Founder’s Sons Plan to Revive Mervyns

By
Tom Ryan

Three
sons of the founder of Mervyns have purchased the department store’s name,
intellectual property and
online properties with plans to revive the brand. John
Morris, along with his two brothers Jeff and Jim, agreed to purchase the
assets in bankruptcy court for about $162,000.

"It’s
great to have it back in our family after 31 years," John Morris,
principal of Morris Management, a private-equity and real estate investment
company, told the Wall Street Journal. "We strongly believe
we have a very strong, loyal base of families in the Western states that
would support Mervyns."

Mervyns
filed for Chapter 11 bankruptcy protection in July of last year and in
October said it would liquidate its remaining 149 stores after the holiday
season.

The
buyers are still exploring options, whether solely focusing on reestablishing
an online presence or reopening stores.

"Real
estate won’t be an issue," Mr. Morris told Inside Bay Area. "There
is plenty of real estate out there."

Mervin
Morris, who founded the chain in 1949, had told CBS 5 in San Francisco
last December that he felt Mervyns had been "raped" by
equity investors, Sun
Capital Partners, who bought the chain in 2004.

Last
week, the founder told CBS 5 that he told his sons not to buy on
emotion: "I advised them not to invest the family fortune, but they
are smart enough they don’t need my advice on that!"

But
his sons appear to agree that the chain had been seriously mismanaged in
recent years.

"It
was tough to watch what happened," John Morris said. "Mervyns
had always performed well. The demise of the retail operation was caused
by factors other than the performance of the stores."

While certainly
challenged by the current economy, analysts were mostly positive about
a re-launch of Mervyns.

"It’s
a great idea," said George Whalin, president
and CEO of Retail Management Consultants.  "If
they could get back in business it would be terrific. There is some real
value in that name."

Discussion Questions:
What do you think of bringing back Mervyns? If you were to design a department
store chain from scratch these days, what would it look like?

BrainTrust

Discussion Questions

Poll

16 Comments
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Charlie Moro
Charlie Moro
15 years ago

Bringing back a brand has got to be one of the hardest things to attempt. It brings up issues of “what did I like about it when it was there?” which may or not have been real but just perception.

When bringing back the name, they will need to deal with both potential customer bases. If they do choose to bring back the brand, they are going to need to address making sure it does not portray itself as Kohl’s “light” and make it a destination for fun and fashion.

Creating a value proposition in this market will be quite the challenge.

Jack Kurek
Jack Kurek
15 years ago

Differentiation.

The key to success will be the ability of the new owners to establish differentiation in the marketplace and then deliver that message to their potential clientele. As has already been mentioned in several other comments, the marketplace has been lost to the competition. How the differentiation is constructed and delivered will be the key to any success–why the products are different, why the in-store or online service is different, why the shopping experience is different, why and what the customer will gain in shopping at the “new” Mervyns versus one of the existing competitors, will have to be first clearly articulated to today’s very wary shopper, and then very clearly executed when the new stores (physical or cyber) go live.

ROBERT JACKMAN
ROBERT JACKMAN
15 years ago

The customer that Mervyns targeted (no pun) in their heyday is still out there. It will take some work on the part of the Morris family and the people they bring in to run the organization, but if they focus on that middle income, aspirational customer, it can be done. Good luck to the Morris family!

Ben Ball
Ben Ball
15 years ago

If I were to launch a department store now, what would it look like?

Hmmm….

Amazon?

Ralph Jacobson
Ralph Jacobson
15 years ago

Great comments on this topic. The challenge is: IS there a department store of the 21st Century? If you look at Macy’s in the 1947 movie, “Miracle on 34th Street,” are the department stores really that different today?

I think the original concept of one-stop shopping still has value today, however, maintaining high-volume categories throughout the store, without dead inventory in other categories draining cash flow is at least a good start on the model for today. Why can’t we take the best specialty shops and put them under one roof? Isn’t that what department stores were a hundred years ago?

Carol Spieckerman
Carol Spieckerman
15 years ago

As skeptical as I am about the spate of lukewarm brand revivals that have been egged on by fire sale freak outs and straight-to-liquidation death spirals, Mervyns is one brand that I believe has legs at the end of the day.

