Macy's Should Monetize Its Former Brands

Except for the success of discounters like Wal-Mart Stores (WMT), BJ’s Wholesale Club (BJ), Dollar Tree (DLTR), Family Dollar Stores (FDO) and Dollar General (DG), it feels like 1932.

That being said, not all retailers will go the way of Circuit City and Linens-n-Things. So the question becomes what retailers can do to tread water through 2009? And when they do make it, what sorts of things are they doing in 2009 to create opportunity in 2010?

That’s the biggest question facing Macy’s (M), which has been in the mid-range of companies affected by the downturn. It has not had the double-digit drop in sales that was seen by the luxury department stores, but it also had a 1.4 percent decline in same store sales from 2006 to 2007. Press reports had the whole 2008 Christmas season (Nov/Dec) down 7.5 percent, but December down only 4 percent. That’s good news for a number of reasons. Mostly because big luxury retailers were off far more in the holiday season; Saks (SKS) was down 19.8 percent and Nordstrom (JWN) down 10.8 percent.

Macy’s, which is really Macy’s and Bloomingdale’s, is doing some forward-thinking things; after all they have survived two major downturns and any number of smaller recessions in their 150 years. They have a My Macy’s pilot project, where product assortments in select stores are more tailored to local habits. This should be retailing 101; I think even a Kroger (KR) manager can pick some of his own SKU assortments. Still, it indicates that Macy’s management is fighting for sales across the country, and not just in markets like New York where there are analysts watching.

In addition, Macy’s is investing in food start-ups, with concepts like chef Todd English’s Figs restaurant at The Gardens Mall in Palm Beach County, Florida. Department stores were traditionally home to great restaurant concepts; it helped keep customers in the stores for hours, not minutes (witness the success of the 40 Carrots restaurant brand at the 59th Street Bloomingdale’s). In addition, restaurants bring customers (including businessmen) into the store regularly, sometimes weekly. That Macy’s is bringing restaurants back in places like Palm Beach Gardens is smart, smart, smart. But it’s difficult and expensive to get this right; let’s hope they have the stamina to make these pilot programs work.

Macy’s still has a lingering problem they have not really addressed; they merged a number of great department store name brands into Macy’s, and alienated longtime cardholders from each store brand when they did it. The most prominent case has been Marshall Field’s. Folks who don’t live in Chicago don’t realize that their flagship store was the subject of boycotts and street protests just after the Marshall Field’s brand was retired in favor of Macy’s. The same sadness was felt by customers at Rich’s (Georgia), Abraham & Straus (Brooklyn), Burdines (Florida), Meier & Frank (Portland), Marshall Field’s (Chicago), John Wanamaker (Philadelphia) and Filene’s (Boston), among others, though only Chicago saw street action.

All of this, however, presents a New Coke/Old Coke opportunity. At the same time it ditched these store name brands, Macy’s has been pushing strange store product brands including Alfani, American Rag and Tasso Elba. These brands mean little to consumers. American Rag? Hello? Macy’s also licenses Donald Trump. Trump is really a head-scratcher; who would actually associate a comb-over guy with men’s fashion leadership?

Macy’s needs to reassert its former store names as in-house product brands, and use that equity. Before the changeover, Marshall Field’s, for instance, was not only a store brand, but the Marshall Field name appeared on a number of goods, including towels. Because Macy’s was so keen to brand the store, it over-reacted and obliterated most mentions of the Field's name, including those that made sense. Reviving these names won’t confuse consumers; Target Stores (TGT) still sells towels under the Fieldcrest brand, a legacy from the time when Marshall Field’s and Target were sister companies.

Chains routinely use store brands as product brands. For instance, Delhaize Group’s (DEG) Sweetbay, a Florida grocer, sells Hannaford brand products, which are actually the name of their sister Northeast grocery stores. Montvale, N.J.-based Great Atlantic & Pacific Tea Co. (GAP) sells its A&P branded food in Germany at its sister supermarket, Tengelmann. And Target sells Boots-branded cosmetics exported from that U.K. drugstore chain.

These former department store brands have national profiles and centuries of brand equity. Some brands like Burdines, associated with Florida, would work well on resort wear across much of the U.S. Marshall Field’s could be used for store-branded housewares, linens and the like. Rich’s, with its Gone With the Wind Atlanta mystique, might be used for wedding wear. And even the more forgotten store names that have been shelved for more than five years could be utilized on simple promotional goods.

