BrainTrust Advice 2006: ‘Told You So, Macy’s’
You could say 2006 has been a lot of things, but if you work for Macy’s, one thing you couldn’t say was that it was boring.
The retailer began the year still looking to integrate the businesses it acquired from May Department Stores and, in the process, launch the first truly national department store banner. Of course, that meant retiring a number of iconic department store names, sometimes over intense objections from customers in places such as Chicago.
Over the course of the year, Macy’s sold off Lord & Taylor as well as May’s bridal business. It doubled up stores in some malls and sought to establish a more upscale profile for many of the stores acquired in the May deal. The chain sought to sweeten the pot for customers at newly acquired stores with the introduction of a new rewards program that enabled shoppers to gain points quickly and with a faster payback than those previously in place.
Macy’s continued to focus on building its already strong private label business and also went out and signed exclusive deals with Martha Stewart and others.
A lot went on over the year at Macy’s and RetailWire’s BrainTrust was there to offer advice every step of the way.
Challenges and opportunities of building a national banner
“In Detroit, we loved Hudson’s. Then Hudson’s became Marshall Field’s. Many older Detroiters still refer to the stores as Hudson’s, which just confuses their children. Now, Marshall
Field’s will become Macy’s. I assume some people will still refer to the stores as Hudson’s, some will insist on calling them Marshall Field’s and most will adjust to calling
them Macy’s. Will there be gigantic consumer pushback? Not likely unless the name change is accompanied by a change in merchandising and/or pricing. Brands are a lot more perishable
than branders like to believe.” – Ryan Mathews, Founder/CEO, Black Monk Consulting
“Consumers identify with local companies and names they trust. If it is a name consumers value, why go to the expense of changing it? One size certainly does not fit all. And
many companies have found that bigger is not always better. Federated is certainly taking a big risk in changing valued brand names such as Marshall Field’s in Chicago… It is
now up to Federated to show consumers why the name Macy’s is better in terms of product selection, price, services and overall atmosphere or they will face continuing sales declines.”
– Odonna Mathews, President, Odonna Mathews Consulting
“Macy’s is undermining its own rationale for its single national brand strategy. Although the following language is from a Macy’s ad dated 11/7/2006 in the New York Times,
it’s typical of many other Macy’s ads: ‘This advertisement applies to Macy’s stores in NY (excluding Binghamton and Horseheads), PA (excluding Altoona, Frazer Heights, Greensburg,
Hermitage, Homestead, Monaca, Pittsburgh, Scranton, State College, Washington, West Mifflin and Wilkes-Barre), VA (excluding Hampton, Lynchburg, Newport News, Norfolk, Richmond,
and Roanoke), CT, DE, MA, MD, ME, NH, NJ, RI and VT.’ The Big Strategy: One brand name, national advertising, consistency. The execution: one brand name, inconsistency.” – Mark
Lilien, Consultant, Retail Technology Group
Store brands and exclusive labels
“Private label requires that the organization have the skills to identify trends before their customer is ready, interpret those trends for their customer, and bring them to market
in time and at the right price. Additionally, the organization absorbs the entire financial risk of the assortment, elevating the requirement for a flexible and efficient supply
chain to the same importance as the trend management capability. Federated has invested an enormous amount of time and money to develop, enhance and sustain these skills. Both
in terms of flexible supply and trend management, the organization has technology, processes and people dedicated to being excellent in these mission critical capabilities.” –
Don Delzell, Partner, Retail Advantage
“‘Fast fashion’ translates to ‘expendable fashion’ and that one factor is a huge driver for the recent rush in private label apparel (along with the ongoing margin and differentiation
benefits). Blame H&M, Zara (and Limited before them). As vertical players’ product development cycle and trend interpretation timelines accelerate to head-spinning speed (how
about two weeks in the case of Zara?), new standards are set for the big guys… standards that make the efficiencies of do-it-yourself brand-building more attractive than ever.
Zara, Federated, Target, Wal-Mart, Penney’s… all have invested major bucks to hone their private label and product development prowess.” – Carole
Spieckerman, President, newmarketbuilders
Discussion Question: What advice do you have for Macy’s going into 2007?
