Macy’s Making Space for Groceries

Discussion
Nov 12, 2007

By George Anderson

Macy’s is in the process of working out a deal to bring a 20,000 square-foot grocery store to the basement of its State Street flagship location in Chicago sometime early next year.

Macy’s, which has faced a shopper revolt over its decision to drop the Marshall Field’s banner, has come to the publicly-stated conclusion that it has done all it can to address the issues of the disaffected and has to move on to bringing in a new group of customers. Bringing in an upscale grocery store to the location would be one way to attract shoppers.

Frank Guzzetta, the former president of Marshall Field’s and current chairman and CEO of Macy’s North, would not discuss potential candidates but did tell the Chicago Tribune, “I would like it to be organic.”

According to the Trib report, Macy’s had discussions with Supervalu’s Sunflower Market division but nothing developed from those conversations. Grocers considered possible State Street tenants include Whole Foods, Trader Joe’s and Fox & Obel.

Macy’s is not the only Chicago department store looking at possibly bringing in an upscale grocery operator to the Loop. Carson Pirie Scott has also been rumored to be looking at a grocery partner.

Bill Bishop, chairman of Willard Bishop LLC and member of the RetailWire BrainTrust, said he thought it unlikely that the area could support two grocery stores.

“That could be a problem,” Mr. Bishop told the Trib. “It will be interesting to see who gets the first one.”

While the speculation about a grocery partner continues, Macy’s is taking other steps to attract shoppers that don’t hold the Marshall Field’s grudge. The store has opened a wine bar in the Walnut Room and added an FAO Schwarz toy store-within-the-store as well as putting greater emphasis on exclusive brands with celebrities and designers including Martha Stewart, Tommy Hilfiger and others.

“There are a lot of people who just can’t get over the Marshall Field’s name change,” Mr. Guzzetta told The Associated Press. “Those people, no matter how hard we worked at it, have continued to be detractors.”

Discussion Questions: What are your thoughts on the potential benefits/drawbacks to grocery stores in department stores? Does it make more sense to lease space to an existing grocer or for a department store to operate its own branded grocery? Will adding a grocer such as Trader Joe’s or Whole Foods to the State Street location be effective in helping Macy’s regain lost sales by bringing in new customers?

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31 Comments on "Macy’s Making Space for Groceries"


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Phillip T. Straniero
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Phillip T. Straniero
14 years 6 months ago

I think Macy’s will need to have a very special offering for this store to succeed in busy downtown Chicago…Whole Foods, Trader Joe’s, or a Super TESCO might make sense. They will also need to provide some easy in-and-out parking in their garage to incent the grocery shopper….

Mark Lilien
Guest
14 years 6 months ago

The comments might be confusing 2 unrelated issues: Marshall Field’s and groceries. Whether the State Street location has an upscale creative food hall or not, the folks who swore eternal antipathy towards the Macy’s brand name won’t be satisfied. Their issue is the loss of Marshall Field’s, period. If Macy’s builds a food hall in State Street, it will probably be an upscale assortment with a lot of the volume sold to folks who work nearby, for their lunches. It’s too hard for most folks shopping on State Street to drag heavy grocery bags home, commuting by bus and train. And any delivery charge would be breathtaking.

Aaron Spann
Guest
Aaron Spann
14 years 6 months ago

I do not see this as an exciting feature that would draw me into the store. People are going to assume that:

1) Prices will be inflated due to the location;
2) Freshness and cleanliness issues could be carried over from previous incidents;
3) A continual perceived “failure” to successfully operate a traditional department store.

A food hall could be a better idea. Macy’s could stand to take a few lessons and learn from their peers across the pond.

Frank Galman
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Frank Galman
14 years 6 months ago

Mr. Robinson who commented previously, apparently enjoys lingering in the past. The old (somewhat stale and not so profitable) Marshall Field’s brand is HISTORY. Out with the old & in with the new! While it is not likely that Macy’s will be teeming with housewives flocking in to do their weekly grocery shopping…they may VERY possibly be able to attract the downtown working people who comprise the exact demographics that TESCO is targeting in their new Fresh & Easy format. Working people (& couple) who are looking for healthy, fresh, home meal (& restaurant meal) REPLACEMANT…at a VALUE! People who have more money, sense & taste than they do time. Kudos to Macy’s for replacing the tired “Food Court” idea with a fresh one.

