Macy’s: A Case Study

Macy’s: A Case Study

James Nobel

Marketing Management

Case Study 2: Macy’s

Professor Podoshen

April 13, 2016

1. Executive Summary

As one of America’s first and largest department stores, Macy’s has enjoyed long term continued growth since its founding as a simple dry goods store in 1858.  In recent years, however, many larger scale retailers like Macy’s that have enjoyed decades of prominence as the cornerstones of the typical American mall have been facing significant headwinds.  A large part of this is due to the fact that these stores have traditionally served as the anchor stores for malls.  Today, however, the “original model for the shopping mall, a colossal suburban structure with big-box retailers as anchors, no longer attracts shoppers” [1].  The outlook for America’s malls, then, is not very positive.  In face, within the next 15 to 20 years, leading retail consultant Howard Davidowitz expects “as many as half of America's shopping malls to fail.  He predicts that only upscale shopping centers with anchors like Saks Fifth Avenue and Neiman Marcus will survive” [2].  Yet, not all malls are doomed in America.  For the malls that cater to the higher end customer, there is, in fact, a reasonably steady and healthy growth trend.  As evidence of this, Davidowitz cites that of the roughly 1,000 malls in the U.S., about 400 cater to upper-income shoppers.  “For those higher-end malls, business is improving, according to data from Green Street Advisors. It's the lower-end malls that are being hit by store closures” [2].  As Macy’s has traditionally been viewed as serving the middle of the market, stores have been opened in both middle and upper end malls.  To this end, while Macy’s stores that serve as anchors in the middle and lower end malls have been hit by declining sales, stores that are part of the anchors in the upper end malls have seen, or have the potential to see, continued growth in the coming years.  For Macy’s districts, such as the North Florida district that serve a wide of markets and economic classes across multiple locations, the challenge lies in continuing to adapt the sales model to meet the needs of the changing market.  Keying off initiatives set forth in the late 2000s and under the guidance of Lee O’Rourke, Macy’s North Florida has enjoyed a turnaround that took them from 52 out of 69 in ranking among the districts, to where they are consistently among the top performers.  As the traditional retailing format continues to decline and the scope of what appeals to consumers evolves, Macy’s North Florida district can drive improved sales growth by building on the marketing initiatives launched to create a more boutique-style retail experience within its stores, while further maximizing the value and relevance of its stores to the local shoppers in each market served.  

1. Internal Strengths

Macy’s has a long standing position in the market with a very broad footprint.  In addition, the company has been able to tailor the size and scope of its stores to suit the individual markets served.  Macy’s also carries a wide variety of goods at all levels of the market, as well as its own private label brands throughout its departments, allowing the store to appeal to more consumers and their needs.  In the North Florida district, for example, stores range from anchors in the very upscale and popular Millenia Mall in Orlando, to the furniture only location in Altamonte.  Macy’s as a whole has already completed the difficult job of restructuring its corporation to consolidate and centralize buying and marketing channels.  This unification of the company gave Macy’s more buying power.  At the same time, Macy’s recognized the need, in the face of an evolving consumer market, to tailor the shopping experience for the many markets served.  The My Macy’s initiative that has been in place since 2008 provides a strong tool to promote a feeling of individual attention for the consumer.  Part of the challenge that brick and mortar stores face in today’s digital society, is the fact that in a virtual shopping world the look, feel, and product experience can be completely tailored to the consumer based on feedback provided by their own personal browsing history and tastes.  In a large scale department store trying to cater to multiple products and a variety of needs and tastes, it becomes much more difficult to create an individualized experience.  Macy’s has made great strides in this area through creating a more localized shopping experience based on a better understanding of its core demographics by region.  Adding to this, Macy’s has built a strong approach to facilitate feedback from the local level through the district and up to the primary decision channel at the corporate office through restructuring its district teams.  Further, each district team has employed a “deep dive” strategy that provides hands-on interaction with local store employees and management, as well as customers, as a means to further tailor the local experience of a given store.  In all of this lies the strength of an open flow of communication from the main office in New York, through the districts, and down to the store level so that feedback and initiatives can be implemented that will quickly reflect to the consumer that Macy’s is listening and paying attention.  The company’s scorecard approach to compiling and presenting both employee and sales performance provides an invaluable month by month glimpse to management at all levels of a given store and district’s performance.  Macy’s North Florida district in particular has a strong district team and management structure that is eager to build profitability across all of its stores, and has just as much focus on growing sales at its smallest location as it does to the premiere store at the Millenia Mall.  In addition, the Macy’s North Florida district serves a very diverse population, making it an ideal test bed for new initiatives that Macy’s should consider when evolving its overall sales and marketing strategy.  Moreover, the feedback that comes when multiple districts can cross compare sales and marketing strategies goes a long way to optimizing retail approaches from something as simple as how a given purse is displayed to the more complex world of overall store layouts.

1. Internal Weaknesses

While the decision to streamline the buying and marketing of Macy’s to a centralized office in New York was perhaps a necessary step in the restructuring of the company, this move may have compromised the efficiency of the company’s goals to make each store’s buying experience more local.  The success of any supply chain is heavily dependent upon efficiency of communication, and ensuring that feedback from the consumer level reaches the level of the buyers.  The split of Macy’s structure into multiple districts provides the means to channel the feedback, however, there is an inherent disconnect to the market that exists when the buyer is sitting in an office in New York and trying to get a true feel for what will truly appeal to the consumer shopping in rural Altamonte, Florida.  As strong as the feedback from the North Florida district management may be, it may take a certain amount of “trial and error” before Macy’s finds a groove with localizing a given store.  To this end, there is an inevitable time delay in how quickly feedback from the market can reach through the local channels, up through the districts, and onto the head office.  This time delay can result in the potential for over-supply of products that may or may not have success in a given market, or in a worst case, missing the market completely with a product.  The North Florida district’s approach to holding “deep dive” sessions with upper level management and buyers at its local store level is a tool that the company could potentially employ more widely across multiple districts to be more proactive in gaining feedback, but with resources streamlined to the main office there is likely little time, staff, or budgetary resources to effect this type of approach on a broader scale.  On a distribution level, while Macy’s has a broad footprint in the market with multiple stores per district, there is a strong potential for overlap in a given district whereby stores are competing for the same or similar customer as consumers become more willing to travel to shop for the best deal.