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[9/30/16]  Macy’s remains a storied and immense American retailer. Founded in the 19th century (as many department stores were), the company operates 850 Macy’s and Bloomingdale’s stores in 45 states, the District of Columbia, Guam and Puerto Rico, reporting 2015 sales of just over $27 billion. Its elephantine, 115-year-old New York City flagship is still the world’s largest department store, and the brand also holds an enviable place in popular culture thanks to Hollywood — “Miracle on 34th Street” is still a popular holiday movie and “Christmas in Herald Square” a favorite song — and its annual Thanksgiving Day parade, which it’s held since 1924.

But Macy’s isn’t the icon it once was. Sales are falling, and, after several store closings in recent years, the company shed another 41 in 2015, with yet 100 additional locations slated to shutter by early next year.

It’s not just Macy’s. A lot of department stores these days are stymied by shifting demographics, changing consumer priorities and behaviors, confounding competition from Amazon and a precarious economy that’s dampened spending. Department stores in general may have doomed themselves as far back as the 1960’s, when they began to trade their place in the urban landscape to become mall anchors, forsaking beautiful Beaux Arts buildings for mundane adjuncts to suburban shopping centers (sites that are themselves in steep decline).

Macy’s does face some unique challenges, however. Its namesake stores in particular are neither discount retailers like Target or J.C. Penney nor luxury shopping destinations like Saks Fifth Avenue, so they’re muddling along in an ill-defined middle. At the same time, Backstage, an off-price effort Macy’s launched last year in response to the continued success of retailers like T.J. Maxx, Ross, and Burlington, threatens to dilute its brand.

“Look at the growth rate of TJX and Nordstrom Rack,” Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive. “That’s where [Macy’s] market share is going.”

But perhaps above all, Macy’s also is grappling with an expansion that has left it over-stored and ill-equipped to offer merchandise that shoppers find unique or exciting. In 2005, department store operator Federated Department Stores (which changed its name to Macy’s in 2007) bought St. Louis-based The May Company, which itself had been amassing a series of department stores and retail chains throughout the West and Midwest, including most of the stores held by Dayton-Hudson, the parent company of a smaller discount chain called Target. In the wake of the deal, Federated crowed about its new juggernaut of “950 department stores, along with approximately 700 bridal and formalwear stores,” and Dayton-Hudson rebranded under the Target aegis.

That acquisition is the root of Macy’s troubles today, Egelanian says. And our experts contend that the takeover of so many department stores didn’t just leave Macy’s with too many locations over a wide swath of the country (though that’s part of the problem), but that Macy’s also gobbled up, Pac-Man-style, department stores that were once thriving local retailers deeply embedded in their respective communities and made them merely cogs in a machine, stripping away their local identities and connections while offering shoppers a homogeneous customer experience with few if any regional differentiators.

Macy’s has already begun to address this problem of subtraction by addition, scaling back massively. But experts suggest its current store closure plans may very well turn out to be just the tip of the iceberg.

“Twenty years ago, Dayton-Hudson sold its stores, which became Macy’s, and put all their eggs into the Target model,” Egelanian said. “Sometimes you think you’re beating your competitors, when you’re actually buying the remnants of their dying chains.”

The blow to merchandising—and loyalty

Macy’s didn’t invent department store consolidation. But its acquisition of The May Company and the subsequent rebranding of several institutions originally founded by local entrepreneurs like Marshall Field in Chicago, William Filene in Boston, Simon Lazarus in Columbus and Edgar J. Kaufmann in Pittsburgh one by one supplanted a local ethos with corporate conformity. That has eroded the connection with customers that once made those stores dependable, go-to retailers and that kept shoppers loyal.

“Those places were the town center, with a big one in the middle of town, maybe a couple near the outskirts,” said Lee Peterson, executive vice president of brand, strategy and design at customer experience consultancy WD Partners. “They had amazing atmospheres and amazing service — they’d get something to your house! Before online shopping, especially in apparel, there was always this element of surprise. ‘What’s Ralph Lauren coming out with? What’s up at Calvin Klein?’ And you’d have to go to the stores to see that stuff.”

Department stores (especially their flagship locations) were places of discovery because talented, attentive people were in charge of both the assortments and the service, Peterson explains. Buyers would go to New York City to see the new merchandise, then bring back what they believed would appeal to their hometown customers.

These days, Macy’s is instead generally buying for the entire chain, acquiring 500,000 of an item rather than the small purchases of maybe 300 or 500 once made by local buyers, Peterson says.

“In the consolidation of department stores, you lost the local thing,” Peterson said. “Once Lazarus became a Macy’s, it’s all about high-level decisions. Merchandise may be important in Columbus, OH, but not across the board, so it goes….CONTINUE READING