Macys Department Store Repositioning Marketing Essay
In 2005, Federated Department Stores (Federated) decided to pursue the repositioning and consolidation strategy of its 15 regional stores chains under just one national brandMacys. Federateds decision was in response to the decline in sales and profits of the traditional department store industry. Just three years later, U.S. was hit with the worst economic crisis since the Great Depression that threatened the existence of many successful retail giants, including Macys. In addition, in 2008, the loss in profits during Christmas of that year was just the tip of the iceberg for department stores that traditionally were used seeing the highest yearly profits during the holiday season. Other factors such as rise of gas prices that increased delivery costs to the stores along with rise of cotton prices due to issues with the crop that increased the prices of clothes made out of cotton further exacerbated the already fragile retail industry. In addition, Macys was positioned in the upper middle segment of the market and had no choice but to increase the prices of certain goods to its customers, thus leading to reduction in sales volume and profits.
Moreover, Macys was faced with another challenge. The department store industry was divided into 5 market segment based on price of items. The segmented consisted of high-end luxury, high-end general, upper-middle, lower-middle, and the low-end areas. Additionally, since Macys was already in the upper middle segment of the market, the company could not immediately launch into the other four segments without spending time developing a workable strategy that will not negatively affect its revenue generation, brand image, market share and not to mention the continue availability of the jobs of many of its employees in different locations, and the retention of the loyalty of customers and suppliers. Furthermore, the traditional department store industry was in a declining stage and consumers were scare, which made competition for the existing companies to be aggressive for sliver of the limited profits that were still available. Yet competition within existing companies was not the only threat, discount stores like Walmart and Marshalls were beginning to build momentum in the market, gaining more sales. Of course, with the popularity of the Internet, online shopping was also rising in popularity, once again adding more retailers to the already heavily competitive environment. Thus, these factors propelled Macys to begin in repositioning and consolidating efforts to restore its vitality.
Consolidation and repositioning tactics, from internal perspective, provided Macys an avenue in creating a national brand and reducing the unit cost of Macys advertising and promotional budgets considerably due to having one central hub for all administrative functions and bulk purchasing. The success of the consolidation strategy is attributed to several factors. For instance, Macys brand already had nationwide recognition as Americas department store through aggressive national advertising activities, Fourth of July Celebrations and Thanksgiving Day Parade. Additionally, when Federated had consolidated its regionally established department stores, these stores had a well-established customer base, were regionally well known, and were in prime locations close to business districts or large shopping centers, which meant that Macys did not have to put any efforts into developing business for those stores but rather maintain and increase business with them.
Moreover, both Federated and Macys had solid leadership teams with strong retail and department store experiences. In fact, Federated management team was already well aware of the issues involving brand conversion since Federated had converted some of its regional stores to Macys brand prior to the official 2005 consolidation. The management team also had a well established relationship with major supply chain and distribution networks that were now selected to serve the Macys stores. Thus, once again Macys did not have to put any efforts into establishing new relationships but would simply have to maintaining the existing ones. Thus, the offshoot of the consolidation tactic enabled Macys to provide moderately priced goods to its consumers thereby maintaining high levels of competitiveness by remaining at the middle of a bell shaped curve and identifying it positioning as affordable luxury.
Yet, offering affordable prices was not the only repositioning tactic used by Macys, the company also changed its brand from specific demographics to fashion conscious consumers as well as the younger female audience. Macys created a bridal registry and offered fashions made by younger designers to further differentiate its brand from the traditional department stores that had failed in their past attempt to attract consumers between ages of 18-25. In addition, Macys launched Everyday Value strategy program that promoted value pricing such that customers would be able to purchase products without having to wait for sales day and the availability of coupons to get the most bang for their buck. These tactics would enable Macys to broaden its consumer base, minimize the entrance of new competitors as well as the emergence of substitutes into its market segment.
Despite the benefits of consolidation and repositioning efforts, there are some negative factors to consider. Change is often very difficult as most individuals are creatures of habit. Thus, consolidation of department stores to one brand (in this case Macys) meant that existing consumers who had regularly shopped at their favorite department stores (such as the conversion of Marshall Fields to Macys in Chicago) would now have to adjust to new products, prices and services. In fact, the perception of some loyal consumers post consolidation was negative, complaining that Macys store had lower quality products and services. Therefore, consumers were reluctant to shop at Macys. Unfortunately, Macys decision to standardize its products and pricing nationwide to lower purchasing cost actually backfired. In fact, standardization resulted in higher prices of products offered at Macys compared to the former regional department stores chains, thus consumers were apprehensive to shop at the new Macys.
However, post consolidation challenges that Macys had encountered did not deter the company from pursuing its long repositioning and branding objectives. Macys continued to aggressively promote its brand nationwide through celebrity advertisement. The company forged ahead as an exponential revenue generating entity by focusing on fashion, adding Martha Stewart, Tommy Hilfiger and Beyonce product lines while still embracing the concept of affordable luxury and participating in Fourth of July Fireworks as well as the annual Macys Thanksgiving Day Parade. At the same time, Macys did not ignore the unfavorable results of its post consolidation and repositioning hiccups that threatened its brand and image. Instead, Macys made some necessary adjustments in order to accommodate its consumers. For instance, in response to negative consumer reception of the product and price standardization decision, Macys abandoned the strategy and instead tailored the product selection based on consumers needs. In this way, customers would have a pleasant shopping experience and begin to trust in Macys brand, which would increase the frequencies in which they visit Macys stores and make purchases. Additionally, as a result of the financial crisis in 2008, many department and retail stores offered promotional discounts such as percent off to sell overstocked inventory and attract consumers, Macys followed suit and discontinued its Everyday Value program to sustain itself during recession.
Indeed, individually all of the above tactics are cash cows themselves therefore in combining them Macys was able to create a unique and valuable marketing position on the national landscape that would be difficult for its competitors to replicate. For Macys, the consumer became the basis for its strategies in terms of the market segments generated, the objectives of the national promotions and advertisings created, the remodeling of the stores for a better shopping experience, the focus on fashion rather than demographics, understanding differences in consumers needs and tastes and setting the price point at a moderate level. It was because of these tactics and strategies that the company began to increase its relevance and uniqueness among its targeted audience. Thus, Macys definitely found a way to be less conservative than the traditional department store as a results of its well developed and thought out and timely executed strategies, which should continue reaping the success for several years to come.
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