November 14, 2013
Macy’s Proves Department Stores Are Relevant
L Brand’s CEO Les Wexner may think of department stores as being "irrelevant," but Macy’s and Bloomingdale’s clearly didn’t get the memo on the heels of a third quarter where comparable store sales for Macy’s Inc. increased 3.5 percent and profits were far ahead of Wall Street expectations. The company has increased earnings per share for 15 consecutive quarters.
"Our improved sales performance resulted from continued success in the execution of our key strategies — My Macy’s localization, omni-channel integration and Magic Selling customer engagement. In addition, business in the third quarter benefitted from intensified marketing strategies to emphasize the outstanding value in our merchandise deliveries," said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc., in a statement. "Both Macy’s and Bloomingdale’s performed well in the quarter, and we saw improvement in the sales trend in every region of the country compared with the spring season."
Wall Street was duly impressed with Macy’s results. Shares of the company stock were up more than nine percent in yesterday’s trading. The best may be yet to come, however, as Mr. Lundgren shared that business picked up in October, a positive sign heading into the holiday selling season.
"Our success in the fourth quarter will be driven by a wide selection of exclusive products from the most-wanted brands and designers. We will bring them to our customers, whether they shop in our stores, online, via mobile — or all three," said Mr. Lundgren. "The values we offer will be appealing. We will be better able to satisfy customers’ needs with an energized organization supported by the hiring of 83,000 seasonal associates. Our in-store and online executions will complement each other, and our marketing will clearly communicate the Magic of Macy’s and the exceptional holiday fashion at Bloomingdale’s."
Discussion Questions
Do you think department stores are approaching irrelevancy? Why do Macy’s and Bloomingdale’s continue to succeed while others in the department store business struggle?
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Terry Lundgren really does get props as a visionary who is also a dinosaur rider. He is transforming Macy’s into a place Millennials will shop at, while holding onto older customers as long as possible. And Bloomingdale’s retains its coolness aura.
On this one, I’ve got to credit the CEO. He’s steered the ship very well.
These two stores constantly promote very well, as my wife loves Macy’s (I’m a Kohl’s Guy). The discounts through their credit card program are a significant draw, and for the life of me, why wouldn’t you wait for a big sale, as they run hot deals as much as supermarkets do? There is an old saying, “What happens when you don’t promote? Answer: NOTHING!”
Their online service has greatly improved over the last couple of years, and both Macy’s and Bloomingdale’s will be huge players for years to come.
Wexner’s comments are ironic given the flat business in women’s specialty apparel these days. Meanwhile, a well-run department store like Macy’s can push the sales-driving buttons wherever they happen to be…home, handbags, shoes and so forth.
So the demise of the traditional department store is premature, as long as we’re talking about Macy’s combination of omnichannel, store and merchandising initiatives.
I think there is always a need for department stores, but they need to deliver an experience that is more than instant fulfillment and convenience. It is the image, the curation of the selection, the service, and the overall personal and social experience.
I think a core reason is innovation. Macy’s has done some wonderful renovations in their flagship store in NYC. The brand new shoe department for the ladies, which is big and beautiful and the new men’s department which is much improved.
I am, however, surprised at the results these articles point out because the customer service at Macy’s is not up to the level of Bloomingdale’s and not even close to that of Lord & Taylor. You can innovate and renovate till the cows come home, but unless sales associates are trained correctly or re-trained, the shopping experience at Macy’s will not be a totally satisfying one.
CEO Terry Lundgren’s vision is compelling and leverages Macy’s and Bloomingdale’s assets and brand identity to innovate and succeed. The “Boots & Bieber” promotion a few years ago was a brilliant example of drawing Millennials into the store and thinking differently about Black Friday. Internally and externally, the strategy is clear, concise, and motivates the team to achieve goals. Meanwhile, new experiments are being run all over the company with fresh ideas.
I laughed the first time I read the market research reporting the demise of the department store. Yes, some have gone away, but others have excelled.
There is a department store shopper. The ability of department stores to bring new products and styles to market make the shopping experience enjoyable. Most stores have great decor and a high customer service component. Department stores have learned to run promotions, which has decreased the high price image. There are brands you can only buy in department stores and this keeps the customer coming back. They have moved out of the good product category to the better and best quality. Walmart has never successfully merchandised any products of the better or best quality, only the good. This leaves the department store as the only place to purchase better quality merchandise.
