FAO and Macy’s Seek to Create Holiday Magic, Maybe More

Discussion
Oct 11, 2007

By George Anderson

Two New York retailing icons are hoping to make a hit this holiday in Chicago when FAO Schwarz opens a toy store-within-the-store at Macy’s State Street location.

If successful, there is something in this deal for both retailers. Macy’s, it has been well documented, has found it rough going in the Second City as many consumers have refused to shop in a store that took the place of Marshall Field’s. The department store chain is hoping that some of the magic surrounding the FAO Schwarz name will entice more shoppers through its doors.

For its part, FAO Schwarz is hoping that a success on State Street will lead to the company opening up store-within-a-stores in Macy’s locations around the country. The company is trying to recapture some of its past glory that was almost lost forever when it filed for bankruptcy protection in 2003.

Ed Schmults, FAO chief executive, said the store-within-a-store would be given 5,200-square-feet inside Macy’s children’s department for the holiday selling season. The space will shrink to 3,500-square-feet from January through October.

“If things go well, we would roll out to other Macy’s, first in the northern territory and then maybe broader,” Mr. Schmults told the Chicago Tribune.

The FAO Schwarz of today is different than the one of the past. Gone, according to the Trib report, are many of the more extravagant items such as a $20,000 indoor mountain. Instead, the company is focused on finding items that are “original” and “well-made,” according to Mr. Schmults.

“We’ve had some very expensive items in the past. We’ve gotten away from that,” he said. “We don’t want families to think they can’t afford to shop there.”

The two companies are looking to make a big splash for the holidays.

The toy retailer plans to launch an ad campaign on buses, kiosks and billboards in Chicagoland beginning on November 1.

Macy’s is giving FAO Schwarz two windows on its main floor to capture the eyes of shoppers. During the holiday season, the line to see Santa will wind through the toy store.

Discussion Question: What do you think of the Macy’s and FAO Schwarz deal in Chicago? What will it mean for each retailer? Do you see other opportunities for pop-up stores-within-stores in the department store channel?

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22 Comments on "FAO and Macy’s Seek to Create Holiday Magic, Maybe More"


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Len Lewis
Guest
Len Lewis
14 years 7 months ago

The FAO Schwarz name–and its stores–don’t have the same magic they used to. This was a unique operation that drew in kids and parents like a magnet all year round.

Having said that, the matchup between the company and Macy’s can be a huge success if, as Mark points out, Macy’s gives it a prime location in the store and puts some promotional clout behind it.

It might get an extra boost from parents who are looking for higher quality toys in the wake of all the problems with Chinese imports.

Michael Tesler
Guest
Michael Tesler
14 years 7 months ago

I think there is a new math started by Sears/Kmart which applies here;
1 + 1 = 1.5

Camille P. Schuster, Ph.D.
Guest
14 years 7 months ago

Is this the right location for FAO Schwarz? Are there enough people in the area who really want to see FAO Schwarz designer toys? Will FAO Schwarz be enough of a draw to get people to come to the loop? If not, this will be another example of how Macy’s doesn’t understand the Chicago consumer.

