January 3, 2007
Recreating Bloomingdale’s
Four years ago, Bloomingdale’s was firmly positioned in the great middle of department store retailing along with the likes of Macy’s, J.C. Penney and a whole host of regional chains. That was a position Michael Gould, chairman and CEO of Bloomingdale’s, found untenable and so began a repositioning that took the chain to the high end of the market where it has been competing successfully in the same space as Nordstrom, Saks Fifth Avenue and Neiman Marcus.
Since 2002, Bloomingdale’s has seen sales jump 25 percent. Profits have been growing at double-digit compounded rates during the same period.
Mr. Gould recently spoke with the New York Post about the changes that have brought the 35-store Bloomingdale’s chain to where it is today.
According to the Bloomie’s chief, the chain identified areas of change to reshape its image with consumers. The chain started by “dramatically” reducing the amount of product carried on the floor to open up space for consumers to shop.
The reduction in merchandise also necessitated cutting back signage. Mr. Gould said Bloomingdale’s reduced the amount of signage in stores by 90 percent since it began its repositioning.
The chain knew that to be truly perceived as upscale, it would need to focus on upscale designers in clothing and beauty care and since has added Jimmy Choo, Hermes, La Mer and La Perla, among others, to achieve that objective. The move has worked, according to Mr. Gould, “Our average unit price is up 42 percent over the past four years. During the same time, our designer business has quadrupled.”
Beyond store merchandising and merchandise, Bloomingdale’s made dramatic changes to improve customer service. Today, the number of sales associates in stores is 20 percent higher than in 2002. The company has also increased the size of its fitting rooms and “Four Seasons” bathrooms are now in every Bloomingdale’s location.
“Everyone in the store now feels that service is a part of the culture,” said Mr. Gould.
Bloomingdale’s has also become more selective about special sales events. According to Mr. Gould, Bloomingdale’s has reduced promotional days by 10 percent annually over the last four years.
The repositioning has paid dividends for Bloomingdale’s and the company is investing in new stores to build on its formula for success. The chain opened three stores in the fall (San Francisco, San Diego and Chestnut Hill, Mass.) and is further opportunities for expansion.
Discussion Questions: What is your take on where Bloomingdale’s was and where it has come to today? What will it need to do to maintain or improve upon its recent success? Where do you see the biggest competitive threats to its business?
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Points 2,3, and 4 of the list are apparent. But, these focused actions have only heightened Bloomingdale’s upscale position. Note, all three points selected start with consumer input.
Neither the consumer nor shopper have viewed Bloomingdale’s as a mid-tier department store! It competes with N-M, and some of the very upscale Macy’s divisions, like in Chicago.
The right focus and the right marketing approach to the brand, Bloomingdale’s.Hmmmmmmmmmm
You would do well here to invoke the name of Marvin Traub, the man who decades ago gave Bloomingdale’s the panache that made it a must-shop for millions of New Yorkers. He was a master merchandiser and created events in that store which were unparalleled in retailing.
That was differentiation of a kind we rarely see in retail today.
The department store business is a troubled business. It’s clearly hard to sustain good operating results over time. My vote? The jury is still out.
It’s not clear to me how much of the Bloomingdale’s article is spin and how much is real. The sales increase of 25% isn’t a comp increase, and it took 4 years. That’s 6% a year, and the number of locations grew during that period. The number of salespeople is allegedly 20% higher, yet the sales increase is 25%. How’s that an accomplishment? And why doesn’t Federated report the Bloomingdale’s profit?
In the past 25 years I have been fortunate to live and work in two large American metropolitan areas: New York/Northern New Jersey and Chicago/North Shore. During all that time every “Bloomie’s” I’ve visited and shopped has been in a very high rent and prestige district of the city or in a top suburban mall location. I guess that is why I am so confused about this article’s description of Bloomingdale’s as mid-market and comparison to Penney’s. It seems to me Bloomingdale’s has always positioned itself in the tier of retailers that include Nordstrom, Saks and N-M with varying degrees of success outside of New York.
I agree with you, Mark! A lot of spin going on here. It would be interesting to know the reporter’s age and background in retail because clearly the premise of the piece is suspect and there is little groundbreaking information or hard hitting inquiry used to develop/support the story line. Many of you may have seen a not-at-all dissimilar “interview” format piece in the Wall Street Journal last week featuring Terry Lundgren, also of Federated, on the subject of the Macy’s expansion.
