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Through a special arrangement, what follows is an excerpt of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.
Federated’s 2005 acquisition of May Department Stores promised scale. Get big enough, the competition couldn’t touch you.
At last, one unified “national branding message” and one singular go-to-market strategy would guide Federated. No more unique, locally-based brands merely popular in specific metro markets. There would soon be stores in 64 of the nation’s top 65 markets under a single banner: Macy’s.
Heralded as “truly an exciting day in American retailing,” the merger, in retrospect, obliterated the department store category’s greatest strengths. Consolidation was favored over differentiation and elusive “efficiencies” were chased at the expense of specialization. As brands from Marshall Field’s in Chicago to Lazarus in the Midwest were shed, loyal local shoppers felt betrayed and rebelled.
Decades of distinct market knowledge ended up devalued and then simply disappeared, rolled up into a singular corporate branding and buying approach. You might argue that Federated had Big Data before Big Data was a thing. It just wasn’t the kind of data visible at the corporate level. It was Big Data dis-aggregated. Data inside the minds of experienced employees, the kind of local market knowledge a top-down buying process doesn’t really have.
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 lesson here is that not everything that can be measured is valuable, and some things that can’t be measured have great value. 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.