Brad Hall
Guest
Brad Hall
14 years 6 months ago
As Marshall Field’s, the State Street store was one of the world’s great department store destinations. Far from being in decline, Marshall Field’s on State Street was flourishing, having undergone a $115 Million renovation completed in 2004 with significant upgrades to the building and merchandise, Field’s continued to attract more than 9 million customers to this one iconic location each year making it the city’s third most popular tourist destination. The value Marshall Field’s provided to Chicago was far more significant than simply a first-class shopping experience and the many museums and traditions Field’s pioneered. Marshall Field’s name represents the best of Chicago culture and style to the world and helped to define the unique character of the city through word of mouth, public relations and tourism promotions. When Macy’s eliminated and replaced the Marshall Field’s name, it did a huge disservice to Chicago. The steep decline in same-store sales Macy’s posts compared to Marshall Field’s has created many new customers for Field’s competition in Chicago, in part explaining the jump in sales at Neiman’s,… Read more »
victor martino
Guest
victor martino
14 years 6 months ago
What I think Macy’s should do is consider three scenarios for their basement market. 1. Consider an alliance with UK department store retailer John Lewis. JL also owns the upscale British grocery chain Waitrose. JL just opened its first department store food hall in England (leveraging their Waitrose expertise). The basement food hall is doing very well–even though it’s far smaller than 20-k square feet. Macy’s might consider a strategic alliance with JL, putting combination Waitrose upscale supermarkets and food halls in selected Macy’s stores like in Chicago. NYC and San Francisco have potential in terms of this alliance and the Macy’s department stores in those cities. 2. Etaly, an innovative Italian grocer is coming to NYC next year. Etaly currently operates a very successful 30K square foot grocery in its homeland. The NYC store will be a much smaller version but will still feature much of what the grocer offers in Italy. The Italian store is a unique blend of fresh food, specialty food and food educational retail. You can read more about is… Read more »
Jason Millman
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Jason Millman
14 years 6 months ago

I find it surprising that Macy’s continues to try unproven tactics, like opening a grocery store in the flagship instead of giving the customer what they want. Chicago has spoken loudly (maybe a little too loud!) but they want Marshall Field’s in name, quality, and service. Again, this is a decision driven by Wall Street not Main Street or State Street for that matter!

Steven Roelofs
Guest
Steven Roelofs
14 years 6 months ago
The Loop (and adjacent areas like Lakeshore East) is one of the fastest growing neighborhoods in Chicago. Many of the commenters obviously haven’t been to Chicago recently. It’s not your Daddy’s Loop any more. Right now, residents need to drive or hop the subway up to Division or down to Roosevelt to buy groceries. Besides these residents, there are the million plus people who work in the Loop. As a non-driver who works in the Loop, let me tell you that a grocery store in the Loop that is one block from all of Chicago’s subway and el lines would have a definite advantage to draw Loop workers, particularly if it emphasized ready-to-(reh)eat meals. HOWEVER… Macy’s has demonstrated quite clearly that it is incapable of delivering an upscale product offering, at least upscale as we in Chicago understand it. Macy’s talking upscale is kind of like Safeway talking upscale and we all know what happened to Dominick’s. A store-within-the-store like Trader Joe’s may work, but would any retailer be willing to take the chance to… Read more »
James Tenser
Guest
14 years 6 months ago

Putting nostalgia for Marshall Field’s aside, I’d like to focus on John Rand’s reference above to Tokyo’s downtown departos, like Isetan and Seibu, which offer tempting delicacies, prepared foods, and attractive bento boxed meals ready for the office or commuter train.

I recall from a visit a few years back that the vendors seemed to be independents who rent space from the host in the basement arcade. Competition kept the atmosphere inviting and the selection varied. Think upscale bazaar, but with very polite shop clerks, and beautiful wrapping paper.

Adaptation of this concept could translate well in downtown locations, like Chicago’s Loop. So could elements of the fondly-remembered Macy’s Cellar concept, also referenced above, which combined an upscale delicatessen/gourmet shop concept with kitchenware and a decent sit-down restaurant.

By comparison, a Whole Foods, Trader Joe’s or similar tenant seems like a force fit in The Loop.