Don Delzell
Guest
Don Delzell
14 years 7 months ago
This has been tried before. Department store retailers, who without exception have proven unable to profitably run toy departments, have turned to stand alone toy retailers to operated stores-within-stores. Penney, Sears and even Albertsons’ grocery stores have tried this approach. It’s never worked anywhere. Putting aside the recycling of an idea without a results resume, this is entirely consistent with the current infatuation at Macy’s with borrowed equity. Apparently their own brand has insufficient equity to support a consistent message and delivery. All the new merchandising and marketing efforts are based on borrowed equity. Exclusive designer programs, celebrity lines with celebrity endorsing during commercials…these are not the actions of a brand with confidence in its own equity. Sure, brands like Nike have long “borrowed” the equity from sports celebrities. Still, if we analyze Nike’s spend, we’ll find that the majority is around the brand itself, not around the borrowed equity. Air Jordan is no longer even promoted by Michael. And Nike’s long running campaigns may use celebrity athletes, but the message is still the brand… Read more »
Li McClelland
Guest
Li McClelland
14 years 7 months ago
This will be an interesting experiment. Macy’s flunked Christmas 101 on State Street last year. While Macy’s tried to convince people that the Chicago flagship store was really still their beloved iconic Marshall Field’s, just with a new Macy’s name on the awnings, the public knew better. Clearly, Macy’s views this 2007 holiday selling season as a make or break for them. I suspect this will not be the blockbuster they hope for, and that their sales will continue to lag as Chicagoans continue to “make their point” to Macy’s management. Macy’s has benefited from considerable free publicity concerning FAO Schwarz by the major area newspapers. There is plenty of room for FAO in the flagship Field’s because Macy’s has shut down so many of the high end specialty departments that had made Marshall Field’s unique and a destination store for Christmas shopping. (Including a magical toy section and huge children’s shoe department.) Some tourists may find the availability of FAO toys to be appealing. On the other hand, FAO already had a massive store… Read more »
michael murray
Guest
michael murray
14 years 7 months ago

I was at the Macy,s downtown Chicago location. The cache is gone from the store. Aren’t they just opening a gift shop on the lido deck of the Titanic here? The store feels slightly out of control and chaotic. I really hope the powers that be see what I think the rest of the industry has already seen. Field’s needed to be tuned up, not put out to pasture.

Steven Roelofs
Guest
Steven Roelofs
14 years 7 months ago
I can’t see how this would work. If FAO tailors its toy selection downmarket to the typical Macy’s State Street customer (the few that are left), it won’t win because it isn’t going to be able to match the selection and prices available at Target and other stores that sell toys in Chicago. If FAO tailors its toy selection upmarket by offering items not available everywhere (like LGB trains and Steiff stuffed animals), it still won’t win because the shoppers most likely to buy the more expensive toys wouldn’t be caught dead in Macy’s. And tourists? With the magic that was Marshall Field’s so noticeably diminished and the nearby Carson Pirie Scott store gone, is there really any reason for the tourist looking for toys to stray far from Michigan Avenue? How ironic that Macy’s is looking to the store-within-a-store concept to revitalize State Street, when Marshall Field’s had boutiques like Designer’s Guild, Thomas O’Brien, Australian Homemade Ice Cream, etc. already in place when Federated so boneheadedly decided to rebrand the store as Macy’s. And… Read more »
Eliott Olson
Guest
Eliott Olson
14 years 7 months ago
Marshall Field’s once owned the toy category and their Christmas toy catalog was eagerly anticipated by the children of Chicago. The toy market was one of the first areas where we saw the rise of the category killer. Toys R Us, Lionel Leisure, Dispensa’s by Oak Brook and others sprouted across the nation. A weak point of the toy category killer was its reliance on a three month window of sales opportunity. Everything rode on Christmas. Marketing gimmicks and baby consumables were tried to level out sales but in the end electronic games, computers and discount merchandisers such as Wal-Mart and Target who dramatically increase department space at Christmas impacted not only the Toys R Us but the traditional toy chains such as FAO Schwarz and K&B. Macy’s is increasing its toy square footage for Christmas just as Target and Wal-Mart will do. There are two reasons for Macy’s to lease the space to FAO Schwarz. First they do not have the expertise or the supply chain to handle a seasonal department that big. Second… Read more »
Craig Sundstrom
Guest
14 years 7 months ago

I counted 13 responses, all of them negative: apparently the jury (and the alternate) have spoken.

At the risk of sounding hostile, it seems that nothing Macy’s tries finds favor…at the moment it seems their biggest claim to fame is that (their) comps-store sales aren’t falling as fast as Dillard’s.

