Gemco Gets More Aggressive
Amid the increasing clamor among discount retailers for more customers, the 77-store Gemco chain is adding a new voice: For the first time in its 26-year history, the members-only discount retailer is signing on with an outside advertising agency, Dentsu Young & Rubicam Inc. of Los Angeles.
Dentsu Young & Rubicam will be handling “overall marketing and creative-positioning strategy,” said Paul Hitzelberger, vice president for sales support at Gemco. Gemco’s in-house agency, Lu Gem, will continue to handle production, media buying, cooperative advertising arrangements and other work, he said.
The change comes at a time of fierce competition in Southern California between discount chains such as K mart and Zodys--and even some medium-price department stores--pushing brand-name merchandise at lower prices. In addition, the local expansion during the last two years of Dayton-Hudson Corp.’s flashy Target stores has heightened the rush for buyers’ dollars.
“The competitive environment has been changing with the advent of Target stores, which are seen as aggressive and upscale, whether they are or not,” said Chuck May, vice president and management supervisor at Dentsu Young & Rubicam. The “formidable competition” of K mart and Fedco--another membership discount store--”all help to suggest that they (Gemco) might want a more aggressive strategy,” May said.
One of the agency’s first tasks will be promoting the grand openings of two new Gemco stores in Rowland Heights and Encinitas. The design, “ambiance,” departmental locations, check stands, even color schemes have all been changed, Hitzelberger said.
“They’re basically Gemcos with some additional topspin,” May said. “They’ll be upscale in appearance, plus have ‘everyday low prices,’ as Gemco says.”
Gemco’s Hitzelberger denies that competition is the reason behind the chain’s new agreement with Dentsu Young & Rubicam. “It’s just good business to have professional support when you’re spending big media dollars,” he said.
Neither Hitzelberger nor May would say how much the Gemco account could be worth to Dentsu. But “a $2.2-billion company (1984 sales) would naturally have a pretty reasonable level” of spending for advertising, Hitzelberger said.
Gemco, a division of Dublin, Calif.-based Lucky Stores Inc., has seen a softening of earnings during the last year, in part because of an 11-week strike last fall at its Southern California stores. For the third quarter ended Oct. 28, Lucky’s department stores division, which includes Gemco, reported a pretax loss of $4.9 million on sales of $530 million. For the same period in 1983, the division posted a pretax profit of $582,000 on sales of $487 million.
