Wednesday, April 25, 2018

Macy's-The Asteroid that Killed Retail

Not too long ago, I wrote The Evolution Solution, which explained the rise of Amazon and the Category Killers according to Darwin’s Theory of Survival of the Fittest. 

The evolution of all events on Earth is part and parcel of natural history, therefore is subject to the same rules and principles. This includes the evolution of retail business in US and globally.

66 million years ago, a huge asteroid hit earth, forming the Chicxulub Crater in Mexico’s Yucatan Peninsula. The effects of this cataclysmic event resulted in the death of 75% of the plant and animal species on earth- including dinosaurs and creatures who had existed for something like 165 million years previous. The balance 25% were those who were able or enabled to survive and grow after the event.

Fast Forward to December 19, 1994. Federated Department Stores “bought” Macy’s (but yet it was Macy’s management that ran the show and still is). Eleven years later, in 2005, Fedmacys bought May Company Stores, completing the hat trick the same year with the purchase of Broadway Stores. By March 2005, All units were converted to Macy’s stores. The other names, their histories, and maybe their loyal followings, were dead.

Look at the list of those stores sanitized to be Macy’s (Wikipedia, The Dead Department Stores–you can see the rest of the names in the graveyard here:

·      Abraham & Straus (Macy's in 1995)
·      D. M. Read Macy's In 1990
·      Ames (Eastpoint)
·      Bamberger's (Macy's in 1986)
·      The Bon Marché (Macy's in 2005)
·      C.C. Anderson's Golden Rule (The Bon Marché in 1923)
·      The Paris (The Bon Marché in the early 1980s)
·      Barnes-Woodin Co. (Yakima, Washington, The Bon Marché in 1952)
·      A. M. Jensen's (Walla Walla, Washington, The Bon Marché in 1951)
·      Missoula Mercantile Co. (Missoula, Montana, The Bon Marché in 1981)
·      Montague-McHugh (Bellingham, Washington, The Bon Marché in the 1950s)
·      Runbaugh-Mclain (Everett, Washington, The Bon Marché in 1952)
·      Stone-Fisher Co. (Tacoma, Washington, The Bon Marché in 1952)
·      Russell's (The Bon Marché after World War II)
·      Bullock's (Macy's in 1996)
·      Bullocks Wilshire
·      Burdines (Macy's in 2005)
·      Maas Brothers
·      Carter Hawley Hale Stores (merged into Macy's West 1996)
·      The Broadway (Southern California). Headquartered in Los Angeles.
·      Capwell's (East Bay)
·      The Emporium (San Francisco and South BayNorth Bay)
·      Hale Bros. (San Francisco and Sacramento)
·      Weinstock's (Sacramento and Reno)
·      Davison's (Macy's in 1986)
·      The F & R Lazarus and Co. (Macy's in 2005)
·      Shillito's
·      Rike Kumler Co. (Rike's)
·      William H. Block Co. (Blocks)
·      Joseph Horne Co. (Horne's)
·      Herpolsheimer's
·      Famous-Barr (Macy's in 2006)
·      Filene's (Macy's in 2006)
·      Filene's Basement (separated from Filene's in 1988, closed in 2011)
·      G. Fox & Co.
·      B. Peck & Co. (sold to Gamble-Skogmo, Inc.)[1]
·      Steiger's
·      Foley's (Macy's in 2006)
·      May-Daniels & Fisher
·      Daniels & Fisher
·      May Company Denver
·      Z.L. White
·      Sanger-Harris
·      A. Harris
·      Sanger Brothers
·      Gold Circle (discount store chain) Founded in 1967 by Federated; merged into Richway in 1988 and later dismantled during 1990 bankruptcy
·      Gold Triangle (discount store chain for electronics, appliances, home building supply, sporting goods, photography, housewares) Founded in 1970 - closed in 1981, 6 Florida locations - 3 Miami, Plantation, Tampa and Orlando.
·      Goldwater's
·      Goldsmith's Merged into Rich's in mid-1980s. (Macy's in 2005)
·      Hecht's (Macy's in 2006)
·      Castner Knott (Hecht's in 1998)
·      Miller & Rhoads (Hecht's in 1990)
·      Strawbridge's (Macy's in 2006)
·      Thalhimers (Hecht's in 1990)
·      Woodward & Lothrop
·      I. Magnin, owned by Federated 1965-1988 and R.H. Macy Co. 1988-1994; most stores closed 1988-1993, remainder of stores converted to Macy's West and Bullock's or sold to Saks Fifth AvenueUnion Square, San Francisco location eventually incorporated into adjacent Macy's.
·      John Wanamaker or Wanamaker's (Philadelphia and New York City flagship stores), sold to Carter Hawley Hale in 1979, then Washington DC-based Woodward & Lothrop owned by Alfred Taubman; sold to May Company in 1995; merged with Federated Department Stores in 2005 (now known as Macy's, Inc.)
·      The Jones Store (Macy's in 2006)
·      Jordan Marsh (Macy's in 1996)
·      Kaufmann's (Offices merged with Filene's in 2002, Macy's in 2006)
·      May Company Ohio
·      Stark Dry Goods - Canton (department store)
·      Sibley's
·      William Hengerer Co.
·      Strouss-Hirshberg
·      L.S. Ayres (Macy's in 2006)
·      Stewart's
·      H. & S. Pogue Company
·      Wolf and Dessauer
·      Liberty House (Macy's in 2001)
·      Marshall Field's (Macy's in 2006)
·      Dayton's (Marshall Field's in 2001)
·      Frederick & Nelson (defunct in 1992)
·      The Crescent (department store) (defunct in 1992)
·      Lipman's
·      Halle Brothers Co.
·      Hudson's (Marshall Field's in 2001)
·      J.B. Ivey & Co.
·      Meier & Frank (Macy's in 2006)
·      O'Connor Moffat & Co., purchased by R.H. Macy in 1945, renamed Macy's in 1947. Their Union Square, San Francisco location is Macy's flagship West Coast store and headquarters of Macy's West.
·      Rich's (Macy's in 2005)
·      Robinsons-May (Macy's in 2006)
·      May Company California (Robinsons-May in 1993)
·      Hamburger's
·      J. W. Robinson's (Robinsons-May in 1993)
·      Steiger's (May in 1994)
·      Stern's (Macy's in 2001)
·      Gertz
The list above comprises 85 distinguished, in some cases legendary, units that became extinct by 2005. Just like the dinosaurs 66 million years ago. Only this time the asteroid, the destructive force for those store units and their customers, was Macy’s/Federated. Also like the dinosaurs, maybe more than 100 years, wiped out.

