May 15, 2015
Macy’s to go more upscale in best stores
Macy’s is looking to get out of the middle of the retailing road with a plan to add more upscale merchandise at its top 150 stores.
Karen Hoguet, Macy’s chief financial officer, told analysts on the company’s first quarter earnings call, that it was looking to "elevate the assortment consistent with the customers in those stores."
Ms. Hoguet said the chain already stocks stores based on local preferences as part of its "My Macy’s" initiative, so it sees the move to more upscale items at the top 150 locations as an intensification of the approach. Thirty "platinum" stores will not only get more upscale goods, but will have fewer clearance items as the department store brings in fresher merchandise to fill its racks.
Macy’s has already made changes at its Herald Square flagship store that reflect the type of approach it is taking at the other 149 locations, according to a Fortune report. The New York City store includes a new hall of luxury brands including Louis Vuitton and Long Champ as well as a Coach boutique. The store also boasts it operates the world’s biggest women’s shoe department.
Photo: Macy’s
- Macy’s, Inc. Reports First Quarter Earnings of 56 Cents Per Diluted Share – Macy’s, Inc.
- Macy’s (M) Q1 2015 Results (Earnings Call Transcript) – SeekingAlpha
- Macy’s to Push Best Stores Upscale – The Wall Street Journal (sub. required)
- Macy’s is adding a touch of luxury to its ‘platinum’ stores – Fortune
- Macy’s Investing $400 Million to Remodel NYC Flagship – RetailWire
BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Recent Discussions
Discussion Questions
Is Macy’s making the right move by going more upscale in its top 150 stores? Do you expect the chain to eventually expand this approach?
Poll
If the customers at those 150 stores will pay for upscale items, then it is the right move. Another way to ask the second question is, are there enough people willing to purchase upscale items in more locations and is Macy’s planning to change its image? What image is created when some stores offer one type of goods and some stores offer goods with a different image? Split images are not successful. Macy’s would be better off changing the name of one of the types of stores or carrying similar merchandise at all stores.
Adding more lines in an attempt to goose sales is nothing new — independent retailers have used this for many years when they felt their business plateau.
The real challenge for Macy’s will not be the merchandise — they have the deep pockets. But their sales training appears to be little more than order taking. Luxury is about connection, convenience and personal service.
While Macy’s has one of those three, without all three I predict that someone will be eating the unsold merchandise, and it won’t be Macy’s.
I really shouldn’t comment on this question since the closest Macy’s unit to me looks like a badly managed Marshall’s store — a chaotic jumble of discounted inventory sometimes sold out of boxes and bins. And that is a store located near three of Detroit’s most trendy and affluent suburbs.
True, the store anchors a troubled mall, but it is troubled because the next closest mall “The Somerset Collection” redefines upscale marketing.
It seems to me you get the kind of customers you try to attract and, in this case, Macy’s seems to be going for the shopper whose next stop is T. J. Maxx.
The world doesn’t need another middle of the road department store, so Macy’s needs to try to do something fairly dramatic to jump start it’s business. Might as well be going upscale. The opposite direction is already over-saturated.
This is reminiscent of early retail department store models where the basement had the clearances and as you ascended the floors the merchandise became more exclusive and pricey. The stores were downtown and offered a one-stop shop for the shoppers. Competition among department stores still turned on brand reputation and in the case of Minneapolis, it was the venerable Dayton’s vs. Donaldson’s. Today’s retail landscape is hugely different with more competition, suburban sprawls, fluid formats, categories, and complete channel blur.
So, where does that take Macy’s in view of this current effort? It makes sense for those “platinum” stores based on their location and customer base. Might these cannibalize from Bloomingdale’s? Perhaps, but it’s a risk worth taking as these shoppers are already going elsewhere. It could be a matter of degree or “intensity” if Macy’s decides to roll out to beyond the top 150 stores, but I would suggest they fight that urge — it would dilute the effort and the notion of exclusivity which is a necessary component of luxury merchandising.
An additional challenge will be marketing and advertising. The messaging for the platinum and top-tier stores will be different from the rest of the chain, and even within a region/district, as there will be a mix of these stores. This will also add challenges as well to the distribution/supply chain flow as they prepare and ship upscale merchandise to select stores.