At minimum, Macy’s should immediately order a really short run of T-shirts, with different versions of each of the store logos. The shirts could be sold in former stores associated with the brand, and even given to employees who worked for the store under its past name. Macy’s former John Wanamaker flagship store ought to sell John Wanamaker merchandise to Philly tourists. These sort of cheap store-based programs could make the financial risk low, but create internal and external goodwill. Macy’s has the added overhead of its remaining downtown stores; promotional items can help promote these monsters to consumers.

There is no prescription for a single right way to monetize this goodwill, which has certainly already been written off. But Macy’s has an opportunity to utilize this intellectual property, not only to develop sales for the future, but to protect these great names from use by others, which could happen if they are not used.

Disclosure: None

Comments

[tginomorebush:]

Totally agree .............. Famous-Barr in Saint Louis Missouri was a standard in the area ...... Federated bought .... changed name ..... and lost customers ...... Famous tshirts in Saint Louis will "sell" ..... Great marketing idea ......... hope Macy is listening!

Jan 18 08:40 AM

[TiredOfTheP...:]

The issue with Macy’s sales has nothing to do with converting former May nameplates. It's the economy stupid. By the articles own admission, Macy's is outperforming every one of its competitors. It is taking market share. The idea that it should use the former names in branded products is preposterous. The example of John Wanamaker is ridiculous in that is a brand that the May Company eliminated! Macy's is creating a national brand. That does not happen over night. The restaurants, the ultra successful e-Spot machines and FAO Schwartz etc. are what will drive Macy's success.

Macy's has not lost business in St. Louis' 6 most successful malls. It was no secret that the downtown store as well as suburban branches in Crestwood Mall, Jamestown Mall and Northwest Plaza was floundering under May and the Famous-Barr name and continues to do so today. It is not Macy's but the malls and neighborhoods they are in. While the Crestwood store is now closing, the other 3 will in due time. Dillard's has already left downtown and the 3 mentioned malls.

Everyone can be nostalgic for old names....not just department store names. Those "boycotting" and protesting in Chicago have made no difference in sales and in fact have made themselves look like fools. They act like spoiled brat self absorbed teenagers who have to tell half-truths and down right lies to make their erroneous points. Ironically, the Chicago stores are one of the markets that are seeing a marked increase in sales because of the "My Macy's" program, despite the economy.

Jan 18 10:58 AM

[TiredOfTheP...:]

A final thought....... Bon-Ton, the company who runs department stores under various old nameplates including Carson-Pirie-Scott, Elder-Beerman, Younkers, Bon-Ton, Herbergers ect. is said by many to be nearing bankruptcy. So obviously, keeping the regional names that are supposedly soooooo beloved by shoppers actually does not make a difference!

Jan 18 04:24 PM

[Garland Pol...:]

Good points,Tired of Propaganda, but the two goals of a national brand, and using any equity in a former name, are not mutually exclusive. The Wanamaker example is NOT preposterous. Macy's has spent inordinate amounts to restore the Wanamaker organ, and has been VERY generous with cultural organizations in the restoration and involvement with these groups. The Friends of the Wanamaker Organ, the light show....But Macy's is missing the boat by not capitalizing more on the Wanamaker name. The store is obviously Macy's, but to most Philadelphians (and to the National Register of Historic Places and the history books) it is Wanamakers, and if it is going to spend the extra money to keep these retail palaces going, it needs to reconcile these two conflicting ideas. Again, the two are not mutually exclusive.

It is the same situation at Marshall Field's. Even though it is a Macy's, Marshall Field's is on plaques, and part of its identity and history. If you are going to have the expense of operating that store, you need to continue to make Macy's a national brand, yet incorporate enough references to what was so that it makes sense to consumers. It doesn't now.

Bon-Ton is not a good example. So many of the mid-market stores have been run like commodities and the only reason they have been able to hang on is the old identity.

Jan 18 09:08 PM

[MY private ...:]

I love this thought, I posted a excerpt on my My private brand website, check it out.mypbrand.com/2009/01/1.../

Jan 18 09:52 PM

[Carol Spiec...:]

Who want's a Buffum's T-shirt? How about an Emporium Capwell keychain? Surely there's a market for a Sanger Harris necktie! Marshall Field's, Wanamakers and the other post-Macy'srelated moniker disappearances are no more significant than the list of controversially absorbed or closed retailers that at one time engendered tremendous localized loyalty . . . oh, that is, until everyone just moved on. Nostalgia is a powerful emotion, but in retail, particularly fleeting.

