Should Macy’s have never gone national?
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.
- The Macy’s Effect – WayfinD
- Federated deal creates $1B spending colossus – Advertising Age
- How retailers can keep up with consumers – McKinsey
- I Visited a New Macy’s Outlet for the First Time and It Was Fascinating – TheStreet.com
DISCUSSION QUESTIONS: To what degree can Macy’s struggles be linked back to its decision to consolidate regional nameplates under one national banner? What lessons, if any, does it offer around balancing the benefits of scale versus local knowledge?
Jasmine GlasheenPrincipal Writer & Content Strategist, Jasmine Glasheen & Associates
Jasmine GlasheenPrincipal Writer & Content Strategist, Jasmine Glasheen & Associates
Jasmine GlasheenPrincipal Writer & Content Strategist, Jasmine Glasheen & Associates
Jasmine GlasheenPrincipal Writer & Content Strategist, Jasmine Glasheen & Associates
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23 Comments on "Should Macy’s have never gone national?"
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President and CEO, Stealing Share
It is a department store problem. Look around. Who is doing well? Department stores NEED a new operating model.
I hate to get off topic and confuse the problem. But, assuming that someone fixed my earlier point, a single brand makes sense.
Local is not (according to research) enough of a powerful switching trigger to foster a store as a destination. The problem is that Federated does not understand BRAND as it is today.
What is the Macy’s promise? Can anyone tell me in a single sentence? Can anyone tell me how that statement it is different and better from ANY of the competitors? I rest my case.
President, Max Goldberg & Associates
A few short years ago, when Macy’s was doing well financially and the company was being touted for its omnichannel approach, we were singing its praises. Now, when sales are down, critics are piling on. Did Macy’s lose its way internally or did consumer tastes change? Certainly, some of the blame can be attributed to ending the local brands it acquired. But let’s remember, some of those brands were underperforming at the time of acquisition. Macy’s needs to examine consumer desires and adjust accordingly. Some of those adjustments may mean moving towards localization, others may point to national realignment.
President/CEO, The Retail Doctor
I’d go one step further. Federated is responsible for the great beige-ing of mall retail in America. When everything is the same, nothing stands out. And the one thing that stands out for anyone when you mention Macy’s isn’t exceptional retailing, I’ll bet it would be: coupons.
I’d add one to the list of excellent points Lee included — the loss of the career personnel in those regional players who trained employees on what the brand stood for and what “customer service” looked like. Derided as blue hairs, they often were the true brand ambassadors, not someone taking a pic on their phone.
Founder | CEO, Prefeye - Preference Science Technologies Inc.
Yes, the great beige-ing of America. Well described!
Founding Partner, Merchandising Metrics
My thumbs up re: the beige-ing of the mall comes with a caveat. I can’t agree that Federated is responsible. Back when Macy’s, Federated and May Co. were separate companies, they had very different platforms. Macy’s was almost pure right brain … highly creative and dynamic. May Co. was almost pure left brain…by the numbers. Federated did a great job of balancing the two … and survived. Federated operated many of their divisions with very real connections to their local markets and at the same time exercised solid financial disciplines.
Federated/Macy’s does not deserve to be singled out. Beige-ing is a virus that many retailers are suffering from. Tough to inoculate against and tough to cure. This one has to run its course.
Principal, Retail Technology Group
The department store concept is something that usually started as one man’s idea in his favorite city and did well in that city serving the local demographic. My perspective as a consumer with years of experience is that that more than five of any department store is too many to sustain success.
Global Vice President, Strategic Communications, SAP Global Retail Business Unit
Tom is closer to the point — new operating models for all department stores are the way. And around the world this is the change taking place. Macy’s has changed in many ways internally and the change will continue — even after Terry retires. They have committed to their need to change and they still have many many loyal shoppers — but those shoppers are changing. The benefit is that many of the kids shifting up from Generation Z grew up shopping Macy’s with their parents or friends — more of them will depend on Macy’s online and in-store for their needs.
Stop the pondering of the past and think forward. Neither we nor Macy’s can change the past but we can leverage and adapt to the future of retail.
Principal Writer & Content Strategist, Jasmine Glasheen & Associates
2005 was the wrong time for Macy’s to consolidate. Differentiation and specialty stores are the name of the game nowadays. Millennials are skeptical of big umbrella brands and corporations. Customers prefer to shop local. Customers won’t leave their house for a product they can find just as easily online, so this was poor timing for Macy’s.
After the merger, Macy’s laid off some of their seasoned employees and started hiring space-fillers with no concept of customer service. It doesn’t matter how many runway shows and parades Macy’s sponsors when their in-store experience and product selection is lacking.
Managing Partner, RSR Research
I never thought the consolidation under one banner was a great idea, but Terry Lundgren made it work for a decade. So I had to declare that I was wrong.
