Case Study [FILENE'S BASEMENT]

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SUMMARY: FILENES BASEMENT
Filenes Basement makes an integral part of USD 11bn off-price retail apparel industry. Currently, it
operates in four major locations with various stores operational. The existing stores are performing well
above expectations for Filenes and therefore company plans to move further to increase its presence,
especially in Chicago region.
The business operandi mainly revolves around selling merchandises which are slow-paced and lagging
turnover. It basically functions as discount specialty store. Automatic Markdown Plan is the method the
firm uses to price the merchandises according to the time-lapse of the unsold-product. The
merchandises are mainly from three categories, out of which outside resources make huge proportion.
Those included the brand-name manufacturers (which made 75% of Filenes inventory pool), retailers
(12-13%) and remaining as the Filenes own private label program known as the The Basics.
However, the company didnt just focus on overstock merchandises. Rather there existed a buying
department which purchased value-added products from the pool of outside resources and sold them
further at a discount. Extensive warehousing and distribution network helped fetch special deals due to
manufacturers pre-season merchandise program, in-season overruns/cancellations, post season
surpluses and pack-aways. Hence, inventory management was an important plus point for Filenes
Basement.
The product mix remains the focus of the organization as it promotes coordinated products (which is
termed as buying groups) rather than unmatched ones.
During 1990s, company experienced a management leveraged buyout from its parent company
Federated Department Stores, mainly on account of strategy differences between Filenes management
and the parent company. The management wanted a strategy deviance from the long practiced
departmental style to off-price apparel market. During the same decade, firm listed itself and became
public limited organization. Subsequent offering i.e. Seasoned Public Offering, followed the very same
year. The finances from such offerings boasted the mission of organizational expansion at an
accelerated pace.
Customer awareness works in favor of this company as its effect is directly proportional to the sales
quantum. That factor was contributed by few of the salient features of its customers. For example, their
educational upbringing (40% college going customers) which translated into higher disposable income
(66% of which have USD 25,000).
In terms of prices, Filenes provided 20-60% benefit and this trend was in 1990s. The products, however,
were of medium to high quality, latest season, branded merchandises, with trendy colours and cuts. The
range covered all major consumer segments i.e. Men, Women, Children and Infants apparels and
accessories. Service delivery also played an important role for Filenes business as it remained conscious
about the ambiance factor in the business operations layout.

Case Study [FILENE'S BASEMENT]

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COMPETITION:
Direct Competitors Indirect Competitors
Marshalls, T. J. Maxx, Loehmanns,
Ross Stores, Nordstrom

Branded merchandises at
discounted price
Dress Barn, Hit or Miss


Limited branded merchandises at
similar discounted prices

Marshalls Poses largest competition for Filenes basement.
Also with extensive store network of 405 stores, it
mainly covers suburban shopping regions.
Moreover, it benefits from extensive retailers
network. It operates under the umbrella of parent
company Melville. Product portfolio is same as
Basement i.e. branded merchandises and private
labels, 20-60% discounted prices.
Difference: Apart from major consumer segments,
Marshalls had home and gift wares in its store.
T. J. Maxx Stores number is 440 with main concentration in
suburban areas. Similar pricing strategy with
differentiation at broader merchandise mix which
included accessories, shoes, and domestics along
with others.
Ross Stores With 200 stores with comparatively smaller store
sizes i.e. 24,000 sq.ft. Prices remained within the
same range.

MARKETING/ADVERTISEMENT:
The advertising mode was mainly used by the company for item/price promotions and was print media
centric i.e. daily newspaper and Sunday inserts.
PROBLEM STATEMENT:
Company intends to expand its existing operations in other locations and is considering two options in
this regard. For this purpose the senior management has assigned real estate president to evaluate
feasibility of proposed site options.
SOLUTIONS:
Remain focused on existing factors of growth, for example the firms sales per square foot was the best
among the competition. This factor is important in terms of space utilization efficiency of the floor
space.
Case Study [FILENE'S BASEMENT]

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With companys prior expansion strategy, company focused on two important factors (a) highest sales
potential and (b) concentration of shoppers based on demographics in a particular region.
Out of regions/places considered to open stores, 13% ( 18 out of 140) were suitable for establishing
multiple discount stores whereas 24% ( 33 out of 140) were suitable for single Filenes store. These
statistics were reached upon after extensive consideration on demographic centers, competitive
presence which those demographic regions (to know cannibalization proportion), space available etc. All
these and various others aid in gauging sales proportion in comparison to cost structure in order to drive
to project feasibility.
According to companys New Modeling Efforts three factors were given further importance in site
selection process i.e. population, income and education. Moreover, factors of longetivity and
advertisements were important as well.
POSSIBLE OPTIONS:
Mentioning the criteria, the Chicago market is definitely a viable option as it fulfills the criteria in terms
of relevant demographics and population number. Moreover, with disposable income of USD 31,556,
this region also fulfills income bracket market the firm caters to as its targeted customers.
Among the two prospective sites, namely Mount Prospects and Naperville, the later seems fairly feasible
due to a salient reason. Naperville does not specifically lie between other Filenes basement stores and
as the research conducted suggested greater percentage of success for singly operated stores in a
particular region it has a better option. Mount Prospects on other hand falls between two existing
Filenes stores causing further cannibalization.