- Macy’s Learns New Ways to Communicate – RetailWire 11/09/06
- Store Brands and Exclusive Labels Make or Break the Retailer – RetailWire
9/12/06
- One Too Many Macy’s x 85 – RetailWire 9/6/06
- Macy’s Looks to Reward Loyal Customers – RetailWire 07/17/06
- Macy’s Takes Hit Over Name Change – RetailWire 06/07/06
- Federated Takes Local Approach in Chicago – RetailWire 04/28/06
- Another May Question Answered: Federated to Sell Lord & Taylor – RetailWire
01/13/06
Hopefully this will be a learning lesson to Federated in regard to the way that they launched Macy’s. Granted, I enjoy shopping at Macy’s in the Detroit area, even though I worked for Hudson’s and was there shortly before the Marshall Field’s transition.
You have so many ways to look at this from both a consumer and a business owner perspective. You have the customer base to look at, and how to keep them and attract new customers. When you have a store in operation for over 100 years and generations of customers continuing to shop with you, it becomes a challenge to retain them and attract new ones. By the same token, it becomes costly to operate a handful of stores under one name (such as Marshall Field’s) when you have such a national brand as Macy’s.
Eventually, Federated and their leadership will see what could have been done differently in the end. In the meantime as consumers, we need to understand that we are living in changing times. Our retail industry today is not the same as it was 20 years ago. There is more competition, more economical and socio-economical issues that impact and persuade consumer decisions, and over time we may see department store names come and go. However, in all fairness, it is important to give new stores a fair try and see what they really have to offer. Coming from a faithful Hudson’s and Marshall Field’s shopper…I like Macy’s! In fact, I shop at Macy’s more now than I did when it was either Hudson’s or Marshall Field’s.
I read this at the Field’s Fans blog today. It was written by a man in New Jersey. It sums up perfectly why Federated and Macy’s have no way out of the mess they created. No amount of promotion, sales, phone calls or $10 gift cards will help Federated because it doesn’t understand the basic problem. Marshall Field’s brand was better than Macy’s brand. Midwesterners, particularly Chicagoans, will not shop at Macy’s. Period. Here it is:
“Just got back from Chicago a few days ago and went to State Street Macy’s. As soon as you walk in the door it just hits you all at once that Field’s is gone. Yes, the beautiful architecture is intact and SOME of the merchandise is the same, but there was just something missing. Maybe it was the catchy Field’s way of displaying merchandise or the Christmas mood that you would feel as soon as you walked into the store. I walked to the basement and it is looking pretty sparse down there. Where once there were tiny little boutiques, now stands little tables of clearance merchandise. I have to confess that it appears that Macy’s tried their hardest to make that store look beautiful and if you’re from the East Coast, they certainly went above and beyond what we get out here, but when it came down to the wire, it just wasn’t the same. I didn’t get the same vibe of Wow– I am in the Midwest– in the nicest dept. store in America– getting stuff that I cannot find anywhere else, but Field’s. Such a shame that this has all been wiped out. I have been reading this blog for quite some time and have made comments from time to time. I couldn’t believe that what everyone was writing about had come true but I have seen it with my very eyes. FDS has ruined State Street and all Marshall Field’s. I will never understand why Field’s couldn’t have run as a separate division. As everyone is saying–the proof is in the pudding. If FDS is too short sighted to see what they did to Field’s and how they have ignored the customers, well they certainly don’t need my money…”
Unfortunately, the damage from the name change is already done and, like most damage, it’ll more difficult to repair than it was to create.
To some extent, Macy’s will just have to take their lumps in comp sales for this year, especially in the Chicago market. There are some folks who will never be won over and others that will give them the chance, but Macy will need to execute great product and great customer service without missing a beat.
Maybe they should target the top Field’s credit card customers who haven’t used their Macy’s card within 6 months of the name change and send them gift certificates or put a credit on their charge account to get them into the door. Then impress the heck out of them.
The good news is about the comp sales is that after a year they will have a new lower benchmark, which they should be able to build back on to.