Bottom line, yes this makes sense for the top stores but will require adjustments throughout the organization. Further expansion carries greater risks and is less likely to happen.
I agree with the comment Ryan made about getting the customers you are trying to attract. Given the accuracy of that, Macy’s should be successful in the 150-store test they are beginning to run. Frankly, I thought this was already happening. Macy’s has several locations in the South Florida market. Using two that I know and have visited as examples, there are obvious differences in the merchandise displayed. One area is highly affluent and located in an upscale mall. The other is in a good area but not as affluent as the first. You can see the difference in the merchandise and even those browsing the store.
I agree with Camille, a split image is troublesome for a high-end store. It’s very hard to communicate externally so customers know what to expect where, with the results being confused shoppers. Those confused feelings are an emotional turn-off to the majority of shoppers. Giving the higher-end stores a different name is a workable alternative.
Smart move on Hoguet and Macy’s part. Macy’s has a strong following across the country as a leading merchant. They are also addressing a bifurcated consumer marketplace.
Limiting the upscale merchandise to their top 150 stores will place sharper controls on merchandise inventory, allow for depth in product lines and deliver stronger sales per square foot in those boxes.
Macy’s digital savvy, which they will use in-store, will guide associates to help customers in the 700-plus stores that might not have the upscale merchandise. In this way, Macy’s will be using a strong play out of their customer service book.
Without an announcement, Macy’s could have done and likely already does this — most retailers vary selections and the depth of merchandise by store. What is not stated in the article is whether Macy’s plans to recognize this difference with a small tagline either in the store name or by department within the upscale stores or simply slip the merchandise in quietly. I know when shopping for suits at Nordstrom that I need to go to the San Francisco store for the widest selections, compared to the suburban stores. Seems that Macy’s has simply offered this up as part of their quarterly report to analysts after a slightly disappointing quarter. So what’s new here?
The company needs a serious real estate makeover. The profit boost to make the best stores better is missing the necessary ingredients for making the substandard stores successful. I can’t imagine that this will increase consumer endearment and support, especially if they are wondering if they are shopping in a second-rate store or why the stores are not all the same. An executive vision that technically abandons this many stores is an indicator that the people driving the business are blind to the company’s needs.
Is Macy’s trying to compete with its sister, Bloomingdale’s?
The key to selling upscale merchandise is creating upscale atmosphere, and this could be a challenge at Macy’s. It will be interesting to see what they do with displays, dressing rooms, music and other atmospherics.
Macy’s already had at least one upscale-ish store in their portfolio, (Marshall Fields) and had existing customers who had been and were perfectly willing and able to continue to pay for upscale when they took over Marshall Fields. But no. Macy’s wanted uniformity and economy of scale in purchasing and advertising so they ripped out the premium brands, introduced cheap knock-offs and couponing to the Chicago area Fields which they then renamed Macy’s. In the meantime Chicagoans have found plenty of other places to spend their money on upscale items. I can’t speak to other geographic markets, but Macy’s will find any efforts to regain cachet to be utterly futile in this market.
To expand a bit on the comments of the embittered Chicagolander above me, in its current state, Macy’s has the problem that it’s assembled—Frankenstein-like—from stores in markets with different incomes, tastes, etc. Back in the ’50s-’90s, even somewhat after its Federated-ization (but certainly before its Maycompany-ization) it could get around this problem by varying assortments between divisions that were geographically separate (for example Macy’s California, later Macy’s west, was more upscale than other divisions, and this facilitated the merger with the similarly upscale Bullocks); but with stores now coast-to-coast, that doesn’t work so well. So they’re going to have to decide: pursue all income levels, and incur the costs of customization—as well as diluting the brand image—or concentrate on the middle…and fight it out with the JCP/Kohl’s crowd.
I would think just having a different brand would be better unless they want to have the outlet quality items which may meld with existing customer base to warrant the same brand.
