Big Changes Seen When Macy’s Minds the Stores
Macy’s West Chief Executive Robert Mettler strides through the San Francisco store in a pinstripe suit, showing off tidily arranged clothes in uncluttered spaces, plasma screens blinking ads for the latest in cosmetics and couches where the weary can rest near the dressing rooms.
He’s here not to brag about his glitzy Union Square flagship but to sell a different message: Big changes are ahead for Robinsons-May, the Southern California department store chain that is being converted to the Macy’s name by new owner Federated Department Stores Inc.
Mettler acknowledges that his company must do a delicate dance to win over Robinsons-May customers -- who are hooked on lower prices and endless sales -- without diminishing its own cachet.
“This would scare a lot of their customers,” he said, stepping off the escalator on the second floor, apparently not yet accustomed to referring to Robinsons-May shoppers as “our customers.”
Among the wares on display: Marc Jacobs sundresses with nine layers of ruffles ($428), cotton Jill Stuart skirts ($255) and premium jeans (averaging about $150 a pair).
Although not all the higher-end labels on this floor will find their way to the former Robinsons-May locations, the conversion to Macy’s is expected to bring generally more upscale items and spruced-up stores. Among the new brands shoppers can expect: Tommy Bahama, BCBG and 7 for All Mankind, Mettler said.
Certainly there are plenty of knots to untangle as Federated prepares to close 28 Southern California stores and rebrand at least 31 others under the Macy’s banner as a result of its $11-billion acquisition in August of May Department Stores Co. Clearance sales started Sunday at current Robinsons-May stores, and all will be converted to the Macy’s nameplate by September.
Last month Cincinnati-based Federated said it expected to lose 5 cents to 15 cents a share in the fiscal first quarter ending April 29, a disappointment given analysts’ predictions of a 70-cent-a-share profit. The company also said sales at stores open at least a year, a key measure of a retailer’s health, would probably dip 1.5% to 0.5% from the same period in 2005, as clearance sales at locations that are closing draw customers from other stores.
Shifting expectations are typical when two huge businesses are being blended, said Burt P. Flickinger III, managing director of Strategic Resource Group.
“Anytime one combines companies of that size, it’s a monumental undertaking,” he said.
Hoping to smooth the way, a transition team has been meeting weekly for six months to deal with issues such as making sure every skirt, shoe and sweater is re-ticketed, for example. The company has boosted capital spending to remodel stores and upgrade systems.
By expanding its store base and reducing its many chains to just two -- Macy’s and Bloomingdale’s -- Federated is carving out substantial advantages, retail experts say. Decisions about Macy’s, which in two years will have grown to 800 stores from 200, can be efficient and cost effective, analysts say.
The chain, for example, will be able to advertise nationally on television rather than tailor ads to the regional brands it is shuttering, said Britt Beemer, chairman of America’s Research Group. Beemer, who predicts that Macy’s will be “almost as promotional” as Robinsons-May, said TV ads should help attract younger shoppers.
“All the research on department stores shows that, without television, you can’t effectively reach the 35-and-under shopper in the marketplace,” he said.
Federated also will wield power with vendors that could help it keep prices low enough to avoid overly rattling Robinsons-May shoppers, Flickinger said. Guided by previous research, he said, Federated will keep the bestselling brands of both Macy’s and Robinsons-May, and that could result in a compelling assortment at competitive prices.
But it’s unclear whether customers will be the ones gaining the advantage, said Eli Portnoy, chief brand strategist at Portnoy Group Inc.
“That would be the marketing spin to take,” he said, but with fewer department stores competing, prices may go up, not down. “They control a major part of the retail marketplace now, and it’s a brilliant move on Federated’s part.”
Federated, in any case, must still deal with the same problems that have plagued department store companies for years. Ten years ago, they claimed 24% of the U.S. retail market, said Marshal Cohen, chief industry analyst at NPD Group; today their share is 17%.
The chains must keep customers from straying to discounters such as Target Corp. and Wal-Mart Stores Inc. or to higher-end competitors, such as Neiman Marcus Group Inc. and Nordstrom Inc. Department stores also have taken a beating from so-called category killers, such as Bed Bath & Beyond Inc. and Best Buy Co., and bold interlopers such as Kohl’s Corp., which made a splash three years ago by opening 28 Southern California stores on the same day.
“We all grew up with them as the mainstay of our shopping experience,” Portnoy said of traditional department stores. “Now there’s so much other competition.”
To succeed, department stores must remind shoppers what sets them apart, he said. Macy’s has addressed this partly by carrying its own brands, such as INC for women and Alfani for men.
Macy’s already has increased spending to staff stores and plans more as the consolidation proceeds, CEO Mettler said. That’s an acknowledgment of the challenge his company faces in matching up with Nordstrom -- which he considers his main competitor in Southern California -- in pampering customers.
“If that’s the standard for what people are expecting for great customer service, then we have to meet that great standard,” Mettler said.
Macy’s hasn’t met it yet as far as Daphne Joubran of Orange is concerned. The 31-year-old student, shopping at South Coast Plaza in Costa Mesa last week, found Macy’s stores to be disorganized and short-staffed. Nordstrom, she said, presents “a smoother shopping experience.”
Nordstrom, for its part, says it welcomes the competition.
“It’s just going to make us work that much harder to provide the best shopping experience we can and have the best merchandise we can,” spokeswoman Deniz Anders said.
Mettler is an old hand in such matters -- the veteran of four decades in retailing served as CEO of Robinson’s department stores in Los Angeles from 1987 to 1993. It’s also familiar territory for Federated and Macy’s, which through the years acquired other Southern California mainstays, including Bullock’s, I. Magnin and Broadway.
Some shoppers at South Coast Plaza said they would be sorry to see Robinsons-May join that list of now-departed names.
Longtime customer Mary Alice Hall of Anaheim said she liked the prices, sales and clothing, such as T-shirts that she had just purchased.
“I think it’s pretty sad that they’re closing,” said Hall, 47, an administrative assistant. “It’s too bad that they got bought out.”
Will Federated ultimately emerge a winner with its latest brand consolidation?
“I think, in the retail game, there are no definitive winners; there’s certainly been losers,” strategist Portnoy said.
“The game for Federated,” he said, is to “be profitable and keep the department store concept alive.”
