Variety is the spice.

• Author: Traugot, Catherine Liden
• Position: Variety Wholesalers Inc. - Company Profile

Variety Wholesalers got Rose's cooking again with the recipe that pepped up its other discount chains.

John Pope was worried. It was 1985, and Variety Wholesalers Inc., the discount-retailing business his father started, had grown to 379 Super Dollar, Value-Mart, Pope's and P.H. Rose's stores. The company had been profitable since Pope took over in 1951, but national chains such as Wal-Mart were moving into small Southern towns that feed Raleigh-based Variety. He had had to close some stores. Revenues were waning.

Variety's strategy had been to advertise several items at or below cost, using those loss leaders to lure customers who would buy some higher-margin items, too. Lately, it hadn't been working. Picking up a trade journal, Pope spotted a story about a California retailer that offered all its merchandise at or below one price. That, instead of a new sale each week, is what attracted buyers.

Stashing the idea in his brain, he rode out the year. When the numbers came in, revenues were down 10%. It was time, he decided, to try the new recipe with 15 stores he was on the brink of closing. Renaming them Super 10, he priced everything at $10 or less. It was just an experiment to see if the formula worked. It had to.

Two counties away, in Henderson, another family-run discount chain was having problems. Rose's Inc. had grown from a general store started by Paul Rose before World War I into a chain that would reach 260 stores in 1990. Only 86 of them were in markets without a retail giant such as Wal-Mart or Kmart.

As competition grew, profits shrank. Earnings per share dropped from $1.17 in 1986 to 45 cents in 1989. Ken Gassman, an analyst with Davenport & Co. who followed Rose's for 17 years, recalls visiting the headquarters and being appalled at the large number of people working there. "There were piles and piles of invoices. I would ask about computerization, and they said, 'We're still heavily dependent on paper.'"

Another problem was distribution. Rose's failed to adopt a time-saving technique called cross-docking, in which warehouse merchandise is loaded directly from inbound trucks to trucks bound for the store. To make things worse, management had lost its fire. "We got a little complacent," CEO Lucius Harvin HI later told a newspaper.

The last member of the founding family to head Rose's, Harvin resigned in 1991. His successor, former Target executive George Jones, had big plans. To compete with Wal-Mart's 100,000-square-foot stores, he wanted to narrow the focus to health supplies, beauty supplies and clothing. He ditched high-priced electronics and items such as faucets and fax machines. Name brands were dumped for cheaper ones.

The plan was crippled by a soft retail market and lack of advertising money. After losing $11 million in the first six months of 1993, Rose's filed for bankruptcy protection. The company planned to reorganize, but Jones left the next year...