Not irrelevant, but diminishing over time. And a one quarter increase in “comparable store sales” does not confirm that stores are on the upswing for the next several years. Increase comparable same store sales for 4 or more quarters in a row and then you have a meaningful pattern.
This guy “gets it”. He’s not only got a firm grasp on what’s important to the consumer but he’s apparently created enough alignment within the company to get enough execution to move the needle where it counts.
The idea of a department store was never wrong, only the execution on the timeless ideals they had long ago. And today we have to consider the omni-channel aspects of the execution, which Macy’s is apparently covering well enough, for now.
I wouldn’t say the department store format is irrelevant, but it is a very difficult format to execute well. Those retailer who are doing well understand their shoppers and create an experience and in-store atmosphere that is in line with their brand promise. I think there is a place for the moderately-priced department store as long as they try to understand their shopper and deliver the expected shopping experience.
Absolutely not. Department stores are still incredibly relevant and this is proven by Macy’s recent performance. Retailers are quickly adapting to new trends and are able to diminish the risk of showrooming through price matching, omni-channel fulfillment, loyalty programs, enhanced in store customer experiences and more.
Macy’s and Bloomingdale’s are seeing success because they are embracing the changing demands of shoppers and creating an environment that meets those needs. Many other department stores are struggling because they are clinging onto an old model that worked before the Millennial generation emerged and before the abundance of technology was placed at our fingertips.
The true winners will be the retailers who can grow with the customer base and respond accordingly to enhance the customer experience and break down the walls between channels.
Macy’s is widely viewed as one of the leaders in omnichannel retailing, and it’s exciting to see how they are leveraging the heritage and legacy of a great brand while adapting to an evolving model of the way shoppers want to buy and interact with the brand.
This question answers itself: Macy’s success is directly correlated to the failures of its competitors (JCP and Sears)…it’s not hard to “succeed” when customers are practically given to you. As for department stores irrelevancy: perhaps in the traditional sense, but maybe we need to think out of the (200K sq. ft.) box…isn’t Amazon really just the department store model moved online?
We don’t buy everything from discount stores, you know! We like our high-end stuff that is very emotional and then we fill it out in the middle, aka, the Department Store.
It goes without saying that moms love the department store for back to school, Christmas shopping, gift giving, etc. Decent quality, one stop shopping, etc.
The department store is long from dying, but it has always taken a great vision and visionary to keep the ship afloat. I worked for Federated back in the Jim Zimmerman days. We consolidated all the Federated technology under one roof. Another great visionary, but it took a village too!
The facts are in and no matter how you brake it down, Macy’s has a winning formula in a dismal economy. The question of relevance as in bricks and mortar for the 21st century retailer is a distraction from the needs of retailers. We should focus on the creation and continuing development of a sales plan that reaches out to one’s market specifics on a global scale, or as needed. Retailers that refuse to expand using all of the tools at hand are simply foolish.
The focus for information technologies needs to be highly relevant and adaptable platforms for now and future communication devices. Failure to allow for adaptation into future devices and software platforms is stagnation, and standing still will only get you run over in retail.
A look at Facebook’s slow or rather “no” growth into the next generation is very telling of the things that can happen when you take your eyes off of the latest and greatest IT apps and devices. At the same time, Apple’s stores are slowing down for many reasons. And then there is Macy’s using e-commerce and stores to make as much money as they can. Someone in that company “gets it” as in using all of today’s tools for success.
Retail needs the middle of the road department store – badly – whether people want to admit it or not, and there are winners and losers. Right now, Macy’s is terrific. They have great assortment, good promotions, well lit, attractive and inviting stores, and a good web-site. Then there is Bloomingdale’s; high-end, perennially cool, and sophisticated.
Mr. Lundgren and his team are doing a great job and that carries down to the regional people, and the store managers and associates. They are also benefiting from the debacle at JCPenney.
The “department store” will continue, I feel for a long while, although the choices and competitors may continue to contract even as there are so few remaining today.