Macy’s Sheds the Old, Stodgy for the Hip

Macy’s has found success in a down economy—by shaping its products and marketing efforts to the local consumer.
Macy’s Sheds the Old, Stodgy for the Hip
12/17/2009
Updated:
10/1/2015
<a><img src="https://www.theepochtimes.com/assets/uploads/2015/09/tunafish94509033.jpg" alt="Shoppers pack into Macy's in Manhattan December 16, 2009 in New York. (Don Emmert/AFP/Getty Images)" title="Shoppers pack into Macy's in Manhattan December 16, 2009 in New York. (Don Emmert/AFP/Getty Images)" width="320" class="size-medium wp-image-1824647"/></a>
Shoppers pack into Macy's in Manhattan December 16, 2009 in New York. (Don Emmert/AFP/Getty Images)
WASHINGTON—Macy’s Inc., the nation’s largest department store chain, has found success in a down economy—by shaping its products and marketing efforts to the local consumer.

“Given the difficult economic climate, we had an excellent quarter. Our business improved progressively each month during the period and we are entering the holiday selling season confident in our locally-focused organizational structure,” said Macy’s President Terry Lundgren in a recent statement.

Although in-store sales were down 4 percent compared to the same period in 2008, its online sales jumped by 21 percent during the third quarter and 16 percent for the year.

The economy has not quite recovered, but Macy’s took the plunge and opened four additional stores in Fresno, Calif.; Visalia, Calif.; Dallas-Fort Worth, Texas; and Kansas City, Mo. Additionally, it reopened two stores near Houston that were closed due to Hurricane Ike.

Financially, Macy’s did better than expected during the third quarter, with $489 million cash in its coffers, 63 percent higher than during the same period in 2008.

Macy’s operates 850 department stores in 45 states, including Guam and Puerto Rico, a staggering increase in the number of stores from 424 in 2005.

Lundgren knows the economic problems in today’s market environment. Consumers are more selective and are seeking bargains. To get customers through the door, knowledge of consumer tastes, trends, and price consciousness has become the mainstay of the retail sector.

Macy’s has fine-tuned its customer orientation to the point that it sent close to 700 different versions of its fall catalog to customers over the past months. In the past, Macy’s sent one catalog for each season.

The department store hired market research firm dunnhumbyUSA LLC to track and analyze sales data and develop a customer segmentation model.

“Lundgren and Macy’s are hoping to mitigate some of the impact of more frugal consumers by using better technology to track their spending habits—with the goal of convincing them to spend more of their money at Macy’s every time they visit,” Lundgren shared at a University of Pennsylvania lecture series, recently published by Knowledge @ Wharton (KW).

Localizing Sales


In 2008, Macy’s embarked on a localization initiative called “My Macy’s” to focus on the flair and preferences of local consumers. The company hopes to develop a more personalized sales approach and is moving purchasing decision making from regional headquarters to the local level.

To test the waters, Macy’s launched its pilot program in 20 regions last year. The intent was fourfold: to make local tastes the center for the store’s merchandise, to give a boost to in-store versus online sales, to cut expenses, and to eliminate duplicate efforts.

Within a relatively short time, “these initial stores have moved the needle on the sales line in this very challenging period of business—by 250 basis points (2.5 percent),” said Lundgren in the KW report.

Its localization efforts generated almost immediate results. Seven “My Macy’s” stores were among the top ten in sales during the third quarter of 2008. Soon after, the company announced that it would implement the strategy nationwide.

By the end of 2008, 13 of the 15 best performing geographic areas were those that operated with the “My Macy’s” strategy.

Lundgren shared that the company’s “My Macy’s” effort would be completed in early 2010.

“At this point, the ‘My Macy’s’ structure is throughout the company but it will take a little bit of time before the localized assortments are fully in the stores. So we had said that we expected that to happen in spring of ’10 [2010],” Macy’s CFO Karen M. Hoguet announced during the company’s third quarter earnings call with analysts.

Benefiting from National Brand Recognition


“Despite the more localized approach, these stores are also reaping the advantages that Macy’s wields as a national brand,” the KW report said. “Most significantly, the sheer size and coast-to-coast reach of the retailer allows Macy’s to nail down exclusivity agreements with top fashion designers as well as a growing array of celebrities.”

Department stores need unique brands to compete in an increasingly saturated market. Competition is fierce to sign on the hottest clothing designers to exclusive distribution deals.

Tommy Hilfiger’s total sales shot up after the firm signed on for an exclusive sales deal with Macy’s. Rachel Roy, a fashion designer whose expensive blouses were mentioned favorably on the Oprah Winfrey Show, was willing to produce a lower cost version of her blouse collection for Macy’s. Her sales shot up after signing on to an exclusive deal with Macy’s.

“Despite its larger economy of scale, Macy’s must compete aggressively for exclusive deals in a market where

Wall Street Responds


In September, Citigroup upgraded Macy’s stock rating from “hold” to “buy,” citing revenue growth, its localization initiative, cost reductions, improved sales, margins, and technology upgrades. The Buckingham Research Group Inc. went even further and upgraded Macy’s to a “strong to buy.”

On the downside, Audit Integrity, an independent research firm, predicted that Macy’s is one of the companies most likely to declare bankruptcy during the coming 12 months, around the same time when Citigroup and Buckingham published an optimistic outlook on Macy’s financial wherewithal.