What really intrigues me, though, is what the reaction to this article is going to be among those long-time Bloomie’s customers who all along thought they were shopping at an edgy, luxury New York emporium only to find out it was “just” a mid-market retailer.
I agree with Mr Seesel, Mr. Robinson et al in regards to Bloomingdale’s and the fact that it has always occupied space that was separate and well above the “great middle” which by the way is not so great and has been shrinking for twenty years…how about “the late great middle”?
So this upscale merchant is finally beginning to look and act like what it is. The reason for the more aggressive presentation, needed changes and acknowledgement of the fact that it is clearly upscale is probably dictated by Federated wanting a clearer separation between Macy’s and Bloomingdale’s, now that it is committed to going forward nationally with just those two brands.
Bloomie’s in the middle? I must have missed that.
Bloomingdale’s has always been well positioned at the upper end. Yes, the leadership has removed the clutter, added sales coverage, and reinforced the culture of service. That’s all good. But it isn’t a new strategy. Current management is executing on the old strategy established by Marvin Traub.
Federated is right to develop a top end brand. That’s where department store retailing has a major chance for survival. The higher the better.
I’d like to second (third? fourth? seventh??) the comments that Bloomingdale’s was never in the same stratum as Penney’s; what it was, was a relatively small chain with a trendy flagship (that did about a third of the business) and scattered branches, whose performance ranged from good (D.C.,Boston) down to horrible (Texas). Though the branches were “nice” – the requisite marble flooring and designer labels – there was really nothing distinctive about them.
The new SF Centre store, by contrast, has very much of a New York feel: bright lighting, the distinctive black/white flooring, and a generally “open” feel….hopefully it can be a model for the rest of the chain.
In the long run, though, I expect Bloomies will be spun off from Federated/Macy’s, either because it’s performing better than that division, or because it’s performing worse: only time will tell which.
The author writes: “Four years ago, Bloomingdale’s was firmly positioned in the great middle of department store retailing along with the likes of Macy’s, J.C. Penney…” Since when? And only four years ago? J.C. Penney was never in the same league as Bloomingdale’s, at least not in my lifetime. J.C. Penney was never in the same league as Macy’s either.
When I was growing up in the 70’s and early 80’s, Macy’s was the best store in town – great merchandise, beautifully presented and the stores were spotlessly clean. If you got a gift from Macy’s in that burgundy box, it meant something. Then something went very wrong about 7 years ago.
I have been to the Bloomingdale’s that opened in San Francisco and thought it was a beautiful store. The selection of brands and designers was great; the store looked very elegant, neat and tidy; the sales people where very friendly and helpful and, at the end of the season, the sales are pretty good, i.e. it was Macy’s circa 1987.
So if FDS can do such a great job with Bloomingdale’s, why is Macy’s just the polar opposite? People in San Francisco, including me, have given Bloomingdale’s a definite thumbs up. With Bloomingdale’s having such a sharp and polished presentation, what’s the point of Macy’s?
As per several comments above, I think it is a stretch to say that Bloomingdale’s shared the same space with J.C. Penney.
That being said, I cannot help notice that every successful strategy noted as being implemented at Bloomingdale’s is being “undone” at the former Marshall Field’s locations, particularly State Street, except for larger dressing rooms.
Target Corp’s — and more recently May Company’s — efforts to return Field’s to fashion leadership has been irreparably damaged with shopping carts, price scanners, disengaged younger sales clerks (read ‘cashiers’), etc. It is like a suicide strategy to justify shuttering the former Field’s locations, especially State Street, within two years.
Great comments by all! I recently shopped the new SF store. While an enjoyable experience, I fail to see a distinctive brand positioning. As has been noted, Bloomie’s does not compete with Macy’s (nor shouldn’t), or any other less-than-luxury department store. It does compete with Nordstrom, Saks and N-M. Each of those, for better or worse, has a very distinctive brand positioning, and on a national scale. Does Bloomingdale’s?
Due to past poor merchandising and inconsistent execution in-store, Bloomie’s may have a distinctively different share of mind in some markets than others. My personal data points support this. The only consistent brand attribute I know of is something like “New York trendy.” Yet the merchandise is really no different than Barney’s New York, as an example.
