Companies that try to be all things to all people confuse customers and endanger their brands. No better examples exist than those in retail.
On February 28, 2005, Federated acquired May Department Stores for $11 Billion, creating the nation’s second largest department store chain with $30 Billion in annual sales and more than 1,000 stores. On July 28, 2005, Federated announced its plans to convert 330 regional department stores owned by the May Company to the Macy’s name.
Because many considered these department stores beloved local institutions in the regions surrounding them, the conversion of the May brands was met with negative reaction. The strongest opposition occurred with the loss of Filene’s, Marshall Field’s, and Kaufmann’s, which were all well known for their flagship downtown stores and local traditions. Kaufmann’s, for example, established itself as an icon, in part, by operating the “Kaufmann’s Celebrate the Season Parade,” which was traditionally broadcast live throughout Pennsylvania.
Many customers publicly vowed never to shop at the May stores that were converted and to switch their loyalty to other major department store chains beyond Federated’s control. Prominent film critic Roger Ebert voiced the grief of many Chicagoans at the loss of Field’s when he wrote in his column on September 21, 2005: “I thought the day would never come. I am looking at my Field’s charge card, which I have cut up into tiny pieces. They look like little tears the color of money.”
A website for Field’s Fans surfaced, demanding not only a return to the name Marshall Field’s but also a commitment to the high-quality merchandise that Field’s offered. In a time of economic turmoil of 2010 that has hit virtually every industry, but disproportionately retail, one has to wonder why this retail giant has not responded better to the boundaries of its most ardent fans.
According to the 2009 Annual Report from Macy’s, they had $23.5 Billion in sales and 810 stores—that’s a loss of $6.5Billion in sales and 190 stores in four years. Lest the argument surface that the entire economy has suffered, let’s do an apples to apples comparison: Based on online financial reports, Macy’s ratio of debt to revenue looks out of proportion compared to its competitors:
- Macy’s: .35 (8.85B/25B) (This source using $25 Billion as the figure, when Macy’s own annual report puts the number $1.5 Billion lower)
- Sears: .07
- Wal-Mart: .10
- JC Penney: .19
In other words, Macy’s has almost twice the comparable debt load of JCP and five times the debt load of Sears.
Clearly, decision makers in at risk industries need to experiment with novel approaches and innovative ideas, but as my mother used to say, they don’t need to throw the baby out with the bathwater. Sometimes traditions remain traditions because they work. Formulate your strategy and then set boundaries for executing it. Sometimes that will mean change, but in the case of Macy’s, it should have meant status quo.
{ 2 comments… read them below or add one }
I think this is especially true in this case because Macy’s, itself, is sort of stuck without an identity. It’s in between everything, and it itself needs some strong new direction and a clear vision. If the other stores had that, they just sacrificed that in a very wrong move. Having worked at AT&T for 19 years, as it went through so many industry changes, I was personal witness to a lot of restructure, renaming, and change just for change’s sake, much of it being much ado about nothing. Real change must come from customer need, and as Buckminster Fuller said, the best solution is the simplest and most elegant.
Fields’ fans weren’t only in the Chicago area. I used to take an annual business trip to Chicago and would keep a running list of what I needed so I could make a “Fields-run.”