Macy’s Goes with Smaller Lineup, Other Changes
Recently, Bloomingdale’s announced it was looking to expand, but would do so with smaller format stores than it has built in the past. Now, the larger of the Federated Department Store divisions, Macy’s, has said it also intends to build smaller units in suburbs with fast-growing populations.
Ertugrul Tuzcu, executive vice president and director of stores for Macy’s North, said Macy’s is in 74 of 76 major U.S. cities, so the company is looking outside the urban centers for future growth.
Mr. Tuzcu, who oversees the former Marshall Field’s locations, said Macy’s is planning to build its first new Chicagoland store at the Promenade lifestyle center mall in Bolingbrook.
Macy’s is also making other changes, he said. For one, the department store plans to expand its menu of gourmet take-out food. “We’d like to position ourselves as a destination for food [at State Street],” he told the Chicago Sun-Times.
The company is also in the process of reconfiguring its Oak Brook shopping center “test store” in the Chicagoland market, including the rollout of an expanded selection of sizes in women’s clothing. The store will house a greater number of apparel choices from petite to plus sizes.
Emphasis is being placed on plus-size fashions, said Mr. Tuzcu. Macy’s plans to offer a deep selection of choices from its own branded lines: Alfani, INC and Charter Club.
The company will emphasize more focused service for other consumer targets including the opening of a separate shopping “zone” for teen girls 14 to 18.
Discussion Questions: Which of the planned changes at Macy’s will be most important for its future growth? Do you see other changes that could help the department store chain achieve even greater growth?
Macy’s biggest short-term issue in Chicago is people’s ire about them getting rid of the name Marshall Field’s. Opening new, smaller stores in the suburbs that aren’t in malls will give them a fresh start and an opportunity to build a new customer base. Giving consumers a compelling reason to shop with them will be more difficult. What will set them apart, price, selection, exclusive merchandise, category dominations? Penney’s is also building free-standing stores away from the malls so they will definitely have competition in this arena. Maybe the best they can hope for in the near term is to set lower base sales so they can show increases in the future when conditions improve for them in the Chicago area.
Category domination is a major competitive tool for Macy’s and Bloomingdale’s. Each chain picked key merchandise categories, and pursued domination using assortments, space, and advertising. When a location is smaller, it’s hard to have a dominant assortment in more than a few categories. And when the assortment isn’t impactful, people won’t travel as far. Furthermore, competitive assortments at specialty stores and other department stores become greater threats. Department store public relations people talk easily about category expansion. But which categories are being reduced or eliminated?
Federated is wise in exploring other formats that are not in traditional mall properties. Mall retail traffic has been on the decline for a few years, as the lifestyle or other formats have been expanding into suburban areas. Many retailers are battling the same challenge…and have determined that they have to have strategies to serve both segments.
There is room for both Macy’s and Bloomingdale’s in this area. Bloomingdale’s traditionally has been the higher-end department store for fashion–carrying more designers and higher end products. Macy’s has positioned itself as “America’s Department Store” and has broad offerings in all traditional department store segments. In both cases, assortment and selection will be the challenge.
Admittedly it’s problematic to try to decipher Macy’s strategy(ies) from a single news article, but this all sounds rather reactive to me: broader assortments, smaller stores, gourmet foods, fashions for this and that group…it sounds like a wish list of (frequently conflicting) ideas rather than a single cohesive business plan.
These “announcements” just reinforce that Macy’s didn’t really have a sound strategic plan to be “America’s department store” after all. Wouldn’t you think that store size, assortment, target buyer, etc. would have been a huge part of the vision/plan when May stores were incorporated into Federated?
Macy’s moves are right on. Everyone is trying to get into the food game, knowing that doing so encourages shoppers to stick around a bit longer. Macy’s has a long-standing, under-exploited reputation in food (via the Cellar) that begs for expansion.
Smaller format stores are another winning strategy. Even mega retailers like Wal-Mart know that large format stores aren’t for everyone (hence Neighborhood Markets) and they are a particular pet peeve of aging baby boomers, a demo that Walgreens has brilliantly captured (expanding product category and service offerings within a smaller footprint that is frequently visited by prescription-filling boomers)!