I’d like to see Bloomingdale’s emerge as a distinctive brand, with unique attributes supported by operational excellence. I don’t see it yet.
Bloomingdale’s when I was younger…please, no snide remarks…was considered a very upscale store. The shopping experience was superb. It seems as if the current management is looking to recreate the past. I wish them luck. Yes, because of the growing schism between the well-to-do and the ne’er-to-do is growing, they are in a better position if they move to the luxury level. But are department stores still growing? Can they reclaim their past glories? Time will tell.
Targeting the affluent market is an excellent strategy for retailers that can pull it off.
The size and growth of the affluent market is unprecedented. It is now comprised of the 15% of US households with incomes over $100,000 a year, plus the near-affluent (about a third of all households have annual incomes over $60,000), and the “affluent-minded” (consumers that know and seek quality, status and prestige whatever their income). Together that’s probably half of all Americans!
The Boston Consulting Group, an authority in the area of affluence, valued the market for luxury goods and services last year at $400 billion, or 12% of all retail sales. They also compute the luxury sector to be growing at a clip of 15% a year, heading toward $1 trillion by decade’s end.
To say that Bloomingdales occupied the same space as Macy’s and J.C. Penney (among others) four years ago isn’t entirely accurate. It has always been positioned above moderate competitors like Macy’s but may not have been executing at the top of its game. The push to enhance content, service and presentation is also part of the overall Federated strategy to market Macy’s and Bloomie’s as two distinct (moderate and better) national retail brands.
Perhaps the biggest challenge facing Bloomingdale’s today pertains to its real estate strategy. How fast can it expand into a national presence without losing some of its New York “cachet” in the process? (See Lord & Taylor as a cautionary example.) And how many mid-size cities are big enough to support both Nordstrom and Bloomie’s when they both have their eye on the prize?
I’m with Mark. These glowing success stories appear periodically in the media, as if they are more about readership feel-good than reporting. For example, I remember a similar story about a large regional chain of garden centers in the Southwest two years ago, and nine months later, the chain closed because it wasn’t profitable.
Bloomingdale’s is just like any other organization in that no matter how successful it is, it has critical problems it is not addressing — the large-scale study we have been conducting over the last 40 years confirms that every organization has critical problems it doesn’t address, and often doesn’t even know about (read it here)
I wholeheartedly agree with Mr Lewis! You Must speak of Mr. Marvin Traub who, with vision and foresight, dragged Bloomingdale’s for Federated Department Stores, up the ladder to lofty heights. His vision, ideas, and work MADE Bloomies the Bloomies that WE know and he accomplished that a while back. He is a brilliant merchant in the true meaning of the word, and set the stage for the successes of today.
Bloomies must remain somewhat out of reach unless Federated wants to try to make it a cash cow — which should NOT be attempted. The pull back of Lord & Taylor — although perhaps a little TOO severe — was exactly what that chain needed to reset itself and re-establish its place.
There can not and should not be a Bloomies in every town — as there should not be a Nordstrom in every town. We live by Growth or Death but perhaps we need to think in NEW terms.
Neiman Marcus is the TOP and does NOT need more stores — some brands should be destinations.
Bloomies must also remain vigilant! When they think they are “done” for now — they must re-evaluate their whole organization and clean up what’s not right and capitalize on what’s right. Utilize precious time between potential store openings for introspection! And — keep those openings to a minimum, as far as I am concerned! By the way — Assortment is EVERYTHING — that doesn’t need to be stated.
Bloomingdale’s seems to be at least marginally successful in their new markets, but it has come at the expense of other Federated Chains. When Bloomingdale’s opened in Atlanta several years ago, Federated killed off half of the Regency Room department (Bridge sportswear and dresses) of Rich’s flagship store at Lenox Square. These were pulled out of the store despite past dominance in the market. It seemed an the only excuse to even have a Bloomingdale’s in Atlanta was to make Rich’s less upscale. Several years later, the once glorious flagship Rich’s at Lenox is now a boring mid-tier Macy’s that is almost devoid of any reason for existence; it is so similar to the suburban stores. There is scarcely any reason to come uptown anymore to shop. My question is can Federated open Bloomingdale’s in new markets without cannibalizing their existing stores? In Atlanta they sure could not.