DOMINICK'S HEAD SEES BATTLE WITH DISCOUNTERS ESCALATING

NANCY BRUMBACK

ROSEMONT, Ill. -- The Chicago retail market is under siege by operators of discount stores, which have almost doubled in number in the past three years, according to Dan Josephs, president and chief operating officer of Dominick's Finer Foods, a leading local chain.

Josephs said the number of Chicago-area discount stores has grown from 68 outlets in January 1990 to 134 in January 1993 and will continue increasing to an expected 200 by January 1996.

"The traditional supermarket will be required to redefine itself as new formats reshape the retail environment," Josephs said. Customers also have undergone a "fundamental change" and are shopping today with more focus on price.

"The days of increasing profits through pricing are gone," he said.

Josephs made his comments at the Merchandising Executives Club of Chicago's annual President's Night. About 400 people attended the event.

Josephs also attempted to put an end to reports that Dominick's, a 100-store chain based in Northlake, Ill., is for sale.

Reading from a memo that James DiMatteo, chairman and chief executive officer of the chain, sent store managers in mid-January, Josephs said, "Our company is not being sold. We are

not in the process of selling our company. We are not entertaining any offers about the sale of our company."

James DiMatteo is the son of company founder Dominick DiMatteo Jr., who died three months ago.

Overall, Josephs said 1993 was a strong year for Dominick's and that the chain expects increased help and information from its vendors as it goes forward.

Josephs also said the company's 16-store Omni low-price division "is not going anywhere except ahead to a very bright future."

The future for Dominick's, which long has controlled this market with Jewel Food Stores, Melrose Park, Ill., is certain to include more competition with discounters.

Josephs said five Super Kmart Centers are set to open here early next month and 13 are expected to be operating by January 1996.

Wal-Mart has gone from six stores in 1990 to 29 in 1993 and a projected 41 in 1996. Sam's Club, a Wal-Mart division, had two Chicago stores in 1990, 12 in 1993 and 22 are projected by 1996, Josephs said. Target entered the market in February 1993 with about a dozen stores and projects 30 units by 1996. Cub Foods, wholesaler Supervalu's no-frills format, has grown from 12 stores in 1990 to 17 in 1993 and is projected to reach 20 units by 1996. Even Dominick's Omni discount division has expanded from eight stores in 1990, to 15 by 1993 and a projected 18 by January 1996.

"The incremental overlapping, the items we carry that overlap with what these stores sell, is about $17 million a week," Josephs said. "That's 10% of our entire marketplace and that has had an impact on our marketplace."

To meet this challenge, Dominick's is developing four supermarket formats -- the conventional Dominick's, a combination food and drug store under the Dominick's banner, a new "fresh store" focusing on perishables and the low-price Omni format.

The first fresh store opened last year in the Chicago suburb of Vernon Hills. Josephs urged grocery and general merchandise company executives to visit the store.

"Take a look and give us ideas about what should go in a Dominick's fresh store on your side of the store," he said. "This is a whole different concept, and you can help us bridge the gap between the fresh and nonperishables sides of the store."

Jospehs also asked vendors to help Dominick's become a more efficient retailer by recognizing the chain's commitment to category management and working within that context.