I feel the need to reiterate: Macy’s should develop Marshall Field’s as an exclusive brand for tailored apparel. Possibly Hudson’s too, if it obtained the rights as part of the May Co. acquisition. This would appeal to loyal shoppers of the old banners. These valued brands are part of Macy’s intellectual property portfolio, and I would argue that they may have deeper intrinsic value with consumers than INC or Alfani, to name two.
Return Marshall Field’s to State Street. Everyone I speak to refuses to shop at Macy’s. The reasons are too numerous to list, from the emotional (attachment to the name) to the rational (lack of XL sizes and dissatisfaction with poor quality and service). Many people can’t stomach the gangsta rap playing as soon as you enter the store, as if Chicago were New York or LA. Each week I get several more flyers, catalogs and coupons (despite asking repeatedly for the flood of mail to stop) and each one only angers me more. I get it. It’s Macy’s. Why doesn’t Federated get it? Chicago shops at Field’s.
My impression is that Federated fell victim to the “tidal wave of change” mentality that so often affects and messes up large companies. It usually goes like this….1. A few top executives and {accountants} at Headquarters put together a bold and visionary new plan that really does look great on paper. The Board of Directors concurs. 2. Many mid-level managers and regional executives are generally excited and supportive but raise legitimate issues concerning strategy and implementation that should be considered and dealt with. 3. The wisdom (roadblocks) of these managers is gradually silenced either by removal from the project or by their being “convinced” that they are not forward thinking or creative enough. Henceforth only “good” news makes it up the line. 4. Consumer polls are administered and interpreted by management in a way that supports what they want to do. Results that do not mesh with “the plan” are rationalized away or buried. 5. Ad agencies and PR and Marketing consultants are chosen on the basis of being rabidly in-sync with the plan…people that top management can work with. Another valuable path of devil’s advocacy is lost. 6. The plan is implemented and while not a total failure, it is embarrassing, costly, and disastrous enough to create much internal dissention of “I told you so’s” and create much external pressure via falling stock price and ratings. 7. Questions arise as to the capability of the top executives to salvage the situation. People inside spend so much time “fixing” and “spinning” that the core business is left to run on its own. Some management and strategy changes are made to show that the corporation “is listening.”
I doubt that Federated (Macy’s)is going to be willing to listen to advice any more now than they were before, but here goes: As soon as possible while there is still strong value, sell off to a reputable merchant most of Macy’s North division assets, including intellectual property rights to all the original sale names, brands, logos, brandnames, and recipes especially at Marshall Field’s State Street flagship. Retain and operate some stores in smaller cities and in a few of the suburban mall locations in Chicago, Detroit, and Minneapolis (e.g..Mall of America) as Macy’s in order to have a Midwestern presence for your national department store and in order to experiment and gradually learn more about operating successfully in the Midwestern market. Then, compete fully and fairly, and may the best store with the best merchandise, the best customer vision and the best service in each market win.
My advice to Macy’s would be to fully leverage the Cellar as a culinary destination and a true point of differentiation in the department store world (every other retailer sends you to the food court). Why not make sure that every Cellar location had a sit-and-stay-a-while ambiance, offering scrumptious breakfast, lunch, dinner, and snack offerings along with free Wi-Fi and culinary events? A couple of main floor grab-and-go mini cafes would be a great addition as well.
Much is made of Federated’s private label prowess; however, Mr. Lundgren definitely understands the power of boutique brands. Spicing things up with limited run boutique presentations from up-and-coming designers in every store (not just the flagship) would help drive frequent visits and increase the cool factor. Borrowing from other retailers’ best ideas isn’t a bad way to go. I’d emulate Nordstrom’s open display cosmetics and Barney’s gorgeous and practical downward-looking jewelry displays for stand-out starters.
Federated: R-E-P-E-N-T!
In the short term, Federated/Macy’s challenge will be to get comp store figures for the former May stores up to respectable enough numbers that when they come out (ETA: FE07) the stock doesn’t collapse.
Long term ? Although I’ve seen no one else mention it, I think the challenge for Federated will be to hold onto both Macy’s and Bloomingdale’s: almost inevitably, the two chains will follow different profitability tracks, and then will come the pressure to divest the “underperforming” one. (That’s why DH became Target Corp, and what paved the way for the Marshall Field’s mess we see today.) And I’m not sure that would be a bad thing: Macy’s has never regained the “edginess” that it had when it was independent, and as long as it has a gentlemen’s agreement wih Bloomies to minimize its high end presence, it never will.
