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When Macy’s took over Marshall Fields, Kaufmann’s and other local icons a year and a half ago, many customers were irked. The company hoped to mollify them by creating a huge national chain with a national strategy and more clout with vendors - and same-store sales dropped 1.3 percent in 2007.
Chief executive officer Terry Lundgren has decided to switch strategies, having admitted that what consumers want in one area of the country is different from what they want in another. Now, 15 percent of the merchandise in stores will reflect local preferences, according to the Wall Street Journal.
But while the last year was softer than anticipated, according to an annual letter to shareholders, Macy’s still outperformed most of its primary competitors in the crucial fourth quarter.
By taking a localized strategy, Macy’s is adopting an approach that chains like Best Buy and Ross Stores Inc. have found valuable. In the past, stores like Wal-Mart and Gap prospered by opening identical stores around the country, but today, consumers want more individualized products, according to the article. In fact, a localization strategy can boost sales at same-store sales by 1 to 3 percentage points, and only 10 percent to 15 percent of the inventory needs to be customized, says Darrell Rigby, a Bain & Co. partner.
A localization strategy at a chain the size of Macy’s - which has 813 stores - can be difficult, however. Lundgren points out that it’s far easier for a chain like Bloomingdale’s, with 40 stores, to stay on top of what is happening at each store. Macy’s management will need to “make sure we were in tune to what it was that the consumer was expecting of us - the product category, the size or the color…”
Macy’s stores stock between 1.5 million and 4 million different items, which means that localizing could affect hundreds of thousands of items in each store.
Lundgren plans to begin customizing at just a third of the stores, as soon as this summer, including those in Seattle, Minneapolis, Chicago, Portland and Salt Lake City.
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