Macy's is doing so many things right . . . and late. Who knew that playing well in the upper middle would be punished so severely in this downturn?

Jan 19 07:15 PM

[One of many:]

Macy's did itself a good deal of harm by eliminating traditional department store names that the customers never wanted to get rid of in the first place. However, simply returning some brand-name items won't be enough to placate disgust that has grown as those customers have watched Macy's reduce classic generational favorites to no more than trendy junk wastelands. A drastic shakeup in upper management, or sale of the stores to an entity that has the same sympathies as the customer, is about the only thing that could bale out Macy's goodwill problems at this point.

Jan 20 05:17 PM

[Daniel W. H...:]

I think the article made an accurate correlation using the New Coke/Old-or Classic Coke illustration. Although I have always preferred Pepsi, I recall as a kid how outraged so many were when Coke changed it's recipe. It comes very close to how outraged so many Chicagoan's-and many, many others throughout the world-are at the loss of Marshall Field's. I seem to recall Coke bringing back Classic Coke fairly quickly-a wise move to keep existing loyal customers happy while still attracting new customers with New Coke. Unlike the executives at Coke, however, Macy's stubborn arrogance continues-and so does the boycott of both Macy's and Bloomingdales. There is a reason that there was never a Macy's store in the Chicago market prior to their acquisition of May's-Chicago doesn't want Macy's. I, like so many of my Chicagoland neighbors, want 'my Marshall Field's'.

Jan 20 10:57 PM

[Average Chi...:]

Macy's should not only monetize the brands, it should monetize the entire buildings that are inextricably BOUND to those brands.

That is especially true for the massive Marshall Field's flagship store on State Street in Chicago. Macy's is throwing tens of millions of dollars down the drain in that store alone.

Bring back Marhall Field's in the form of entire stores. Not just in a few shirts. Bring back the name AND the quality of Marshall Field's and Chicagoans will return in droves.

Until then, the boycott against Macy's will continue. Macy's shareholders, please dump your leadership!

Jan 21 08:14 PM

[Danny K.:]

Here are some thoughts.

1. Macy's has cache when it was a big city store, but when it's in every city from Akron to Birmingham, how much cache can it possibly have.

2. Alfani, American Rag and Tasso Elba are a great execution of private lables. Nonetheless, to me they are another way to say "Sears Toughskins" and Macy's has become too much like Sears and Penney's in my eyes.. They have their place, but I think Macy's has gone too heavy on them.

3. Macy's need to have a consistent store enviornment and "look" like Target does. When you walk into any Macy's, you should know you are in a Macy's and get the same positive, shiny, clean, well-lit feeling you get when you walk inside a Target. They have too many 30-year old stores that feel like 30-year old stores.

4. Macy's needs to explore more big box stores and a different format. Otherwise, it is just a big oversized clothing store. Ironically the departments they got rid of in the 80's due to lack of margin (books, electonics, records & tapes).

5. Trump? Typical tone-deaf New York liberals. Do they really think any of us rubes are impressed with Donald Trump or would even be caught dead wearing something with his name on it as if it were an aspirational brand? Remember Sears' "Arnie" line? lol

Jan 22 02:21 PM

[Danny K.:]

Oops forgot to finish my sentence in the last post .....

Macy's needs to explore more big box stores and a different format. Otherwise, it is just a big oversized clothing store. Ironically the departments they got rid of in the 80's due to lack of margin (books, electonics, records & tapes) are the departments that make a store interesting and drive traffic. If Target can make money on electronics, Macy's ought to be able to.

Jan 22 02:24 PM

[birdwriter:]

"Tired of propaganda" should stop spreading it then! I am sick and tired of Macy's shills and their insulting, condescending lies.

I am a former Field's customer. My husband and I are both professional business people, formerly in retail. Between the two of us, we spent approximately 10K per year at Field's in the last years leading up to their decimation by Macy's. In the 2+ years since Macy's, we have spent exactly zero dollars in a Macy's or Bloomindales' location.

Macy's is not Field's. Period. I walked through the Oak Brook store this week, formerly a beautiful and upscale location. It was dirty, poorly maintained and merchandised, and filled with pseudo-designer junk. It made me ill. I have no gripe with Macy's coming to Chicago, provided they did it with their own new stores. I do have a MAJOR problem with them blowing into town, disregarding their customer base, and destroying a respected worldwide icon of fashion, service and quality.