When I was growing up in the ’70s and ’80s the Macy’s in my town was the best store within 20 miles. A middle- to very high-end store. Beautifully maintained, great merchandising and displays and lots of name brands and designers like Gaultier, Armani, Valentino, etc. This wasn’t the flagship in SF but out on the suburbs. The Union Square flagship 30 years ago was fantastic. This was when Macy’s had a way hipper vibe and brands then Nordstrom.
Then by the early ’00s it all disappeared. The same store is now very poorly maintained, torn, worn out carpets patched with electricians tape, POS stations thrashed with holes in the woodwork and the parquet flooring is the same from 1976. Very sad. I think before they add a higher end level of merchandise maybe they need to do a serious remodel first and spend it on upkeep.
Bloomingdale’s looks great, why make Macy’s the poor relation?
More Discussions
How Timely Is the Planned Lowe’s Website Renovation Focusing on Personalization?
Is Lowe’s being timely with its website reno, and is it right to be placed as…Should Costco Be Opening Members-Only Gas Stations?
Is this the right move for the warehouse club?As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…
If the customers at those 150 stores will pay for upscale items, then it is the right move. Another way to ask the second question is, are there enough people willing to purchase upscale items in more locations and is Macy’s planning to change its image? What image is created when some stores offer one type of goods and some stores offer goods with a different image? Split images are not successful. Macy’s would be better off changing the name of one of the types of stores or carrying similar merchandise at all stores.
Adding more lines in an attempt to goose sales is nothing new — independent retailers have used this for many years when they felt their business plateau.
The real challenge for Macy’s will not be the merchandise — they have the deep pockets. But their sales training appears to be little more than order taking. Luxury is about connection, convenience and personal service.
While Macy’s has one of those three, without all three I predict that someone will be eating the unsold merchandise, and it won’t be Macy’s.
I really shouldn’t comment on this question since the closest Macy’s unit to me looks like a badly managed Marshall’s store — a chaotic jumble of discounted inventory sometimes sold out of boxes and bins. And that is a store located near three of Detroit’s most trendy and affluent suburbs.
True, the store anchors a troubled mall, but it is troubled because the next closest mall “The Somerset Collection” redefines upscale marketing.
It seems to me you get the kind of customers you try to attract and, in this case, Macy’s seems to be going for the shopper whose next stop is T. J. Maxx.
The world doesn’t need another middle of the road department store, so Macy’s needs to try to do something fairly dramatic to jump start it’s business. Might as well be going upscale. The opposite direction is already over-saturated.
This is reminiscent of early retail department store models where the basement had the clearances and as you ascended the floors the merchandise became more exclusive and pricey. The stores were downtown and offered a one-stop shop for the shoppers. Competition among department stores still turned on brand reputation and in the case of Minneapolis, it was the venerable Dayton’s vs. Donaldson’s. Today’s retail landscape is hugely different with more competition, suburban sprawls, fluid formats, categories, and complete channel blur.
So, where does that take Macy’s in view of this current effort? It makes sense for those “platinum” stores based on their location and customer base. Might these cannibalize from Bloomingdale’s? Perhaps, but it’s a risk worth taking as these shoppers are already going elsewhere. It could be a matter of degree or “intensity” if Macy’s decides to roll out to beyond the top 150 stores, but I would suggest they fight that urge — it would dilute the effort and the notion of exclusivity which is a necessary component of luxury merchandising.
An additional challenge will be marketing and advertising. The messaging for the platinum and top-tier stores will be different from the rest of the chain, and even within a region/district, as there will be a mix of these stores. This will also add challenges as well to the distribution/supply chain flow as they prepare and ship upscale merchandise to select stores.
Bottom line, yes this makes sense for the top stores but will require adjustments throughout the organization. Further expansion carries greater risks and is less likely to happen.
I agree with the comment Ryan made about getting the customers you are trying to attract. Given the accuracy of that, Macy’s should be successful in the 150-store test they are beginning to run. Frankly, I thought this was already happening. Macy’s has several locations in the South Florida market. Using two that I know and have visited as examples, there are obvious differences in the merchandise displayed. One area is highly affluent and located in an upscale mall. The other is in a good area but not as affluent as the first. You can see the difference in the merchandise and even those browsing the store.