George Anderson
Guest
George Anderson
14 years 6 months ago

If Marshall Field’s was Chicago’s favorite store, I’d hate to see how it treats its least favorite. On second thought, nix that, we know Macy’s State Street is the least favorite. Favorite or least favorite, either way, they both lost money. I don’t see the harm in trying grocery, it’s not as though Macy’s has an image to protect in Chicago.

j paresi
Guest
j paresi
14 years 6 months ago
A holiday Monday, and already 16 comments…this story still has legs, and hearts, as you can tell by the postings! If it were any other company other than Macy’s, I would say that the grocery and prepared foods idea would have some traction at the State Street location, given the hundreds of thousands of workers and new residents of The Loop and nearby neighborhoods. To make it truly successful, the Macy’s North group should take a trip over to the UK, and STUDY how Selfridge’s, Harvey Nicols, M&S, Harrods and John Lewis and the other major department stores prepare, package and merchandise their food halls, since that is really the only way it will work in The Loop….something not available anywhere else. That said, given Macy’s frankly lower-tier approach to customer service, marketing, packaging, and maintenance, I cannot see them pulling this off with any credibility or savvy. They seem to be working overtime to burnish their image in Chicago (and nationwide) as a faceless and unexciting mass market retailer. In Chicago they have the… Read more »
Li McClelland
Guest
Li McClelland
14 years 6 months ago

Some people may not be aware how much the Chicago loop downtown area is booming these days with permanent residents. There are new campus dormitories and expensive lofts, condos and apartments being created from former commercial office space and industrial space. This population eats, and can use some more places to buy groceries. But Macy’s? Macy’s spent big bucks to buy Marshall Field’s, the crown jewel department store in America with THE finest historic retail space in America on State Street, only to turn it into a grocery store? Words fail. As some other commentators have suggested, one won’t be seeing too many suburban commuters rushing to Macy’s on their lunch hour to buy salami and canned peaches and carry them home on the train.

Clint Glascock
Guest
Clint Glascock
14 years 6 months ago

I wanted to respond to those that claim MF was in decline before it was changed to Macy’s. I’m not an eloquent writer so I borrowed a piece written by Brad (11/5/07) from fieldsfanschicago.org:

“Regarding Macy’s claim that the hope to end years of declining sales at Marshall Field’s. This is not simply misleading, it is patently untrue.

Prior to 2003, the entire department store sector experienced declining sales, yet Field’s remained profitable with average sales per store higher than Macy’s or Bloomingdales.

In the years immediately prior to Macy’s takeover, Marshall Field’s was profitable and sales were not declining. In 2003, Field’s posted profits of $106 Million and in the first quarter of 2004 revenues began to increase by 6.1%. This was the beginning of Field’s turnaround….”

Craig Sundstrom
Guest
14 years 6 months ago

“Those people, no matter how hard we worked at it, have continued to be detractors.”

That is probably true, though it seems to be a(n almost) theoretical point, since I’d be hard pressed to name many things Macy’s has tried (The 8-steps-backward-1-step-forward of dumping high-end labels for fabricated–in every sense of the word–house brands doesn’t count.)

Which brings us to the latest idea: is it a bold and innovative concept, a desperate attempt to fill space, or just a dumb idea? (Depending on execution, it could be all three.)

What I’d really like is for Macy’s to make an exception and pull back its Stalin-like veil of secrecy for once: State Street was (purportedly) doing $250 million/year before its Macyizing; what’s it doing now?

Bill Robinson
Guest
Bill Robinson
14 years 6 months ago
A high end grocery store at the former Marshall Field’s store would probably work. If they do it, it should be unified with their celebrity-oriented campaign that they’ve embraced for this season. (Out with the 2006 brand building dancing girls and in with cast offs like Martha, Donald Trump and Tommy Hilfiger.) But come to think of it, aren’t there many better ways to build traffic and loyalty from the 25 – 40 year old loop business types that Macy’s so fervently desires? Here are three: 1. Sell to brides. Lots of the desired demographic get married, have a big celebration, buy a house, and fill it with stuff. Maybe, Macy’s can buy a chain to build a foundation to build loyalty from this segment. Oops. Wasn’t David’s Bridal part of the May deal and Macy’s let it slip away? 2. Rent formal wear to guys. When guys go to a formal function they typically rent a tux. This requires them to make at least three trips to the store: to get fitted, to pick… Read more »
Doron Levy
Guest
Doron Levy
14 years 6 months ago

This is a clever move for Macy’s and it is a huge step in differentiating itself from the competition. Connecting with a high-end grocer is also a good move in keeping it in the higher end. Contracting it out is the best relationship for Macy’s as if it doesn’t work out, there is an easy exit. Plus, Whole Foods and Trader Joe’s are established brands which will take some of the growing pains out of marketing. I love seeing this type of cross selling and I hope it works out for them.

Dr. Stephen Needel
Guest
14 years 6 months ago

Perhaps the question should be, “Why on earth would you put a grocery store on that part of State Street?” A food hall, a la Harrods, sure. A grocery store where nobody lives or drives to? I don’t think so. The upside to such a decision is that all of us who comment at this site will have new material to work with when we talk about retail mis-steps.

