Reaching its 150th birthday in 2008, Macy’s Inc. has emerged as an American household icon over the past few decades. Macy’s sells a range of merchandise, including men’s, women’s, and children’s apparel, accessories, cosmetics, home furnishings, and other consumer goods. Since its merger with Federated Department Stores in 1994 and May Department stores in 1995, Macy’s has been pursuing ways to be more creative and distinctive in meeting customer needs and in delivering exceptional values. In order to maintain its share of the department store market, Macy’s has been aggressively investing in a distinguished shopping experience with unique merchandise, exclusive fashion brands, online sites, and breakthrough marketing. However, the ‘Credit Crunch’ in 2007 and 2008 has led to a tremendous decline in consumer confidence, causing decreases in store sales and profits. Macy’s 2008 fourth quarter earnings showed a profit of $750 million. Demographics, consumer spending, and fashion trends drive demand in the department store industry. Macy’s has always faced tough competition in its geographical areas, including discounters, luxury stores, and mail order retailers. Macy's is distinct from warehouse stores in that it does not sell goods in bulk and operates at a higher price point.
The company has launched localization initiative in division consolidation, aiming to accelerate its sales growth and increase profitability. This localization strategy is a locally driven merchandising project to put more region specific products in the local Macy’s stores they shop. The My Macy’s program was launched in February 2008.
Market Needs and Trends
Fifty years ago, most department stores were independent retail stores that offered one stop shopping for the average consumer. Over time, these stores would be slowly transformed into today’s shopping mall. Department stores have served as ‘anchors’ in over 1,200 shopping malls. It has been estimated that monthly mall visits have dropped 50% between the early 1990’s and the mid-2000’s, according to the US Department of Commerce. This drop-off has coincided with an elusive increase in the overall pace of life. Hectic, hurried trips to the mall serve to increase the appeal of shopping formats that can cater to multiple needs, i.e. department stores. Department stores, once the beacon of shopping convenience, have become a cumbersome and sometimes frustrating experience for their traditional customers. Many companies are looking to off-mall locations to expand. Off-mall locations can be more convenient than regular malls, expand store locations, and allow companies to enter smaller markets.
Department stores’ main category, retail prices, has been decreasing due to the increasing competitiveness of discount stores. Discount stores are gradually offering more and more inexpensive, quality apparel that have resulted in lower retail prices for clothing. Consequently, department stores are increasingly relying on sales and promotions to remain competitive.
Many larger retailers are looking to consolidate or reduce their sub-departments and focus more on apparel. Growing competition from other large specialty retailers, such as Best Buy, Wal-Mart, and Target, has whittled away at department store sales in their respective secondary categories. Focus needs to remain on apparel and fashion-related merchandise as department stores are more susceptible to fashion trends.
Department stores have looked more to store consolidation due to harsh competition and economic conditions. Consolidation will aid to the development of better marketing and operational synergies. Mergers and acquisitions can expand Macy’s brand name industry-wide.
Some companies have shifted their marketing focus to focus around its consumer’s lifestyle classifications, such as traditional, active, or career, and have implemented plans specific to each market. Categorizing...