I agree with Camille, a split image is troublesome for a high-end store. It’s very hard to communicate externally so customers know what to expect where, with the results being confused shoppers. Those confused feelings are an emotional turn-off to the majority of shoppers. Giving the higher-end stores a different name is a workable alternative.
Smart move on Hoguet and Macy’s part. Macy’s has a strong following across the country as a leading merchant. They are also addressing a bifurcated consumer marketplace.
Limiting the upscale merchandise to their top 150 stores will place sharper controls on merchandise inventory, allow for depth in product lines and deliver stronger sales per square foot in those boxes.
Macy’s digital savvy, which they will use in-store, will guide associates to help customers in the 700-plus stores that might not have the upscale merchandise. In this way, Macy’s will be using a strong play out of their customer service book.
Without an announcement, Macy’s could have done and likely already does this — most retailers vary selections and the depth of merchandise by store. What is not stated in the article is whether Macy’s plans to recognize this difference with a small tagline either in the store name or by department within the upscale stores or simply slip the merchandise in quietly. I know when shopping for suits at Nordstrom that I need to go to the San Francisco store for the widest selections, compared to the suburban stores. Seems that Macy’s has simply offered this up as part of their quarterly report to analysts after a slightly disappointing quarter. So what’s new here?
The company needs a serious real estate makeover. The profit boost to make the best stores better is missing the necessary ingredients for making the substandard stores successful. I can’t imagine that this will increase consumer endearment and support, especially if they are wondering if they are shopping in a second-rate store or why the stores are not all the same. An executive vision that technically abandons this many stores is an indicator that the people driving the business are blind to the company’s needs.
Is Macy’s trying to compete with its sister, Bloomingdale’s?
The key to selling upscale merchandise is creating upscale atmosphere, and this could be a challenge at Macy’s. It will be interesting to see what they do with displays, dressing rooms, music and other atmospherics.
Macy’s already had at least one upscale-ish store in their portfolio, (Marshall Fields) and had existing customers who had been and were perfectly willing and able to continue to pay for upscale when they took over Marshall Fields. But no. Macy’s wanted uniformity and economy of scale in purchasing and advertising so they ripped out the premium brands, introduced cheap knock-offs and couponing to the Chicago area Fields which they then renamed Macy’s. In the meantime Chicagoans have found plenty of other places to spend their money on upscale items. I can’t speak to other geographic markets, but Macy’s will find any efforts to regain cachet to be utterly futile in this market.
To expand a bit on the comments of the embittered Chicagolander above me, in its current state, Macy’s has the problem that it’s assembled—Frankenstein-like—from stores in markets with different incomes, tastes, etc. Back in the ’50s-’90s, even somewhat after its Federated-ization (but certainly before its Maycompany-ization) it could get around this problem by varying assortments between divisions that were geographically separate (for example Macy’s California, later Macy’s west, was more upscale than other divisions, and this facilitated the merger with the similarly upscale Bullocks); but with stores now coast-to-coast, that doesn’t work so well. So they’re going to have to decide: pursue all income levels, and incur the costs of customization—as well as diluting the brand image—or concentrate on the middle…and fight it out with the JCP/Kohl’s crowd.
I would think just having a different brand would be better unless they want to have the outlet quality items which may meld with existing customer base to warrant the same brand.
When I was growing up in the ’70s and ’80s the Macy’s in my town was the best store within 20 miles. A middle- to very high-end store. Beautifully maintained, great merchandising and displays and lots of name brands and designers like Gaultier, Armani, Valentino, etc. This wasn’t the flagship in SF but out on the suburbs. The Union Square flagship 30 years ago was fantastic. This was when Macy’s had a way hipper vibe and brands then Nordstrom.
Then by the early ’00s it all disappeared. The same store is now very poorly maintained, torn, worn out carpets patched with electricians tape, POS stations thrashed with holes in the woodwork and the parquet flooring is the same from 1976. Very sad. I think before they add a higher end level of merchandise maybe they need to do a serious remodel first and spend it on upkeep.
Bloomingdale’s looks great, why make Macy’s the poor relation?