to be unique. As a small private company, our ‘new vendor approval process’ takes two days, rather than two months.”

Another key component of Bealls’ merchandising strategy is maintaining flexibility to move in and out of businesses as needed, often downsizing brands that become over-distributed. As Hedgecock explains, “Guys are still looking for those traditional mainfloor sportswear brands, but we needed to create the right balance. Brands like Haggar and Lee are turning and selling well for us. But overall, we’ve ‘right-sized’ the traditional category by door according to climate and lifestyle and it’s now more productive than ever. Having worked at other stores, I must say that managing inventory is a core strength at Bealls.” (Strong inventory management explains why Bealls AUR is generally higher than their mid-tier competition, according to several vendors.)

Also a core strength at Bealls: highly regionalized assortments, to the extreme of changing the type of fish printed on cotton t-shirts to match the type of fish that inhabit the waters nearest that particular store. (Vendors joke about Bealls buyers becoming sudden experts on saltwater vs. freshwater fish.)

Notably missing from the menswear mix at Bealls is tailored clothing, a category they’ve tried to sell over the years with limited success. “The snowbirds come down here and they want to wear board shorts and flip flops, not suits and ties,” says Hedgecock (although Bealls neckwear assortments feature some fabulous whimsical designs, including original prints from local artist Leona Lovegrove translated on ties by MMG).

More than compensating for a lack of tailored is a huge emphasis on casual/active/outdoor categories, both branded and private label, which is about 25 percent of the mix and growing. Most private label is sourced directly; Bealls boasts a talented design and sourcing team. In fact, outdoor and active generate well over half the men’s volume at Bealls. Among the most successful categories these days: performance knits, board shorts, fishing and golf. Notes Hedgecock, “With 1,200 courses in Florida, golf is a passion for many of our customers. It’s also a passion for most of our executive team, if we could only find the time to play.

MARKETING MAGIC

Jesse Blount has spent his entire career in retailing, starting out as Christmas help at Sears when he was just 16. He spent 19 years there climbing the corporate ladder (men’s, kids, shoes, hard goods, marketing), then spent the next eight years at Kohls (credit marketing, prospecting, CRM, loyalty program). He joined Bealls two years ago as VP/chief marketing officer.

Asked about Bealls’ media mix, Blount describes a balance between traditional (newspaper, TV, radio, direct mail) and emerging (social, email, digital display and search), the latter of which is the faster growing component. “But our customers are not necessarily early adopters,” he explains. “Email has taken hold but they still read newspapers; they’re embracing Facebook, not Pinterest. The key is talking to all of our customers in the way they want to be addressed; the challenge is figuring out where we need to be in the transition from traditional to digital. We’re constantly watching to determine if we’re getting the appropriate ROI.”

Admitting that their media mix is evolving at a faster rate than they had intended, Blount shares the good news: “At least it’s not evolving as fast as the rest of the country.” Their business is divided into two primary segments—year-round residents vs. seasonal residents; he notes that when the snowbirds arrive in November through March, the population literally doubles and the merchandise mix and advertising strategy change accordingly.

One of Bealls’ greatly appreciated marketing innovations is Bealls Days, a weekly special shopping experience (and discount) for customers “50 and Fabulous!” With much targeted advertising, seniors have been encouraged to stop in on Tuesdays for free coffee, casual conversation with Bealls associates, and lots of fun shopping!

OUTLET OPPORTUNITIES

CEO Steve Knopik “thanks his lucky stars” that Bealls started its outlet business four decades ago. “In the early 1980s, we began searching for new concepts to build a second business. We tried several ideas—Just Labels, Junior Images—but off-price was the one that ultimately worked Of course, this business has evolved tremendously: as late as 2010 and 2011, we were still more discount department store than true off-price. But in the past three to four years we’ve moved to incorporate the core tenets of off-price: faster turn and broader selection. And this business is growing: it’s slightly more than half our total volume, with stores that average 20,000 square feet. (Since it’s typically recycled space, we’ll take anything in the 18-25,000-square-foot range.) We have about 2,500 active vendors supplying our outlet stores, with a goal to open as many new ones as possible. We plan to add five to seven percent more square footage over the next few years.”

Those stores may also be in completely new locations for Bealls. “We’re interested in many markets that we’ve not yet begun to penetrate so there’s much opportunity. And unlike most retailing today where growth is digital, we believe off-price growth is still essentially brick-and mortar. [Bealls uses the nameplate Bealls Outlet in Florida, Georgia and Arizona, and Burkes Outlet in another 13 states where the name Bealls (unaffiliated) is owned by Stage Stores.]

Knopik goes on to praise chairman Bob Beall for having the wisdom, determination and stamina in the late 80s and early 90s to stick with their outlet strategy even when it wasn’t working. (It was actually Bob’s dad E.R. who came up with the idea to add outlets when, while vacationing in the Carolinas, he noticed the number of fancy cars parked outside outlet malls and recognized the potential.)

Knopik is not afraid to admit how tough it was to perfect the concept early on. “Our original goal for the outlets was to penetrate all markets where we had department stores, and then figure out which other markets we could conquer. Based on our strong department store business in Florida, we were sure we understood the mature retiree customer. But what we didn’t realize was that retirees in Arizona are very different from retirees in Florida. It took us a while to figure out that customers in Arizona have a different lifestyle, a different color sensibility. They don’t want pastel seashells on their t-shirts! So regionalizing assortments for Arizona took several years to fine-tune but once we did, the business took off.

“With less marketing and advertising in the off-price sector, creating awareness of who you are and what you offer is challenging,” he adds. “But once we got our footprint established and gained critical mass, we were okay. And ironically, the economic downturn in ‘07-‘08 actually helped our outlet business: department store customers traded down and many never traded back up when the economy improved.

“Retailing will make you humble: no doubt about it.”