A New Start for Lord & Taylor
Lord & Taylor won’t have Federated Department Stores around to ignore it anymore.
The upscale department store chain is now the property of NRDC Equity Partners and National Realty & Development Corp. following the Federal Trade Commission’s approval of the deal.
In the past, NRDC Equity Partners (a partnership of private equity firm Apollo Real Estate Advisors) and National Realty & Development have said they plan to continue operating Lord & Taylor as a retail venture. It has also expressed support for CEO Jane Elfers and the current management team in place at the chain.
In June, NRDC principal Richard Baker told Forbes, “Our plan is to operate the company, review every store, understand which should be left alone and which should be modified. The flagship will be analyzed like everything else — does it need to be that large? Maybe it only needs to be half that large.”
Mr. Baker has said he believes the consolidation that has taken place within the department store sector in recent years will help Lord & Taylor increase its customer base.
Discussion Questions: What will Lord & Taylor need to do to grow? Will it be freer to make the changes necessary for growth now that it is no longer
part of Federated?
In recent years, Lord & Taylor has sought to enhance its fashion image and attract a younger and more fashion conscious consumer with clothing lines
such as Lauren by Ralph Lauren and Ellen Tracy. The jury is still out on whether this strategy is working.
“Our plan is to operate the company, review every store, understand which should be left alone and which should be modified,” said NRDC principal Richard Baker. “The flagship will be analyzed like everything else…”
Sounds good to me. There isn’t much mystery what success would look like – it would look like what L&T used to look like: fashion leadership, a good mix of private label and (strong) designer brands, and dominance (first- or very competitive second-place) in the localities it operates in; and there isn’t any mystery either what is necessary — though not necessarily sufficient — to achieve this: a competent management team with sufficient time and resources to make it happen. Clearly that didn’t happen under May (whose mis-stewardship lasted for far more than a blip); hopefully the new ownership will profit from the (many) mistakes previously made.
Will management be freer to make changes now than under the Federated ownership? L&T was only Federated owned for a blink of the eye. Addressing the deeper question of positioning in the market…
Nordstrom has established dominance in the moderate niche of the luxury department store segment through outstanding service, pleasant shopping environments, and now, strongly customer-centric assortments. Can L&T create a niche it can dominate? Perhaps. Nordstrom has weaknesses which can be exploited in younger age demographics and in overall fashion trendiness. Saks and Neiman have weaknesses in brand positioning, consistency of assortment, and customer service.
If truly interested in creating a sustainable and profitable position, take the time to assess the landscape. Find a combination of needs not currently met in an effective manner. Analyze the skills, technology and resources needed to meet those needs. Rebuild accordingly. If it sounds simple, in theory it is. In practice it takes discipline, realism, hard facts, and a willingness to appear to go backwards before you go forward. As a privately held chain, L&T has that opportunity.
Lord & Taylor had great cache prior to ownership by the May Company. May changed the merchandise mix from Manhattan upscale to a St. Louis version and hurt the brand. The new owners have location, location and location. If they can embrace an upscale private label model coupled with selected designer brands in a back to the future play that harkens back to their pre-May Company days, their future is bright.
Lord & Taylor has 2 major merchandising choices: (1) grow the famous label business using the same brands Macy’s, Nordstrom, and Saks use and/or (2) grow a unique fashionable private label business, like the “Triple A Team” (Abercrombie & Fitch, Aeropostale, American Eagle). The rewards are greater for #2, and although the risk is greater too, it can be managed by market testing and gradual adoption. While the Manhattan real estate market is red hot, it would pay to redevelop that location into mixed use (offices, condo’s, and retail space).
Do you really think a real estate development firm gives a damn about the venerable Lord & Taylor’s fashion image? And how much leeway do you think the chain will get in upgrading, remodeling or building new stores?
Real estate companies are not retailers, nor do they want to be. Give me an example of one that does and I’ll rethink my position.
Unfortunately, Lord & Taylor is a bit of a solution in search of a problem. The value lies in the real estate and the brand, not in the merchandising. A somewhat radical idea, but one that may fit in with the interests of the current owners, is to revamp the entire chain by getting rid of the larger department store environments and capitalizing on the brand equity in a more upscale larger boutique environment.
Luxury is, and looks like it will remain, hot and L&T could move into this area easier than going downhill. While risky, it could allow the current owners to get their payback from the real estate and get it a second time by selling the re-sized chain.
I agree that the recent department store consolidation will help Lord & Taylor grow. In several markets in the Northeast, Lord & Taylor will be the only upscale department store besides Macy’s. It is too bad that the store had exited half the country a couple years ago. Many of the stores were new or recently remodeled. Some say Lord & Taylor will have to go upscale to succeed. But maybe it could also pick up several of the mid-market brands – Liz Claiborne, Sag Harbor – that it has dropped. These brands might be more likely to cut deals with Lord & Taylor, since Macy’s will be favoring its own private brands (INC, Alfani) from now on.
Furthermore, since NRDC also owns Linens n’ Things, Lord & Taylor could possibly now carry housewares. It could start to carry the Nate Berkus line to compete with Macy’s Martha Stewart products (set to arrive in fall 2007).
Some of the newer ads feature a faded L&T handwritten logo behind “Lord & Taylor” written in plain script. I hope they don’t get rid of the handwritten logo. This differentiates the store from the plain script logos of Nordstrom and Macy’s.
In this time of mergers and sell outs, there is only one sure way to stay on top: Customer Service. Everyone can go online and buy items at any store; any vendor. Shopping has to be an experience for the customer. It is the little things that go a long way. Having fresh coffee at customer service while they wait on their gift wrapping. Make the cosmetics department as exciting as possible with contests, music and fun. Visually wow the customer the moment they walk into the store. Every salesperson and manager needs to acknowledge every customer. Have management on the floor more; hand written thank you notes; a tea room would be awesome; a salon; Senior’s Day. Make it their store where they feel at home and know the employees. And, of course, offer merchandise that not everyone has. Don’t give them any reason to shop anywhere else. Management has to be positive for the associates to be positive. Sales associates are the backbone of the business. Treat them well. Praise them for good work; and sincerely. Have very good contests for associates. Let different departments team up together. Offer the best in benefits. Everyone trades a day of their life to come to work for someone. Treat your employees like gold and you will have the best store ever!
I’m inclined to think a branded approach is better than private label, simply because everybody (it seems) is going private label, and whenever everybody is doing something, there’s profit to be made by doing the opposite.
Also, as someone above noted, the branded products have a reduced number of outlets, and should be willing to offer great terms and support.
Here is my bet: The flagship Lord & Taylor location in New York will be sold for major dollars and Nordstrom will take part of the space and some other retail giant will take the remainder. As for the other locations, look for Nordstrom to swoop in (for example, Chevy Chase, MD)
There will be a long, slow good-bye to Lord & Taylor.