Martin Balogh
Guest
Martin Balogh
14 years 7 months ago

FAO already tried this at Carson’s on State Street a few seasons ago and it was a bust. Now that Macy’s has ruined the State Street store as a destination for tourists and Chicagoans alike, it hardly seems this reincarnation will fare much better.

The decline in the store’s foot traffic is staggering. I purchased a book recently at Barbara’s Book outlet there and according to an employee, their business has severely declined since the name change.

Here is an idea for Macy’s in their continuing misguided effort to win over this market; open a Ray’s Pizza in the Walnut Room. After all, as we get more educated in the Macy’s way of doing business, Chicagoans will flock there for a new holiday tradition.

Ryan Mathews
Guest
14 years 7 months ago

Band aids staunch bleeding, they don’t cure the cause.

Karen McNeely
Guest
14 years 7 months ago

Chicagoans have been given this opportunity previously, so this is really nothing special.

Perhaps about 5 years ago Carson Pirie Scott had FAO Schwarz toy departments in a number of their stores. I’m not sure if the results were a flop or just so-so, but the shops are no longer there.

Unless Macy’s does a much much much better job of marketing the shop, I don’t see that it will do much to get the confirmed anti-Macy’s customer back in their store.

Joel Warady
Guest
Joel Warady
14 years 7 months ago

As a born and raised Chicagoan, I can attest to the fact that as long as the Macy’s continues to use the Macy’s name instead of Marshall Field’s, the State Street flagship store will continue to see sales slide. Adding FAO Schwarz to the mix won’t matter. Chicago had an FAO Schwarz store on Michigan Ave., and consumers watched this store close during bankruptcy.

Their perception will be of a bankrupt brand (FAO) located in a carpetbagger (Macy’s) location. In Chicago, we are proud of our heritage. Neither Macy’s nor FAO Schwarz is a part of this heritage. This is a non-starter for both brands.

Anne Howe
Guest
14 years 7 months ago

I wonder if this is a concept that was researched in the Chicago market with shoppers? The concept of a store-within-store is a good concept if serving consumer desire or needs. Is this concept just serving two retailers trying to salvage the season? I agree that an A location would be way more likely to surprise and delight shoppers. I also question the reality of transporting the merchandise on the public transit system in Chicago. Perhaps they could really delight shoppers and deliver the toys at a really great rate.

Raymond D. Jones
Guest
Raymond D. Jones
14 years 7 months ago

Two wrongs don’t make a right! This is the kind of thinking that got Macy’s in trouble in the first place.

Marshall Field’s was an icon in Chicago. They arrogantly dumped the Field’s banner in favor of Macy’s. Now they think bringing another famous New York banner to the city is going to somehow change things?

FAO is just like Macy’s–all show and no go. That’s what customers will continue to do at Macy’s–no go.

Dick Seesel
Guest
14 years 7 months ago

FAO Schwartz has lost much of its cachet over the years–and has strong associations with “New York retailing”–so this move may not be the answer for driving traffic into the Macy’s State Street store. The Chicago customer is already alienated by the Macy’s name imposed especially on the landmark Marshall Field’s downtown store, although there is no turning back.

If the merchandising, location and presentation of the FAO Schwartz “store within a store” is so magical and compelling that it becomes a destination, good for Macy’s…but they have so many other content, presentation and marketing issues in so many other large mall locations, this is only a Band-Aid.

Mark Lilien
Guest
14 years 7 months ago

FAO Schwarz will be happy in Macy’s if the location within the building is Grade A. The Chicago Macy’s is huge, and Macy’s might be tempted to assign a grade D location to the toy department. The FAO Schwarz name alone isn’t strong enough to withstand being buried. Macy’s gets huge payback from its best areas within the building, so the rent and/or revenue sharing from FAO Schwarz would have to be very high for this to be a profitable deal for Macy’s. Furthermore, FAO Schwarz would benefit from frequent creative publicity events, because traffic is the name of the game, and a single location can’t afford a large ad budget. Because of the market size, Chicago advertising is among the most expensive in the country.

gayle soucek
Guest
gayle soucek
14 years 7 months ago

I think this is a lose/lose for both parties. Macy’s can’t draw the shoppers now that Field’s loyalists and tourists have abandoned ship. (and I LOVE the gift shop on the Titanic comparison!) They have brought the store so far downmarket that they’d be better served having a Chinese toy bazaar. Hey, it might not be safe, but it will be cheap!

