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Through a special arrangement, what follows is a summary of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.
When the Federated Department Stores’ merger with May Department Stores was announced on February 28, 2005, the deal’s promise was pitched to Wall Street with one word: Big.
Terry Lundgren, CEO of Federated Department Stores who would lead Macy’s Inc. for 14 years, wanted scale — economies of scale, efficiencies and synergies. Get big enough and the competition couldn’t touch you
For the first time, Federated would command a “truly national retail footprint” with one singular go-to-market strategy, Mr. Lundgren told analysts that day. Soon 64 of the nation’s top 65 markets would be represented by a single banner: Macy’s. “This is truly an exciting day in American retailing,” Mr. Lundgren said in a press release.
Heralded as a new beginning for the department store category, this merger, in retrospect, might have been the beginning of the end: The fateful day the department store category obliterated its greatest strengths.
From that day forward, the strength of the corporate machine at Federated worked to consolidate regional brands under one banner, shedding brands from Marshall Field’s in Chicago to Lazarus in the Midwest. Loyal local shoppers rebelled. The dismantling of local institutions left shoppers feeling betrayed.
Decades of distinct market knowledge ended up devalued and then simply disappeared, rolled up into a singular corporate branding and buying approach. By becoming big generalists in a category that had personalization and specialization right decades ago, department stores dismantled the differentiation that might have saved them from obsolescence in an era of online algorithm-driven commerce.
The consequence of losing intimate local knowledge offers insights on where retailers should focus today. For retailers with physical stores, there’s one choice that stands out: Go back to the principles of local-market retailing, shop-floor buying decisions, and hyper-personalization.
The presumption that nationalizing a local buying approach can save money isn’t wrong. It can. But a national brand like Macy’s also ended up being less meaningful to many shoppers in specific markets.
The ultimate model of survival for physical retailers today is to go local and stay there. This is not a new idea. It’s the founding principle of department stores.