Ward Puts New Retail Plan to Tough Test : Prototype Specialty Store Takes on Keen Southland Competition

OCEANSIDE —  You might have expected Montgomery Ward to pick any place other than Southern California to test its prototype for an electronics and appliance outlet. It’s hard to imagine a more competitive environment for such a store.

But despite all the risks, that’s just what the big Chicago-based subsidiary of Mobil Corp. did here last week, in a small strip shopping center just a few miles south of Camp Pendleton.

Ward wants the experiment to have “a real acid test,” President and Chief Executive Bernard F. Brennan said in a telephone interview.

The Oceanside store is among the first local signs of a drive by Ward to shed its traditional market strategy as a mass merchandiser and reposition itself as a specialty retailer. That repositioning eventually will include changing its name to “Focus Montgomery Ward.”

Ward’s new store here will be competing against numerous other electronics and appliance chains in a market so competitive that at least two--Golden Bear Home & Sports Centers and Pacific Stereo Corp.--have recently dropped out.

In Oceanside alone, customers have their pick of Federated, Silo, Mad Jack’s, Sears and a handful of independents. Low prices and a wide variety of products also are available at nearby discount general merchandise stores.

But Ward is backing its store with heavy advertising and promotional campaigns. For example, customers are offered refunds if they find the same item advertised elsewhere at a lower price. It also is trimming 5% off a customer’s bill if an item is not in stock. And, Ward operates its delivery fleet seven days a week.

Operating costs have been trimmed by locating the stand-alone store in a smaller, less expensive shopping center. And, it hopes to reduce overhead by utilizing personnel, advertising and distribution operations in San Diego County that service Ward’s five existing mass-merchandise stores.

“(Ward) had a huge void in Oceanside,” Brennan said. “And there are certain pockets in Los Angeles where we can drop in a specialty store and make an impact.”

Retail industry analysts generally have applauded Ward’s experiments.

“Sears and other large retailers have made noises about going in this direction,” said Ron Rotter of the Morgan, Olmstead, Kennedy & Gardner investment firm in Los Angeles. “Basically, the specialty retailers are taking market share from the department stores.”

In addition to the Oceanside store, Ward last year agreed to open separate outlets in at least two jointly operated storefronts with Toys “R” Us, the big toy retailer, and said that it will consider similar ventures with other specialty retailers.

The “alternative stores” are an outgrowth of Ward’s 1985 decision to change from a department store operator to a specialty store chain.

“Over the years we’d become a meaningless store to our customers,” Brennan acknowledged. “We were servicing a loyal customer base, but we were not growing.”

Before last week, Ward had not opened a new store since 1983, but it plans to open about 20 more stand-alone retail outlets and a pair of larger stores during 1987. One of the new storefronts will be a stand-alone apparel store that will open next to the electronics and appliance store in Oceanside. All the other new stores this year will be in other states.

It will also continue to remodel 300 existing department stores.

Brennan said the renovated stores are outselling its traditional stores and helped boost profits last year to a record $106 million, up from $42 million in 1985. Revenue dropped to $4.4 billion from $5.4 billion in 1985, largely because of Ward’s elimination of its money-losing catalogue business and its Jefferson Ward retail store chain in the South and East.

Five San Diego County department stores and one store in West Virginia already have been remodeled and renamed Focus Montgomery Ward.

The Focus name and merchandise selection will spread to Ward’s 70 California stores--including its Torrance store, which has been remodeled but not renamed--during the next two to three years, according to Brennan.

Its larger stores are being recast to include some--but not always all--of five broad categories: apparel, appliances and electronics, home furnishings, automotive products and a seasonal merchandise shop. Eventually, every item sold through the planned chain of stand-alone stores also will be available inside the larger “stores within a store,” Brennan said.

Brennan agreed with an observer who described Ward’s repositioning as “akin to turning a fully loaded supertanker around in its own length.”

That turnaround, he said, has been “a painful process but it’s beginning to pay off,” adding that storewide sales were up 15% in February compared to a year ago, even though a number of product lines have been trimmed.