I think a.) he deserves some kind of award for steering that ship as long as he did and b.) as Tom points out above, the whole sector has a problem. People simply don’t want to shop “by brand by department” anymore. They prefer to shop by lifestyle.
If I had an easy fix, I’d report it here. But I’ve worried about department stores since long before the Macy’s consolidation. They have felt dinosaur-like for a very long time. The world has changed.
Principal, Retailing In Focus LLC
Some of our observations about Macy’s are based on 20/20 hindsight, not based on what seemed like a smart move at the time. Even though there was plenty of debate about the disappearance of powerful local nameplates like Marshall Field’s, the reality is that several of those retailers were in their own slow decline. So Macy’s effort to create a national brand (and economies of scale) paid off for a while.
Where Macy’s has lost its way is in the failure of the “My Macy’s” initiative to cater more effectively to local tastes. The best data science in the world may not be a substitute for experienced managers who really understand their customers’ taste (and when things sell in a given climate). But the bigger issue is the overassortment of women’s brands, erosion of customer service and lack of capital spending; no amount of localization can overcome those hurdles.
Founding Partner, Merchandising Metrics
Urban Planner
For me, back then, the seeming excitement of Macy’s was based on their Herald Square store in NYC and the Union Square store in San Francisco. If each city could have had an exciting catalytic store on that scale it would have made a difference.
And that kind of experiential marketing is what is necessary to save some department stores? Great center city stores do make a difference. That being said, the mall stores pale by comparison.
President, Humetrics
When you specialize in everything, you end up specializing in nothing.
Overseer of Order
Ask yourself: were the reasons for management’s decision to make this move motivated by the customer or by their own self-interest? In the “buy local” culture of today, driven largely by the recession but also by “farm to table,” do customers really care about national return policies, singular advertising synergies and creating buying efficiencies?
And at the same time, where is the excitement for going into a big box store anymore? Where are the Marvin Traubs and the vision for making shopping a fun and exciting event?
Today’s department stores are in a sale price-driven race to the bottom.
This just in…
Macy’s is dismantling its assets ala Sears. Here the once locally proud sub-brand of Marshall Field & Co., Frango Mint, is being sold off.
Principal, Your Retail Authority, LLC
CFO, Weisner Steel
In a few cases — specifically THAT one — where there were strong plates, I think it was a mistake, just as Bloomingdale’s was never “Macy-ated” (or even contemplated, AFAIK). But for others, I’m not so sure: Lazarus, for example, had already gone from being a Columbus store to a mashup with Shillito’s, Rikes, Hornes, etc…, so much had already been lost.
I think the bigger mistake was the May acquisition. May itself was, of course, a merger of two fundamentally different companies which many would argue never really worked. And you don’t build a strong company by combining a so-so company with a flawed one. But whatever the merits, it’s clear Macy’s ended up with too many stores that didn’t really fit any consistent image.
Food Regulatory Consultant (labeling, advertising, promotions)
This was many years ago, and maybe not a valid comparison, but when I worked at the now long dearly departed Borden Co., a marketing VP thought that the revered Borden name could sell anything. They bought a successful BBF (Burger Boy Foodorama) regional fast food chain competitor to McDonald’s. Then changed the name to “Borden Burger.” In a few years, that was shuttered. I suggested they convert all that real estate to “Elsie’s Premium Ice Cream” parlors but that idea fell on deaf ears.
They also bought up several thriving potato chip/snack companies. An attempt to convert to a “Borden” brand failed miserably. Here in Columbus, many still remember “Lazarus,” in Dayton it was “Rikes,” in Cincinnati “Shillitos,” in Pittsburgh, Kaufmann’s etc. Everything seems like a good idea at the time — and perhaps it was, at a time.
Founder | CEO, Prefeye - Preference Science Technologies Inc.
One size does not fit all as they say. Macy’s product lineup lacks imagination, instead competing on price. Macy’s apparel is an overwhelming sea of stuff … all of it looks the same as customers are confounded with complicated discount coupons making one feel like they lost out if they do not have a coupon, like a person in front of them in the checkout line. Plus, customer service is rare, very rare. Sorry, Macy’s.
In comparison, Nordstrom has always assorted based on location. Regional assortments are always Nordstrom-esk maintaining the Nordstrom brand while servicing the regional customer. An art more than data science.
CEO
Urban Planner
Haven’t been to one, but Von Maur’s seems to be expanding. And Boscov’s too, although they had their scare already. In Hardware Retailing Magazine there is a current issue about how the Sears Hometown company (spun off from Sears a few years ago) is co-locating appliance stores with independent hardware stores, and working well for both. There probably is a niche for department stores, at least in center cities, and in some suburban and exurban locations, but if they just sell the same stuff that everyone else is selling, without decent service, and with little pizzazz, yes, they are doomed.