Susan Rider
Guest
Susan Rider
14 years 6 months ago

First of all, there are other areas to consider before jumping into the grocery business. Why is it that the loyal customers of Marshall Field’s don’t like the Macy’s change? What could Macy’s emulate from Marshall Field’s to gain that loyalty?

Under the circumstances and in keeping with the quality branding of Macy’s, it probably makes more sense to partner with Trader Joe’s or Whole Foods rather than try to enter this market as a novice. In Chicago, this would be definitely a draw and may lure some old MF customers back.

Gene Hoffman
Guest
Gene Hoffman
14 years 6 months ago

I had an invisible conversation with that great grocery guru, Yogi Berra, and he allegedly said, “It’s deja vu all over again.” Department stores such as Kmart, Sears, etc. have tried to pull in new and more customers with leased grocery stores in the past–but perhaps not today’s “organic” kind.

Macy’s understandably is looking for something that can make up for dropping the Marshall Field’s name in Chicago, or at least neutralize it, but adding groceries in its flagship store on crowded State Street doesn’t strike me as thinking outside the box. Carting groceries along with other purchases to your car parked “somewhere near” that store or on a crowded bus or on the L to your home or apartment seems more burdensome than magical. However, a specialty type operator offering unique smaller packaged products such as Trade Joe’s or the new U.S. Tesco type might have some magnetic appeal to those folks looking for new reasons to saunter through Macy’s-on-State.

Joel Warady
Guest
Joel Warady
14 years 6 months ago

Macy’s needs to focus on their core competencies, and selling groceries is not one of them. So right at the start, they would need to move forward with an established partner. And as others have pointed out, having a traditional,even if it is an organic one, does not make any sense. They need to mimic the Food Halls of Europe if they plan on having any success.

Macy’s opened a similar concept in their New York store with Brinker’s Eatzi’s. It did not work for them in NY; I’m not sure why they think it will work for them in Chicago.

fred faulkner
Guest
fred faulkner
14 years 6 months ago

What goes around comes around! Years ago, department stores throughout the country had grocery stores in their basements. In a metro area, this can be an asset to the city and the inner city population.

John Rand
Guest
John Rand
14 years 6 months ago
Someone already said it–this has been done before. Occasionally, it has been done well. Oddly enough, it was done well by Macy’s many years ago in Manhattan, where they successfully created a cross between a food court, a grocery store, and a basement bazaar. I remember wandering around in there on a Saturday several decades ago and marveling at the food, the variety, the merchandising, the smells…it was very well done. And it was all what a grocery store today would call “perimeter”–along with some excellent cross merchandising in cookware, table linens, kitchen appliances, etc. I never knew why they stopped. Was it unprofitable? I didn’t have a reason to know, back then, and never heard the rest of the story. But as a shopper and confessed foodie, it was wonderful. I knew many people who came in from New Jersey just to stock up on delicacies there, both fresh and shelf stable. Something like this exists in Japan’s “depatos”–the large department stores have ground floors where you can buy a boxed lunch, fresh meats,… Read more »
Dick Seesel
Guest
14 years 6 months ago

The wisdom of adding groceries to the State Street location depends on its strategic purpose:

1. Is the goal to draw more traffic into the store by adding commodity categories, whether or not Macy’s partners with a company like Trader Joe’s?

2. Is the goal to provide a convenience to the growing numbers of residents in the mid- and South-Loop neighborhoods?

3. Is the goal to provide a true “food hall” experience like Harrods (as another commentator mentions)? This might provide the State Street location with some much needed cachet but not necessarily the traffic frequency of a more convenience-based option.

This is one of many ideas that Macy’s is tinkering with, in an effort to gain acceptance of its nameplate on the State Street store, without addressing the other fundamentals that have cost it business at many other former Marshall Field’s locations.

Eliott Olson
Guest
Eliott Olson
14 years 6 months ago

When the State Street building was constructed, Marshall Field’s sold everything. They had a philatelic department, a book store, sporting goods, white goods…. The men’s and women’s hat departments were real departments, not just tree stands. Most of these departments are long gone from the present day US department store.

Macy’s is looking to fill the empty space and is taking the approach of the small town landlord who created a mini-mall in the old department store that vacated when Wal-Mart came to town. The State Street store is obsolete. Macy’s needs to either down size or completely vacate the space and let the real estate professionals figure out the highest and best use.

