Posted at 12.29.2018
Federated SHOPS determined in 2005 to reposition and combine 15 of its regional department store chains under just one countrywide brand-Macy's. This decision was in reaction to the drop in sales and profits that had struck the traditional department store industry, that was in a maturing level and moving towards a downward pattern for quite a while. Just 3 years later, in 2008, U. S. current economic climate was hit with a tough economy that threatened the livelihood of several successful retail giants. While Macy's did experience a substantial drop in revenue in 2008 with a online loss of $4, 803 million, in comparison to other department stores such as Mervyn's that gone bankrupt when the tough economy hit, Macy's were able to stay in the game. Macy's ability to not become obsolete was in part because of the loan consolidation and repositioning tactics that provided the business an avenue in setting up a countrywide brand and minimizing the unit cost of advertising and promotional finances considerably due to having one central hub for all of the company's administrative functions and mass purchasing.
The success of the loan consolidation strategy is attributed to several factors. For instance, Macy's brand already acquired nationwide recognition as "America's section store" through intense nationwide advertising activities, Fourth of July Festivities and Thanksgiving Day Parade. In addition, when Federated got consolidated its regionally proven department stores, these stores got a well-established customer base, were regionally well known, and were in primary locations close to business districts or large shopping centers, which recommended that Macy's didn't have to place any initiatives into developing business for those stores but instead maintain and increase business with them.
Moreover, both Federated and Macy's had solid leadership groups with strong retail and team store experiences. In fact, Federated management team was already well aware of the issues regarding brand conversion since Federated got converted a few of its regional stores to Macy's brand before the official 2005 consolidation. The management team also got a more developed romance with major resource chain and syndication networks that were now determined to serve the Macy's stores. Thus, once more Macy's didn't have to place any work into establishing new romantic relationships but would simply have to maintaining the prevailing ones.
On the other hand, as a consequence of a declining retail industry, less and less customers were flocking towards shops as well, thus making competition aggressive for the prevailing companies fighting for a sliver of the limited income which were still available. Yet competition within existing companies was not the only danger, discount stores like Walmart, Aim for and Marshalls were starting to build momentum on the market, gaining more sales. Furthermore, with the existence of Internet, online shopping was beginning to rise in level of popularity, which also earned more sellers to the already greatly competitive retail environment. Thus, credited these issues, Macy's repositioning and consolidating attempts was a good proper move to reestablish its vitality. In fact, the offshoot of the loan consolidation tactics empowered Macy's to provide reasonably priced products. Thus, by staying at the center of a bell shaped curve, Macy's could gain a large area of the market show and by determining a new position as "affordable luxury, " Macy's would be able to broaden its consumer base. In addition, Macy's national brand in conjunction with its unique product price point at the mid-level range (less than Saks Fifth Avenue but higher than Walmart), certainly provided the business with a more powerful buying power available on the market.
Yet, offering affordable prices was not the only repositioning tactic used by Macy's, the company also evolved its brand from specific demographics to fashion conscious consumers as well as younger feminine audience. Macy's created a bridal registry and offered fashions made by more youthful designers to help expand differentiate its brand from the traditional department stores that experienced failed in their previous attempt to entice consumers between age range of 18-25 since traditionally consumers of shops were women between age range of 25 to 55. In addition, Macy's launched Everyday Value strategy program that marketed value pricing in a way that customers would have the ability to purchase products and never have to wait for sales day and the option of coupons to get the most bang for his or her buck. In this way, Macy's could have a much better chance to stay close to its customers, provide affordable luxury and find a viable middle ground.
While consolidation and repositioning initiatives got their benefits, there were some problems. Change is often very difficult as most individuals are creatures of behavior. Thus, consolidation of department stores to one brand (in cases like this Macy's) intended that existing consumers who had regularly shopped at their favorite department stores (such as Marshall Field's in Chicago) would now have to adjust to services, prices and services. In fact, the perception of some loyal consumers post consolidation was negative, complaining that Macy's store had lower quality products and services. In addition, Macy's possessed standardized its products and pricing nationwide to lower purchasing cost, however this tactic actually backfired. Standardization led to higher prices of products offered by Macy's compared to the former regional shops chains, thus consumers were apprehensive to shop at the new Macy's.
Yet such problems did not deter Macy's, instead the company made the necessary adjustments to be able to accommodate its consumers. For instance, Macy's left behind the standardization strategy in response to the negative consumer reception and designed its product options predicated on the consumers' needs and choices. In this way, Macy's would be able to penetrate the local market and provide consumers a more pleasurable shopping experience thus acquiring consumers' loyalty in Macy's brand. Furthermore, Macy's continued to aggressively promote its brand nationwide through super star advertisement. The company forged in advance as an exponential earnings generating entity by concentrating on fashion, adding Martha Stewart, Tommy Hilfiger, Beyonce products as well as many other popular products to its menu. Macy's also developed its private brands such as American Rag and Charter Team. By creating private brands and providing exclusive brands such as Martha Stewart and Donald Trump, Macy's could have a greater control over each brands' value chain there by minimizing product circuit time as well as increasing the rate of recurrence in line creation. Thus, it is clear that Macy's acquired a competitive gain over other shops that were destined to the prolonged buying pattern where clothing selections were ten or twelve month old and were outdated in terms of latest fashion fads. In this way, Macy's integrated two different models to stay competitive. The company used strong retail brand model by creating and promoting its own products, which comes with a higher operating cost however produces higher profit margins. At the same time, Macy's utilized display model by giving diverse and popular brands to lure customers thus creating a unique shopping experience while reducing its operating cost. The business also extended with the idea of affordable luxury, participated in Fourth of July Fireworks as well as the twelve-monthly Macy's Thanksgiving Day Parade. Also, therefore of the financial meltdown in 2008, many team and retail stores offered promotional savings such as "percent off" to market overstocked inventory and attract consumers. Macy's used suit and discontinued its "Everyday Value" program. Instead, this year 2010 Macy's introduced "My Macy's" program by tailoring products based on local tastes to be able to gain customer loyalty and market show.
Thus, for Macy's the consumer became the foundation for its strategies in terms of the market segments made, the objectives of the countrywide campaigns and advertisings created, the remodeling of the stores for a better shopping experience, the focus on fashion somewhat than demographics, understanding distinctions in consumers' needs and placing the purchase price point at a modest level. In this manner, Macy's found a way to be less traditional and more forward thinking in its strategy development than traditional department stores. Because of this, Macy's was better prepared to weather the surprise when financial crisis possessed plagued other shops during the tough economy and thereafter.
In simply a short year after the recession and succeeding year from then on, Macy's net gain began showing positive benefits, moving from $350 million in '09 2009 to $847 million in 2010 2010 respectively, a clear indication that the repositioning and loan consolidation strategies Macy's acquired started just five years previously had indeed prevailed thus far. Along with the aftermath of downturn still lurking about, the rise in gas prices that increased the delivery cost of products to stores as well as issues with natural cotton crop that increased the expense of cotton and consequently the rise in prices of organic cotton based clothing the complete retail industry is still struggling with an uphill challenge. Thus, what the future retains for Macy's remains to be observed, yet, in order to remain relevant, Macy's would need to continue modifying its strategy to match ever evolving overall economy and judging from Macy's past behavior, the business will probably reinvent itself once again.