Macy’s Gets Back into Toys
By Tom Ryan
FAO Schwarz will open toy stores in nearly 700 Macy’s department stores over the next two years, marking the first time in 20 years that the department store will operate a year-round toy department.
The shops, ranging from 200 square feet to 3,500 square feet, will carry a variety of FAO-made products, many exclusive to Macy’s. The first 275 shops will open this fall, in time for the holiday shopping season.
The decision came after a test selling toys in Macy’s Street store in downtown Chicago performed above expectations and pushed the entire children’s apparel business "well above" expectations.
"We expect it to drive new customers into our stores and to insert a new level of fun and excitement onto the children’s selling floor," said Macy’s CEO Terry Lundgren Friday after the company’s annual meeting.
The arrangement is the latest in a string of exclusive deals for Macy’s. Since its merger with May Department Stores in 2005, Macy’s has signed exclusive distribution deals with Oscar de la Renta, Tommy Hilfiger and Martha Stewart.
For FAO Schwarz, Macy’s brings national distribution and an opportunity to bring its stores to local communities. . The 146-year-old company continues to independently own and operate its own stores, including a flagship store on New York’s Fifth Avenue.
"I think it’s a fantastic opportunity for us to drive our market share," said FAO Schwarz CEO, Ed Schmults.
But since Macy’s was last in the category, the toy industry has become dominated by Toys "R" Us touting broad assortments and discount chains like Wal-Mart playing up low prices. A price war in 2003 pushed FAO Schwarz — as well as KB Toys — into bankruptcy reorganization.
Getting back into toys is expected to help differentiate Macy’s from competitors.
"This gets back to the need to give their customer an additional reason to visit the store if they need to go out and attract a new group of customers to replace those that have decided to shop elsewhere or less frequently," consultant Jim McComb, president of McComb Group LTD, told the Northwest Indiana Times. "So this is all a part of a strategy to build their customer base back."
But some were still concerned about a struggling Macy’s re-entering the fiercely competitive toy market.
"You’ve got to ask: Does putting two brands that are struggling together make a better product in the end?" Will Ander, a retail consultant for Chicago-based McMillan/Doolittle LLP, told the NWI Times.
Discussion Question: What do you think of Macy’s move to open FAO Schwarz shops in its stores?
- F. A. O. Schwarz Will Sell Toys in Macy’s Stores – The New York Times
- Schwarz returns to Chicago with new store in Macy’s Story – The Northwest Indiana Times