Do you remember these stores? Maybe your mother or grandmother took you there as a child? Did you go there to see Santa? These stores were more than just memories; like Bailey Savings and Loan in It’s a Wonderful Life, they were neighborhood institutions with loyal followings.

I know. I worked as a buyer at Abraham & Straus before this merger. A&S, as it was known by its customers, was the leading unit of Federated, competing (favorably) with Macy’s for the attention of the New York City area shopper. A&S was moderate priced, though not immune to sales, which people took seriously because they WERE serious-not marketing BS.
There were many local units in the NYC area at the time- There were the “carriage trade” department stores- Saks, Lord& Taylor, Martin’s, Gertz(look at them now-two gone and two a shell of what they were), then the Moderate-Macy’s, A&S, Stern’s, Bamberger’s. Below them were the discounters-EJ Korvette, Mays.And the few who stood alone as the fashion arbiters-Bergdorf Goodman, Bloomingdale’s (which latter is the only Federated unit not renamed Macy’s- though you wouldn’t recognize it if you saw it then). Each had its disntinctive niche and its loyal following.

Now we have Macy’s- trying to be all things to all people. Which never works. So then we have the 25% survivors-those velociraptors who saw the opportunities to feast on the suddenly open environment. Is it any coincidence that Amazon also began in 1994?

And what about the loyal customers in EVERY major city and region in the US? What were they left with? Those stores which had been a part of their lives-gone. Replaced by-who? Macy’s. Famous for the Miracle on 34thStreet, but not about catering to customers in Chicago, Boston, Atlanta, Miami, San Francisco, Akron, etc. Did Macy’s distinguish itself with superior merchandise to what had been there before? Not in my opinion. 

And when it came to the sales and promotions that brought people in passionate droves, did Macy’s do a better job than the dead souls that had been there before? Not in my opinion. Macy’s quickly trained the customers with predictable behavior what and when to buy.

What was gained and what was lost in this transition from distinguished regional and local department stores?

Gained- NOTHING. Only the arrogant satisfaction of Macy’s management knowing their previously local name had been proliferated nationwide. The merchandise was not better; the prices were not better; the service was not better.

For the Customers: A comfortable, trusted shopping place where their momma took them and where they take their kids; 
For the Retail Business- Instead of a dynamic local or regional retail department store environment, the entire nation is sanitized to one store, one name. Maybe, in some regions, one that they don’t know or trust.

Imagine if Baskin-Robbins (and every ice cream shop nationwide), eliminated all flavors but one-vanilla. What would be the fate of their business? People would learn to eat somewhere else.

Somewhere else- Amazon, Zara, H&M, Uniqlo. The Category Killers are the velociraptors who were invitedby this arrogant marketing move to build a customer base. For parents, there was no comfortable destination; for their children, left as orphans of a bygone era, left to make their own friends.

The result is clear and obvious- the demise not only of the regional department store, but of the department store in general as a shopping destination. Don’t underestimate the role that this played in today’s retail “apocalypse.”

What could Macy’s have done differently? Leave it alone. Buy it, and see the wisdom to keep the regional and local customer base coming. Many areas-merchandising, sourcing, logistics, etc. and economies of scale could be applied in a group situation. Without burying the locals.

I believe now you can see how the Macy/Federated buyout was akin to the asteroid hitting earth 66 million years ago; its destructive force wiped out life as it was before, and impoverished a rich department store culture.

Also, I hope you can see, again, how retail business is governed by the same rules and principles as all other natural history. And that Darwin probably had no clue how far reaching his principles of natural selection were. 

Final note: Break up Macy’s and give people back their local commerce? Would work, even in Amazon World.

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