Pier 1 Seeks Safe Port in a Sea of Competitors

New York —Pier 1 will continue its “less is more” merchandising and market strategy, broadening its price point spread as it further edits assortments — reducing its SKU base by 20 percent — all in an attempt to refocus its business against intensifying competition.

“After this past year, we were looking at it again saying, you know, we feel comfortable going down to 2,800” SKUs, from an already stepped-down 3,200 items, said Cary Turner, executive vp and cfo, at an S.G. Cowan Consumer Conference last week. Pier 1 previously had maintained about 3,500 SKUs in its mix.

Pier 1 has been surrounded in recent years by competitors entering its market space, chipping away at the segment and making a grab at its customers. The situation has cost it top-line sales and eroded profits.

Most notably, Target's Global Bazaar seasonal section has attracted the eyes of executives, observers and, most critically, some customers. But at the early stages, the erosion in its market share was cast off merely as a marketing problem by the company's management, so that now the merchant is racing to make up for lost time.

Indeed, Target's expansion in the segment is credited by some for Pier 1's upmarket push to a “better-best” pricing and assortment strategy. The company has also shifted its merchandise style focus to what it calls “modern craftsmanship” with cleaner and simpler lines and a “more sophisticated” color palette, Turner noted.

“We want to broaden the price points because what we found was if we really move up a bit and distinguish between 'better' and 'best' within the store, [consumers] can make those choices” easier, whether buying for themselves or as a gift, Turner explained.

“There continues to be more and more competition — this year, dramatically so,” Turner acknowledged. “Yes, we deal with the discounters and yes, we deal with the high-end guys. And if we're doing our job right, we're going to be on the north side of this quality, image and value-to-price relationship, where we can compete against the Targets and the World Markets of the world. But we can also be a special value when we compare ourselves to Restoration Hardware, Ethan Allen, Pottery Barn, Crate & Barrel and others.”

The edited merchandise initiatives will necessarily translate to a smaller vendor universe, he said, even as assortments churn at a 70 percent annual rate.

The mix will also shift slightly with a greater emphasis on decorative accessories. Furniture will also expand slightly, while seasonal will be squeezed.

Turner said the merchandise mix is currently about 40 percent furniture, 13 percent housewares, 25 percent accessories and 7 percent seasonal.

Pier 1 will continue to scale back its net store growth, but it will further push its direct-to-consumer effort, kicking up catalog mailings to 10 million copies this spring, he said.

“If you go back to the question of where is our niche and what is our reason to exist, when we're competing against all of these players,” Turner said, “we really want to provide something new, unique and different to the consumer at a value that complements what she already owns. If you think about that, that allows us to stand right next to every Target in North America and compete against all the high-end players.”