FAO Schwarz will not have the traffic or the customer class they need, and will possibly be tarnished by association in the minds of many Chicagoans.

Macy’s will waste floor space and promotional dollars, and need to come up with yet another excuse why sales are down.

I love it when a plan comes together….

Jason Millman
Guest
Jason Millman
14 years 7 months ago

Desperate times call for desperate measures–and that is exactly what Macy’s is doing by putting a FAO in the State Street Store. This is a last ditch attempt by a retailer failing in Chicago to get customers. Macy’s failure in Chicago is that it NEVER follows the cardinal rule of retailer–Listen to the Customer. Chicagoans didn’t want Macy’s on State Street–they wanted Marshall Field’s! A tiny seasonal marketing ploy isn’t gong to change that.

William Passodelis
Guest
14 years 7 months ago

Carson Pirie Scott and Co. had an FAO store within a store several years ago at the 1 South State flagship. FAO also had a store on Michigan Avenue in the former I. Magnin building which closed several years ago and to top it off FAO is a New York classic. A classic New York store in a New York store that is viewed with disdain and anger is NOT an answer for Macy’s on State. I am afraid that Macy’s will give FAO a poor location within the State street store as well. Also, shoppers will probably shop for toys at Target, Wal-Mart, or other price conscious retailers because they know they can get the same merchandise at a better discount. This is not the best decision and does not bode well for either participant. The typical Chicagoan’s ire (and many other Americans as well) at the wholesale discard of Marshall Field’s is not going to go away soon or easily.

james nastoff
Guest
james nastoff
14 years 7 months ago
The FAO Schwarz deal seems like grasping for any idea to try. But we consumers across the entire Midwest continue to tell Terry et al what we want–we want Marshall Field’s, including the name, the products, the clean well-maintained stores and the service. We will not shop at Macy’s. The introduction of a bankrupt toy store inside Macy’s has no relevance. That does not turn Macy’s into Marshall Field’s. We say it as plainly and clearly as we know how. We will not be spending our money in those stores until Marshall Field’s returns and yet that message continues to be ignored. And this message is as valid for Nicollet Mall, Rosedale & Southdale in Minneapolis as it is for State Street & Oak Brook in Chicagoland. Somehow Terry et al think they will win this game. We assure everyone nothing could be further from the truth. It is we who control the purse strings. At some point I think shareholders may tire of their assets being depleted due to “bad weather,” “sun spots” or… Read more »
colleen fisch
Guest
colleen fisch
14 years 7 months ago
I don’t believe this move will help sales for Macy’s or FAO Schwarz. Maybe they can tell their shareholders that they are “doing something” but Chicago has a palpable HATRED of Macy’s and FAO Schwartz has fared poorly here in the past (even when placed in correctly upscale retail locations). Macy’s corporate has clearly removed Macy’s from the upscale category and gone after Penney’s and Kohl’s. Chicago residents will not drive downtown and pay $20.00 to park when they can go to Kohl’s down the street. Macy’s at Chicagoland malls can not compete with Kohl’s anyway. Retail is a hard game. If someone with a brain acquired the State Street Field’s and put the name back on the door and then applied the Starbucks smart “experience” method of merchandising, they could make some money as Chicago would be thrilled to have a place to go again. Until then, the bloodletting continues as Macy’s corporate proves that they apparently just wanted to buy condo sites in Chicago…. Many MBA programs will feature Macy’s corporate in the… Read more »
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