In my own local area, there really isn’t too much visible change in appearance. The store, while remerchandised a bit, hasn’t changed too much. It does seem just slightly more open. It holds true of both locations in my area. The differences seem to be in price and service. Price seems to have moved dramatically up. Service, while not terribly different, does seem a bit weaker. Although that may be only perception.
I do like the uniformed appearance of their staff. That, from my view is a positive change. It’s unlikely that service levels will move up or down too dramatically quickly since they likely have the majority of the same staff. There has likely been too little time for any changes in training or influence to take effect.
Macy’s challenge, like any department store, is to not become irrelevant and part of a dying breed of retailing. Although, like with supermarkets whose death has been predicted for decades, department stores may yet have the opportunity to stave off the obituary. In order to accomplish that, Macy’s would need to become a preferred destination. To do that, there must be a reason to go there.
Today, it’s simply a choice and not a first choice any longer for many consumers. Making it a first choice and a preferred destination will require distinction among their peers, as well as other types of retailers offering the same products. That will be difficult without a clear strategic vision and a continuous effort to ensure that they are meeting their vision and the consumer’s expectation of that vision. Of course, their vision has to be one that will inspire the consumer to respond in kind to their efforts.
I’m not clear that any department store other than possibly Nordstom’s has a vision clear enough. As a result, competition will continue to erode their profitability and their existence as we know them today.
I’ve been living in Chicago for 10 years…2 things that I’ve learned about Chicagoans.
1) They love all things Chicago.
2) They hate all things New York.
Macy’s broke both rules.
Take a handful of Macy’s locations spread around the country. Without announcing anything to the public, change the compensation plan on a pilot basis to pay everyone in the store a commission for selling anything in the store. Train the staff to keep personal lists for reaching out to the best customers. Post the sales results for each staff member on the break room bulletin boards weekly. Measure the profit impact monthly, and after some procedural and training adjustments, roll out the new compensation program to the whole company with no exceptions after 12 to 18 months of testing. In other words, copy what Nordstrom’s has been doing for generations. How could this strategy fail? Guarantee: the test stores will double the comp sales increases of the other stores.
I shop at the Macy’s in the Mall of America in Bloomington, MN. I think there’s an association that Macy’s and Nordstrom (also at the mall) are similar when in actuality, Macy’s has offerings for many levels of customers. I’m a typical Kohl’s/ Target customer and found affordably priced apparel at Macy’s, so I’ve gone back. I initially expected that they would be a higher-end retailer exclusively. I think a lot of people associate Macy’s with not being affordable. Marshall Field’s did have a similar mix but I think shoppers were more aware of it and it didn’t feel unapproachable. I think that Macy’s has to sell that message that they are high-end but that they also have the moderate prices. Maybe a marketing campaign that would sell the idea of try us, you’ll like us.
Mark’s suggestion is an interesting one. At least it’s worth experimenting with different levels of payroll and customer service to see what happens. Certainly the Macy’s store in my area (formerly a Marshall Field’s) appears to have visibly less customer service than its predecessor, which is also leading to a visibly haphazard selling floor…at least in women’s apparel.
Seeing the tag line “Marshall Field’s is now Macy’s” in recent ads is likely to get the response, “No, it’s not!” from many customers.
At the same time, Macy’s continues to take a less promotional tack than the May Co. stores that it acquired, leading to some truly bizarre decisions such as keeping its #1 private label (INC) off sale during Black Friday, at least in its Mall of America branch.
Is there anything so distinctive today about INC, Style & Co., Charter Club and so on, compared to Macy’s competitors such as J.C.Penney? Federated might improve its results by putting at least the same effort into national-branded product development (in partnership with its key resources) as it does on private label. High margins are great but so are top-line sales.
A primary task might be establishing and sustaining coherence in promotional activity and consumer connections. Macy’s appears to be doing many different things, and perhaps, has lacked the brand focus that a Nordstrom has benefited from. Take this year, establish a focus and deliver repeatedly to that focus. Don’t deviate, even if the initial results aren’t up to expectations.
