Macy’s National Strategy Gets a Makeover
The Wall Street Journal (April 21, 2008, B1) detailed a strategy by Macy’s CEO Terry Lundgren to localize store assortments to cater to what shoppers are more interested in buying. This localization—called “My Macy’sâ€â€”will for now will be only 15% of the total SKUs, which range from 1.5 million to 4 million, depending on store size.
Macy’s same store sales declined 1.3% for 2007 from the previous year and 2% overall. Macy’s is the largest department store in the U.S., with 2007 sales at $26.31 billion. The other department store leaders are J.C. Penney, with sales of $19.86 billion; Sears, $19.50 billion; Kohl’s, $16.47 billion; and Nordstrom at $8.83 billion. Only Sears posted a worse 2007 sales decline than Macy’s.
Mr. Lundgren is obviously one of America’s smartest and leading merchants. But somehow, to me as a shopper, the strategy of all the stores across the country being a cookie cutter didn’t make sense from the beginning. If shoppers didn’t find what they were looking for in one Macy’s store, there was no reason to even set foot in another.
Having acquired nearly all the major regional chains and then homogenizing them to eliminate any differences, Macy’s may be lucky sales weren’t even lower. Even before Macy’s acquisition strategy took place, one of the faults in traditional department store retailing was that stores looked too much like each other and they carried the same national brands.
If you think of your own town, there are sure to be residential areas that are very affluent, with customers who are more selective and can afford better brand names. At the same time, in an urban environment assortments may need to be tailored to shoppers who work downtown. The people who live downtown may be affluent younger professional folks and a minority of lower income residents.
Once again, we believe the Internet has a profound effect on this strategy; in today’s shopping world, comparison shopping engines can pinpoint stores with lower prices and greater availability. This makes national brand names much more comparable and stores more vulnerable.
However, gearing stores to more localized assortments will be harder than one may think. It means turning some of the control over to local management rather than centralized buying and decision making. According to WSJ, “Management behind the scenes will be revamped to have 13 executives oversee the merchandise assortments at 10 stores each, instead of 7 executives overseeing assortments in up to 23 stores.â€
In going localized, Macy’s is following the approaches that Best Buy, Ross Stores, Inc., Wal-Mart and Gap, Inc. have trail-blazed.
We wish Macy’s well as they make their transition—and we’d love to hear what readers think of this new approach.
Curt Barry is president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory management, merchandise planning and benchmarking. Learn more online at: http://www.fcbco.com.
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