I'm also tired of hearing how "Field's was losing money," or "Nobody was shopping there," or "the department store is dead." Bunk! Anyone with reading and computer skills beyond a third grade level should be able to view Target's easily accessible financial statements, and see that the store was always profitable, even more profitable per square foot than Macy's or Bloomindales.

Also, the posters who smugly point out that Macy's lost less in this economy than the upscale stores-- (I refuse to call them Macy's "peers," because they are not)-- are only telling a half-truth. As the author references, Macy's suffered serious declines BEFORE the economy tanked, while upscale stores such as Nordstrom's and Saks are experiencing double-digit declines now only after years of strong gains. Of course, since Macy's refuses to break out sales by store or division, it's easy for them to produce a smoke-and-mirrors show to convince investors that the stock, which has lost about 75% of its value, is actually doing quite well.

Finally, for the poster who claims Chicago ex-Field's stores are showing "a marked increase" in sales, pray tell which stores that would be? I have been at Woodfield, Oak Brook, and State Street quite frequently over the past 2 years, and in most cases the employees outnumber the customers. Yes, people might flock in for the 80% off discounts, but what becomes of the margins?

Macy's is a textbook case of what NOT to do in retail, yet their arrogance remains. I hope the board of directors stops drinking the Kool Aid before it's too late.

Jan 22 03:10 PM

[mr. w:]

Yes, bringing back Marshall Field's may actually boost Messymart's sales by 10%. Field's was an iconic store that has been turned into a little more than a bargain basement rummage sale. My wife and I wouldn't be caught dead buying anything with a Messymart label. People are very apologetic when you say I'm wearing something I bought at Messy's. It's like they know they shopped and bought it at 80% off so it offsets the feeling of the cheap, inferior quality it actually is. When is the Board and shareholders going to wake up; I guess somewhere when they write-off $9B (yes billion) in goodwill from dumping names such as Marshall Field's, Kaufmann's, Wannamaker's, Rich's, Burdines etc....

Jan 22 05:29 PM

[KPO'M:]

Of course, the whole "My Macy's" campaign was a partial repudiation of the "national brand" concept. Even management admitted that trying to make every store a cookie-cutter match for all the others across the nation was a recipe for disaster. Bringing back branded merchandise is a logical next step.

Something that the article and "no more propaganda" don't point out is that Macy's has $9 billion of debt (May was a leveraged buyout). They don't just need to do less badly than their peers. They need to hit one out of the park. Selling a few of those brand names along with some prime locations would be a great way of raising that cash, at least when the private equity market recovers a bit. Chicago is a prime example. When it gets right down to it, most of the Field's fans really just care about State Street. Macy's could keep most of their locations in that market, perhaps move their flagship to Water Tower, and keep on trucking after getting the cash infusion from a sale. I'm sure the same is true in other markets.

Jan 22 07:50 PM

[Garland Pol...:]

KPO: I think your idea of a single State Street store is totally valid. This idea could also work for some of the other downtown locations of Macy's. The reality is that for decades and decades, a department store was not a chain. Instead, it was one store that was more of a real estate play. Department stores were filled with leased departments; they were "malls" before there were malls. The local community in Richmond, Virginia, where I am from called the old Thalhimers the "tall mall" in downtown Richmond. Individual fashion brands like Ralph Lauren and even some of the cosmetics and jewelry vendors also operated their own boutiques inside the store. Thalhimers even leased space to a stamps and coins shop and accepted City of Richmond utility bills, for a fee. A chain as big as Macy's cannot do this sort of thing even if they wanted too; it is far too complex and requires local leadership who can do things like sign a lease with a local coin dealer.

Jan 23 06:49 AM

[Rich I:]

Macy's is fairly clueless as to the potential upside of doing exactly what you mention in your article -- I REALLY believe that they could care LESS about doing what you offer--They do not seem to want to be "bothered" with a small amount of sourcing work and attention to detail of merchandising correctly to maximize what could be a GREAT opportunity. They really simply seem to want to say -- "accept what we have and like it -- period"
They use their I. Magnin trademark on lingerie only because there was an outside attempt several years ago to ressurect that name independantly. They are reactive and I am not sure that they can be pro-active -- and I dont believe that they want to be pro-active

Jan 23 04:32 PM

[jonm4at aol...:]

I would so like to know who made Marshall-Fields "Big Shirt"/"Field Gear". GREAT button down shirt, extra long and COULD be dressed up with a tie when needed.

Mar 19 09:09 AM