A secondary task could be relentless management effort around what the corporate culture truly is. I’m not sure what Macy’s values are, and people I know who work there aren’t either. The mid-department store world is yours, for now. Consolidate. Become so incredibly good at being Macy’s that no one can or will effectively compete against you. If Macy’s is to be a national brand, make it one.
There is obviously lots of equity in the names they will be abandoning, such as Marshall Field’s. Long run, this feels like the right strategy, but short-term, there will be challenges. The worst thing they can do is to try to have their cake and eat it too by being wishy-washy on the transition. I was involved with Deutsche Telekom trying to migrate the name for landline telephone services to T-COM and it was crazy! They kept the “Deutsche Telekom” name on the bill but tried to win new customers with the “T-COM” name! This was obviously the 40 year plan!
My experience with a McAlpins store becoming Macy’s was to experience what other people have commented on: less desirable consumer service and experience. If Macy’s replaces a local store and eliminates the most loved characteristics of the local stores, they risk a negative reaction from loyal customers. What to do?
Even Wal-Mart is finding that the one store fits all strategy is not the most effective strategy. However, in implementing the strategy of differentiating stores based on local interests Wal-Mart risks increasing operating expenses. Controlling costs and satisfying local consumer needs is a huge challenge for any retailer and Macy’s is facing the same paradox.
Unfortunately for Macy’s, us Baby Boomers are living longer than expected. That means it will take longer for us to die off, so their brand strategy will take a while. Eventually the next generation will conform as long as they keep to their retail strategy.
My advice to Macy’s is stop trying to convince the Field’s customer that Macy’s is just another version of Field’s, it’s not. Field’s was a mid level to very high end store.
Under the current leadership of FDS, Macy’s became a low end to mid level store. Chicago gave Macy’s a chance and they aren’t impressed.
Macy’s may have created an uproar in Chicago when they came to town. Changes to established businesses, especially on such a grand scale, never go without making some waves. However, if Federated is to take Macy’s national, the only way they can do that is to do it lock, stock and barrel. This means changes in established businesses.
Will all of these changes be to everyone’s liking? Of course not. Will the consumer nationwide benefit when he or she comes into Chicago, a regular Macy’s customer, needing something while on his business trip? Or what about the family moving from a city that had a Macy’s?
As a Macy’s employee, I know what it is like to serve customers who shop our stores all around the country. They have come to expect a certain level of service, certain lines of merchandise, and policies on things such as special orders and returns that they know will be the same no matter where they go. By keeping the uniformity of the name company-wide, I think more people are able to be satisfied and better service provided.
It appears FDS had a disastrous Christmas in Chicago and many other parts of the upper Midwest. Their dumbing down of the Marshall Field’s stores has been a miserable failure. They do not do themselves any favor by constantly telling Chicagoans that they are improving the former Marshall Field’s and that May shoppers must get used to Macy’s being less promotional. When in truth, all you see are 15% and 20% off ads and now spend $25 and get $10 back. My prediction is that they will continue to lose market share.
Marshall Field’s held the dominant share in Chicago, but as Macy’s, will be reduced to just another mid-level department store in a very crowded market. They have lost the suburban upscale customer to Nordstrom, Saks, Neiman-Marcus and my guess to a soon to be expanding Von Maur.
My advice would be to sell the State Street store and Marshall Field’s name to a company that would take the time to understand the Chicago market. An interesting purchaser would be George Weston Limited, the owner of Selfridges and Holt Renfrew. This would leave them with Water Tower and suburban stores, (after all they will have no need to have two unloved Macy’s stores in downtown Chicago) where they may eventually win over some customers from Carsons, Penney’s, Sears and Kohl’s.
FD needs to learn how to serve the market, not impose a market. In its advertising, promotions, and merchandise, Macy’s has distinguished itself as just another big box lookalike and consumers are voting by opening their wallets at other stores!
The emphasis on celebrity-branded product and disappearance of great designers does not support FD’s claims that they are improving product. Hmm… P. Diddy (Macy’s) or Prada (Field’s)? Donald Trump (Macy’s) or Dolce & Gabbana (Field’s)?
Does FD really not get it?