Macy’s already-initiated merchandising shift has them focusing on further developing relevant private labels and supplementing those, not with acres of national brand real estate, but with interesting and differentiated boutique brands; a strategy that will be easy to right-size for smaller format stores.
Finally, the move into larger sizes is a win not only for women of certain sizes but also for full-figured teens, a group largely overlooked by trendy specialty retailers.
What’s not to like?
Give it up Macy’s, it isn’t going to work. The Bolingbrook store was already planned by Field’s when May bought them. There is no obvious market for Macy’s there and it will certainly end up just as poorly trafficked as the other suburban stores like Northbrook and Hawthorn. Gourmet food does sound like a good idea, but there are already more convenient locations all around the Loop and Michigan Avenue (Fox & Obel being the best known) so given a choice between those and the store that killed Marshall Field’s, just about every Chicagoan would choose one of the former. I mean please. Macy’s can’t even sell Frango mints marked down 75%. A Dean & Deluca or Fauchon would make a huge difference but I doubt either of them would want to be associated with Macy’s. And more sizes of the same private label merchandise that Chicagoans SHUN isn’t going to do anything but gather dust on the racks. Macy’s (and Mr. Tessler) is just going to have to accept that half the revenue that Field’s pulled in is permanently gone to other retailers. Chicago will never get over the loss of Field’s and Federated should just start looking for someone to take over 111 North State right now.
I have been to Harrod’s and Marshall Field’s; “…you were no Harrod’s!!@!…” Get over it Chicago! In the end, it had been ruined by May Company and it was just another generic department store no better and no worse that all the others that are gone…edited and more nimble smaller stores with some unique product whether apparel or food will help refresh and rebuild the Macy’s image. In three to five years Chicago Macy’s will perform as well as they do anywhere else and Marshall Field’s, like Ernie Banks, will be a nice memory that never won the big one.
This is another good example of macro level innovation in the hope it will make a major statement, when micro level innovation would probably take Federated further and faster. Federated needs to rapidly and repeatedly better define what is in the box and use its existing locations to great advantage. Gourmet food is fine–if that is what you want to stand for. If not, it becomes a diversion. The same with dabbling in the tween market. Without a strong identity and lots of small but interesting innovations emphasizing that identity, Federated isn’t going to move its position very much.
This is another good example of macro level innovation in the hope it will make a major statement, when micro level innovation would probably take Federated further and faster. Federated needs to rapidly and repeatedly better define what is in the box and use its existing locations to great advantage. Gourmet food is fine–if that is what you want to stand for. If not, it becomes a diversion. The same with dabbling in the tween market. Without a strong identity and lots of small but interesting innovations emphasizing that identity, Federated isn’t going to move its position very much.
Capitalizing on Marshall Field’s reputation for fine foods, both in-store and take away, is the first smart thing I’ve seen Federated do in the Chicago market. Field’s food service was something that truly made them unique and brought in customers who weren’t there to buy a promotionally-priced piece of private-label clothing, which seems to be Macy’s core business.
Smaller Macy’s stores are a potential winner for Macy’s. The department store was a great idea before World World II, when there were no malls, and when categories had more limited assortments. Now people shop with a purpose. It makes no sense to have everything under one roof.
Attracting the 14-18 set is also promising. Federated has totally missed Gen X and Gen Y. In my recent Retailing class at Towson University, I asked how many of the early 20 somethings had visited the local Macy’s in the last year. Two hands shot up out of 35.
Macy’s is right to build out its plus size category. There should be excellent synergies with the home departments. Will Macy’s carefully study the market baskets of plus size customers? Do these shoppers buy cookware? Home accessories?
Gourmet Food might be a major winner as a traffic builder. But Macy’s must truly understand the gourmet food shopper. Are they also buying ties and shirts? Toasters? Glassware? How frequently are they visiting the store?
Innovations are a good thing. Change, after all, is at the heart of retailing. But gaining a complete understanding of the customer response is a totally different challenge. Does Macy’s plan to myopically test all of the innovations at Oak Park outside of Chicago? That’s a red flag. Testing should be a corporate mission where business intelligence software plays a major role especially a chain serving 74 of 76 urban markets.
