Macy's finds local angle paying off

Minnesotans might think it strange to see swimsuits at the Macy's Mall of America store in the dead of winter, but Macy's says it knows just what it's doing.

With the popular water park at the Radisson Hotel Bloomington sitting right next door, Macy's store managers discovered that tourists looking for something to splash around in during the retailers' off-season had been out of luck in winters past.

Then came My Macy's.

The initiative was launched a year ago as a test in Minneapolis and 19 other markets to give store managers and merchandisers more flexibility to match clothing and accessories with local tastes and needs. Thus, the tourist-heavy Macy's store at the Mall of America now carries bathing suits year-round and brings in its back-to-school jeans two months before the rest of the chain.

CEO Terry Lundgren said the small but significant gains at the Mall of America helped convince him and other executives at the Cincinnati-based retailer that My Macy's should be rolled out to the rest of the 840-store chain in the coming months.

The news, announced Monday, came as part of the largest restructuring in company history, and put 7,000 employees out of work in the process. Macy's will collapse the three remaining regional headquarters under a single operation, which it says will reduce expenses by $250 million this year and $400 million a year starting in 2010.

The Twin Cities got socked with its own version of this downsizing exactly a year ago, when Macy's closed the Minneapolis-based headquarters and cut 950 jobs. At the time, Macy's was shrinking from seven divisional buying offices into four, a move the company said saved $60 million in 2008 and will save $100 million more this year.

Thirteen of the company's top 15 performing markets were in My Macy's districts, according to the company. Macy's declined to name the markets, but Yustin suspects that Minneapolis was part of that group.

"My Macy's is reinventing a department store that is running on a 150-year-old structure," said Yustin, who now has his own consulting company, &Yustin. "The stakes are higher and the accountability is greater. You really have a line responsibility to be able to deliver on your store on every single piece of merchandise, whereas before, it was a collective of 60-something stores."

Under My Macy's, district managers and merchandisers are responsible for fewer stores. The Minneapolis-based region, which will soon be one of 69 nationwide, has two districts of 10 stores each (compared with 16 to 18 under the former regional structure) led by a vice president and a team of district merchants and planners grouped by "families of business." Women's ready-to-wear, for instance, has a district merchant and district planner responsible for a cluster of stores. They visit the stores at least every two weeks, talk to salespeople and customers and shop the competition.

Such intense scrutiny, said Macy's spokesman Jim Sluzewski, helped the company discover that one suburban Cincinnati store had the youngest demographic in the city. So Macy's beefed up offerings for juniors, young men and young career. At Chicago's State Street store, Macy's found that 15 percent of its shoppers were Asian-American. In Pittsburgh and St. Louis, women want more business suits and traditional dresses.

Still, not every one internally has gotten the message. On a recent visit to the Macy's flagship store in downtown Minneapolis, three salesclerks said they'd never heard of My Macy's.

Expert skeptical

Marketing professor David Brennan of the Center for Retailing Excellence at the University of St. Thomas in St. Paul is skeptical that the My Macy's effort will be able to deliver.

"They're trying to do this localization thing, but it's going to be very difficult," he said.

When Macy's bought Marshall Field's, it inherited stores that already were well-tuned to local customers' needs, Brennan said. Then Macy's promptly "confused its customers" by beefing up its private labels, Brennan said, and stocking stores with inventory that it knew would be a cut lower in quality than what Midwesterners had come to expect from Dayton's and Marshall Field's.

"They repositioned the company away from the core and its most loyal customers," Brennan said. "Sadly for them, that is one of the key factors that has resulted in their not meeting their planned sales and, more recently, profits."

A survey by TNS Retail Forward of about 40,000 customers found that consumers just discovering the brand were twice as likely to shop in a Macy's store as were longtime customers. And at a time when debt-soaked consumers were canceling their cards, the Macy's division that included the Twin Cities added 1 million new credit card customers last year, Yustin said.

"There was this whole new group who were not Marshall Field's shoppers who didn't feel like they were identified with the legacy and maybe thought it was old-fashioned," he said. "They were a younger and more ethnically diverse customer."