As Target, J.C. Penney and Kohl’s (the one that stole Mervyns’ thunder while Target wasn’t looking) focus on acquiring or licensing higher end brands, Mervyns has a real opportunity to fill the widening hole that exists right smack in the middle of soft lines. It doesn’t hurt that the Mervyns name enjoys strong consumer recognition at a time when vague resonance is considered good enough. This is one re-do that I’ll be watching anxiously.

Don Delzell
Don Delzell
15 years ago

The question asked is “if I were to design a department store chain from scratch these days, what would it look like?” Which is a wonderful question. My initial inclination is to say that I would hope others who loved me would dissuade me from my insanity if that should happen.

I’m not a huge fan of the department store model, particularly during recessionary cycles. Having said that, this creates an opening to examine the competitive differentiation possible in the marketplace. Essentially, and always, these have come down to service, price, assortment, location, and the shopping experience. If at all possible, for this perfect new model, I’d find a very poorly-served geographic area! But that’s too simple, and not really fair.

Right now, it is hard to find a competitive strategy which I’d invest time and money in. Price is a dead end, and over-saturated with existing competition…and indefensible in the long run. Service is possible, yet requires margins and financial strength which is unlikely anyone really has, particularly in today’s environment.

Differentiation on service takes money, technology, process and culture. Building or creating many of those takes talented people and time, and lots of resources. Possible, but you’d better have deep pockets and great people running the show. Assortment is indefensible, expensive from a working capital point of view, and in today’s market, not a compelling reason to shop. All the assortment plays I can think of have already been played. A new Mervyns is extremely unlikely to have a compelling point of difference from Kohl’s or JCP on the basis of assortment. Which leaves the shopping experience. Here, it is possible to differentiate…yet again, to be sustainable and economical, this takes deep pockets, extraordinary infrastructure, and the ability to execute within extremely limited margins.

Sorry…my department store from scratch wouldn’t be a department store. It would be a specialty store.

Rochelle Newman-Carrasco
Rochelle Newman-Carrasco
15 years ago

If they can pull it off it will be one of those optimistic stories for pessimistic times. The brand does have equity and given an “urban” Loehmann’s spin where value reigns, it could attract or re-attract a loyal following.

If I was designing a department store today, it would be the thrift of a thrift shop and the fashion of a Barney’s. With an interactive component thrown in. A series of boutiques with the best of the best for less. One can dream.

William Passodelis
William Passodelis
15 years ago

I really agree with the comments of both Mr. Delzell and Mr. Seesel.

The Target “constant change” format and formula approach to Mervyns was a mess. Target was paying attention to Marshall Field’s at that time to obtain cash to grow Target which was, of course, the company’s main objective and also the most likely opportunity to obtain maximum cash upon the sale of Field’s–which Target was highly successful with!

Target was actively growing Target stores and moving Dayton Hudson to the eventual Target corporation. Everything was about Target.

This left little more than leftover interest for Mervyns. The only apparent use for Mervyns was obtaining cash–to help grow Target stores. This drained Mervyns and left it open to the takeover of its customers by the aggressive “darling” of US retailing–Kohl’s.

Also, yes, the Mervyns California branding was a disaster. I was so surprised when I saw that–especially in Florida. Florida has its own style, culture, and its own sun–they don’t need California. Although, I believe Mervyns pulled out of Florida not long after the “Califonia” was added.

The resurrection of Mervyns is a conundrum. If executed with detail and focus, it might actually work. There IS a LOT of “goodwill” and fond thought of Mervyns by former customers.

The middle level market, however, is full of falling knives and quicksand pits–it is a pretty horrible place to be.

I agree with Mr. Delzell. A specialty store has much better potential (but this is certainly NOT “Mervyns” historical identity) although in this economic environment, I am not certain anything in retail is worth involving oneself in. I too would hope that loved ones would rescue me from my insanity!

