Filene’s Remodels Basement

Discussion
Jul 24, 2006
George Anderson

By George Anderson


Filene’s Basement is moving from its heritage of offering steep discounts on designer merchandise. It is, as a Boston Globe report points out, looking to broaden its horizons by offering more upscale designer fashions at deeply discounted prices.


Filene’s move out of the basement, so-to-speak, is reflected in the chain’s decision to seek more upscale digs for its stores. A case in point is the announcement that the newest Filene’s Basement will set up shop on Boston’s Newbury Street.


Although the company’s origin lies in Boston as the creation of the Filene’s department store (another chain being converted to Macy’s by Federated Department Stores), the independent Basement stores have not opened a new store in the city over the past 100 years. Filene’s Basement was founded in 1908 by Edward Filene to sell off excess merchandise from the Filene’s Department Store business.


Heywood Wilansky, chief executive of Retail Ventures Inc., the parent company of Filene’s Basement, said, “We’re healthier than we’ve been in a long time. We’re expanding more rapidly, and we’re opening our first Boston store in about 100 years. It just gives me a kick whenever I say Filene’s Basement and Newbury Street. Never in my wildest dreams did I expect to open a store there.”


In recent years, Filene’s Basement has been able to drive up the average cost of merchandise sold in its stores by focusing on more upscale fashions. Stores, for example, that previously sold men’s designer suits for $99 are selling more prestigious brands starting at $199.


The retailer is also upgrading its look in-stores to reflect its newly modified image. According to the Globe report, the company’s Union Square store in Manhattan has flat-screen televisions on the walls and private dressing rooms.


Michael Silverstein, a senior vice president at The Boston Consulting Group and author of the new book, Treasure Hunt: Inside the Mind of the New Global Consumer, believes Filene’s Basement has found a niche with fashion conscious middle-class consumers.


“She knows the price of the goods at original retail. She knows something about quality, materials, and style,” Silverstein said. “She is like a missile looking for a perfect bargain — great price, great brand, fashion right.”


Marshal Cohen, chief retail analyst at NPD Group, sees the rationale behind Filene’s Basement’s shift but offers this caution. “Fashion isn’t a science. There’s a lot of opportunity for risk when you buy more upfront and rely more on fashion. They are trying to compete in high-fashion — an extremely competitive arena that is only getting more intense.”


Discussion Question: Is Filene’s Basement on the right path to carve out a profitable and growing niche for itself?

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8 Comments on "Filene’s Remodels Basement"


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Mark Lilien
Guest
14 years 7 months ago

Two years ago, Retail Ventures was a $7 stock. A year ago it was $14. Today it’s around $17. So investors like Filene’s Basement’s parent, which also owns Value City and DSW. Filene’s Basement’s repositioning and location expansion may be risky, but their past positioning seems worse. When a retailer loses their uniqueness, repositioning is mandatory. The alternative is financial mediocrity or worse.

Laura Davis-Taylor
Guest
Laura Davis-Taylor
14 years 7 months ago

This is an interesting one! From the female point of view, Filene’s is a place to go in seek of the bargain “thrill kill” and it usually delivers the goods. Yet, the experience is less than ideal. This is primarily due to the dressing room scenario, as you are forced to try on clothing in a big open space amongst a throng of other harried women insulted by their lack of privacy. Not fun.

If they do this right by improving the experience and still offering the opportunity to find that “amazing item at an unbelievable price,” I think this will be a great move. If they move up too much and try to be too rich for the middle class bargain hunter, they will be in scary waters. It will be all about staying close to the emotional drivers of that Filene shopper and monitoring their efforts for appropriate cause and effect.

Richard Layman
Guest
14 years 7 months ago

But Filene’s Basement isn’t only in the Boston market. In markets like Washington, DC, they have far more flexibility because the brand equity isn’t so rigidly based on bargains.

Mr. Lilien’s statement: “When a retailer loses their uniqueness, repositioning is mandatory. The alternative is financial mediocrity or worse;” is oh so true, and an excellent sum up of what we need to do with regard to traditional commercial district revitalization.

Gene Hoffman
Guest
Gene Hoffman
14 years 7 months ago

When a company has a need to change, it usually means that something isn’t clicking properly; whether it be its management, strategy, systems, assortments, need for greater return for new owners or whatever. The challenge a revised Filene’s Basement faces is to get its base of customers seeking “thrill kill” bargains to pay a higher price because of a label change or the “such.”

Don Delzell
Guest
Don Delzell
14 years 7 months ago
The biggest danger I see is moving too far up the designer chain. Designer labels achieve their status by being forward, leaders rather than interpreters. The more forward a fashion statement, the smaller the actual consumer group which will potentially purchase the “real thing.” Fashion trends reach larger groups of consumers through “interpretation.” This is not just a process of lowering the price. Colors are diluted or changed, silhouettes are adjusted, fabrics are made more accessible, accessories added or taken away based on perceived value…there is a long series of actions taken which expand the market for a trend. Price is only one of the variables which does this. By taking the “real thing” and playing only on price, the danger becomes the actual size of the market for the “real thing.” Combined with the issue of availability (are these still closeouts, or just really low margin up front buys?)in size and color, the size of the market might be very small. Even mid-level designers are interpreters. Be careful, Filene’s Basement. Even at extremely low… Read more »
Craig Sundstrom
Guest
14 years 7 months ago

Most businesses begin with a purpose more narrowly defined than “making money,” then eventually drift toward that singular goal. For FB, the epiphinal moment came when the “upstairs” and “basement” operation(s) – used here both figuratively and literally – became decoupled; their original raison d’etre now gone, they should sell what (and how) is most profitable, even if it ultimately means selling, say, used motor oil; the path of course is not without the risk of getting lost, but it can work…look at Barney’s

Karen McNeely
Guest
14 years 7 months ago
I think there is too much that is not being said here. Is opening one store in an upscale area an indication of the direction of the entire company, or is it to make a one store that is more of a showpiece to add panache to the name? If they are taking the whole company up a few notches, is it across the board or is it icing on the cake? Again, this could be done to add a little more prestige to the brand. Finally, if they truly are taking everything up several notches (which I don’t think anything in the article actually says) I think it is a good move at the wrong time. While most women love getting a great deal on a designer label, I think the surge in the luxury market is now post peak. I noticed that the latest issue of “In Style” is touting more subdued less ostentatious looks, so flaunting your logos isn’t going to be quite as hip as it used to be.
Sylvia Handler
Guest
Sylvia Handler
14 years 6 months ago

It’s all about finding reasonably rentable locations for stores in areas where you have dyed-in-the-wool devotees (found with some simple detective work) and hope to bring about more. There are areas in New York City that don’t have a single one of the discount chain stores (Loehmann’s, Daffy’s etc.) within close proximity, where any of the discounters would do a thriving business, but are probably unaware of these locations.

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