Joseph Peter
Guest
Joseph Peter
14 years 6 months ago
Based on recent blogs, news media coverage and my own personal experiences, I disagree with Mr. Galman. Macy’s has let down many Chicagoans with its elimination of the favorite department store of Chicagoans…I am wondering if Mr. Galman is a Chicagoan himself and understands that even though Marshall Field’s is now in the past, it was cherished by many in the Chicago area and now its an empty hole to walk into our local Macy’s. -House brands have replaced familiar name brand. -Classy background music such as Jazz and Pop has been replaced with Light Rock. -Strict Facilities Upkeep formerly kept very clean by Target is now nothing more than dirty floors and burnt out lighting. -Any reference to Marshall Field’s other than the plaques on the exterior of State Street have been destroyed -Classy paper shopping bags have been replaced with cheap plastic bags. -Customer service has been cut drastically. It was almost annoying how much service you would experience at a Field’s store under Target or previous owners…the employees were so helpful it… Read more »
Liz Crawford
Guest
14 years 6 months ago

Well, you can’t blame them for trying. Macy’s is trying to gain foot traffic in the store…especially in a major metro where ready-to-eat groceries and fill-in may lead to impulse items across the aisle.

But that may be part of their challenge: getting consumers to cross the aisle. Look at Target–they have had trouble getting just such cross-over. The question in my mind is: what’s the brand equity here?

Mark Burr
Guest
14 years 6 months ago
The more I read, the more I compare this type of situation to the fall of J.L. Hudson in Detroit. It lost money, no one would invest, it closed, it got demolished, and the nail in the coffin of shopping in Detroit took it’s final blow. That’s not to say that it hadn’t taken that blow already long before that. The loss to Detroit was sentimental more than it really hurt. The damage was done years prior. From what I can gather in Chicago, MF was losing money, it was not being supported by the city, and someone else offered to try. Because they wouldn’t leave it the same, the community who didn’t support ‘the same’ won’t support the new either. This may or may not be the best idea in the hat, but at least its an idea and an effort. For those in Detroit, they had neither. They wound up with nothing. The result was a city that continued to be abandoned by investment. Its deterioration was well underway and it continues. Maybe… Read more »
Justin Time
Guest
14 years 6 months ago
I agree with one of the last comments, that most haven’t been to the Loop recently. I was there during the summer, and besides the CVS or Walgreens on about every block, getting some kind of supermarket fare is few and far between until you venture into the North side neighborhoods, away from the Loop and the Magnificent Mile. My nephew recently moved to Downtown Chicago, and both lives and works near the Loop, next to Grant Millennium Park. How he and tens of thousands of other workers/inhabitants of the area would welcome that supermarket in the basement of Marshall Field’s. ( I too, can never accept Macy’s conversion of that great store). Anyway, the Cellar, originally started in the basement of the Macy’s 34th Street store. What better way to utilize the Marshall Field’s lower level space than with a supermarket. Deja vu all over again, and very welcomed. The supermarket and the grand downtown department store were always made for each other. Be it Trader Joe’s, SunFlower, Dominick’s or Whole Foods, my nephew… Read more »
Robert Craycraft
Guest
Robert Craycraft
14 years 6 months ago

Whole Foods and Trader Joe’s are far too upscale for a store location that, per their own press releases, in increasing womens wear plus-sizes and young men’s departments. Those are hardly signs of a store on the upscale move. Quite the contrary.

Marshall Field’s Marketplace worked because of the high quality food and wines combined with the panache of the Marshall Field’s name.

This location needs to be sold to Selfridge’s and reopened as Marshall Field’s and Company in the Selfridge footprint as it was being redesigned and, I believe, performing quite well in despite problems elsewhere in the MF chain.

Martin Balogh
Guest
Martin Balogh
14 years 6 months ago
If they had kept it Marshall Field’s, then the logical addition to the store would have been a Fox & Obel outlet in the basement, offering high end purchases that could be carried or delivered to nearby apartments, as is done at F&O in their River East location. But as Macy’s, they will not be delivering a high-end shopper, so they need to go more down-market. I was in the store yesterday and there was no one at the newly opened Sarah’s pastry shop. I suspect it is too expensive for the kind of shopper Macy’s is attracting. Their shopper is more Aldi’s than Fox & Obel. There lies the root of their problem in Chicago; you can not attract high income shoppers to a store that the market equates with low end merchandise and service. Here is what I said in June ’06: “My prediction is that sales will be off so dramatically at State Street that there will be talk within a year of down sizing it to better serve the customers. Sad… Read more »
Dan Desmarais
Guest
Dan Desmarais
14 years 5 months ago

Marks & Spencer does exactly this in the UK. It failed in the US, but that was a decade ago.

Build great high-end private brands and you can sell anything to the customer once she’s in the store.

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