Mark Lilien
Mark Lilien
15 years ago

If they get some great locations at a great prices and keep their overhead down, Mervyns can be successful. Not a bad formula for anybody. The brand name won’t mean much if the execution is mediocre or the capital base gets stretched too thin. I assume they’ll be smart enough to cluster the stores in just one market, not re-expand out to multiple states.

Dick Seesel
Dick Seesel
15 years ago

Long before the Sun Capital takeover in 2004, the damage was done to the Mervyns brand by its longtime owners at Target Corporation. The company veered from strategy to strategy for many years–more aspirational one year, more budget-conscious the next, more focus on national brands one season, more “Targetization” the next season by shifting gears to private brands. And who can forget the “Mervyns California” branding fiasco in unrelated markets like Minnesota?

At the same time, the level of execution declined sharply from the company’s heyday in the 1980s and early 1990s. Stores looked run down, stockouts were rampant, and newer competitors like Kohl’s moved into Mervyns’ core markets several years ago. So it’s easy to blame the private-equity deal for the demise of Mervyns but frankly, the company lost its way a long time ago. Good luck to the Morris family, but most of the best locations are now in others’ hands.

John Crossman
John Crossman
15 years ago

I love the dream; real hard for this not to turn into a nightmare.

Estevan Dufrin
Estevan Dufrin
15 years ago

Given the brand heritage that Mervyns had/has, the resurrection of the brand should build off of that.

Simply put, update the brand to reflect the clean and modern design consumers are looking for (see Coke as example), but keep the cachet that comes with the heritage of the brand.

I see this as essential to both an external branding element and in the layout of any brick and mortar stores they may bring back. The keys to a great department store from a consumers perspective is intuitive layout, lighting, clean open and organized spaces and quality products.

Give the middle class great value (inexpensive) with a high-end look and the business can be successful. The perceived value of the shopping experience cannot be overlooked. It’s not just in the Mervyns brand but in the products they sell.

david nellis
david nellis
15 years ago

One comment addressed the difficulty of “bringing back a brand.” I disagree that anything of the sort the mission or the focus here. Aside from the name “Mervyns,” which embodies the nostalgia of the chain’s glory days, a totally new Mervyns for the 21st Century needs to emerge (and along with it, a new brand promise). At the risk of stating the obvious, it must be a store–and a mindset–that is strategically merchandised and marketed based on (1) identification and understanding of who and where the target audiences are (demographically and psychographically) and what will drive them to visit/purchase, (2) the changed dynamics of the retail arena overall and in their specific markets, (3) the increasing impact of retail of e-commerce and, of course, (4) the 800 pound gorilla in the room–the recession–and how it impacts everything from internal operations to external motivations to shop and purchase, or not.

That said, even lousy economic times create opportunity for the right people who have the right ideas AND the right financial backing. I have a lot of respect for the Mervyns Family’s courage taking on this challenge–I hope they do their homework, hire smart people who understand the value of a strategically driven, “Ready, aim, fire” approach to retailing and retail sales promotion (as opposed to many clients I encounter who are so hot to trot that they are willing to risk big money, even in the current economic client, on an instinct-driven, “Ready, fire, aim” approach.

Go get ’em, Mervyns!!! Hope you win big!!!

Mike Osorio
Mike Osorio
15 years ago

I admit this is an emotional vs. a rational response: I would love to see the Mervyns of old brought back: a high service, family oriented purveyor of moderately priced quality apparel and home accessories in neighborhood locations. Unfortunately, success today in apparel retail requires much more than a nostalgic name. If the Mervyns brothers have a real merchant’s vision for the customer experience and the product mix right for today’s consumers, they may have a shot. My advice? Start slow with a handful of locations where particularly loyal customers are clustered and with a consistent and passionate merchant and customer experience vision. Otherwise, don’t bother.

john Smith
john Smith
15 years ago

I would build in Mexico first. They have always loved Mervyns. It will be tough coming back; lots of other stores, even Target and Wal-Mart are getting more competitive. Kohl’s, Penneys, Sears and now Forever 21…they bought many of the empty Mervyns stores for its new format–family oriented, offering women’s, men’s, junior’s, young men’s, and kid’s. Good luck to them!