The smaller format for Macy’s will succeed. I think the Federated Cincy hotshots have looked at their store base and concluded this is the way to go.
One of their most profitable sales per square foot store is also one of their smallest. This store is located in Natrona Heights, PA. It flourishes in spite of the fact that located less than 5 miles away is a much larger Macy’s, former Kaufmann’s location.
Smaller maybe better. Just like TESCO, these smaller Macy’s where the customer doesn’t have to walk miles to get into the store from the parking lot may just be the recipe for success for the time challenged consumer.
As far as their Macy’s North problems, they would all go away if they just admitted they made a mistake and converted these locations back to the familiar, fantastic Marshall Field’s green store logo.
Why can’t Federated have three banners? A&P has at least 7 and other chains have at least as many. Food Lion/Delhaize actually has increased its banners by two. So what’s the issue?
Mr. Tesler, I have been to Macy’s and Marshall Field’s, and Macy’s, you are no Marshall Field’s. And that is Federated’s problem in Chicago. I suggest that it is Federated who is going to have to “get over it,” because that last time I checked it is the customer who decides success in retail. What a shame to see a company lose the dominant market share in the third largest retail market in the country, simply because they will not admit they made a huge mistake.
As far as building smaller stores, it has already been done quite successfully by Kohl’s.
If Macy’s has a big identify crisis, I am not sure having tiny stores with a limited assortment is the way to go. Many people have already voted with their pocketbooks that even the larger format stores are a yawn. The Macyization of America (getting rid of all the much loved hometown chains) have really hurt their market share more than anything else. In Atlanta, Macy’s can not even approach the dominant market share that Rich’s had enjoyed for decades. A recent article stated that all former Federated hometown chains had significantly reduced market share except for Burdines of Florida, where the reduction was less pronounced. Also, putting mini format stores in their existing markets would have even a more devastating effect on the chain’s reputation. Now that Belk has bought the upscale Parisian chain, many Atlantans are horrified at the thought of a Belk taking up residence on upper Peachtree at Phipps Plaza in Parisian’s old Atlanta flagship building. Why is this when Belk has equally exquisite stores in their core markets? Because Belk has opened dozens of “small-format” stores in seemingly every lifestyle center built in the Atlanta suburbs for the past decade. These Belk stores are jokingly referred to as “Penney’s with Polo” and have definitely tarnished the Belk image in Atlanta. Overcoming these suburban and exurban outposts will be the biggest chore for Belk when they roll out the name change this fall at some of Atlanta’s most upscale malls. Watch out Macy’s, with your “small formats”–it could make your image problems multiply exponentially.
All points are positive for Federated Stores. But, the market segmentation that is being utilized is strategically smart and on target for many current and future business opportunities.
Bloomingdale’s is on the top and Macy’s covers all but the low end. The test store in Oakbrook, IL is one to marvel at and tip your hat to Federated for the marketing expertise shown. Too bad other retailers in the food and grocery arena don’t think this way. Or do they? Hmmmmmmmm
All of the ideas are good and have merit. Having said that, Macy’s had better make a decision and stick with it — Gimbel’s already showed us that you can not be all things to all people. The ideas mentioned are somewhat disparate and if attempted together would not fit with each other. (There is however NO problem with more sizes in womens and expansion of selection.)
Some of the other ideas/plans, however, may work well if targeted to the right areas and implemented to areas where research says they would fit.
There is the rub. Macy’s must do some homework and discover what the story is for the respective target markets and then – implement. If they would simply pay attention, they would have a hit. I think we can already see areas of their marketing plan which proves that a single “blanket” idea for all 74 urban areas will not play in all 74 urban areas.
And by the way — I shopped at Marshall Field’s State Street for quite a while — to the end of the supposed ruination of May Company. State Street was by no means “just another store” and May Company in its short stewardship did NOT “ruin” State Street. The State Street store was stylish, graceful, peaceful, complete, forward, pleasant, beautiful–I can go on. I ALWAYS spent more than I planned. They had unique, desirable merchandise in so many varied areas. The service was superb. The many food options were all excellent– whether you wanted sit down, white linen dining, or a quick cafeteria style bite. State Street had no equal in America and there will never be anything like it again.