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Thursday, July 19, 2007

Macy's Bites the Dust

You don't have to be an avid reader of this blog, but it sure would have come in handy had the management team at Federated Department Stores been reading it in September of 2005. If you weren't a reader back then, everything you need to know about Macy's today is all there.

In Federated, Filene's and Failure, I wrote that Federated's inability to comprehend brand strategy doomed their consolidation efforts from the outset. Now, according to the Los Angeles Times, it seems Macy's sorry fate is at last revealed:

Retail industry analysts said the company's tepid performance of late has made it vulnerable to an acquisition. Revenue fell 0.2%, to $5.9 billion, for its fiscal first quarter that ended May 5. Sales at stores open at least a year have slipped for the last three months.

The giant chain, with more than 820 stores nationwide, was forged by Federated Department Stores' 2005 acquisition of May Department Stores. The combined company then converted regional chains — including Robinsons-May in Southern California and Marshall Field's in Chicago — to the Macy's name, with mixed results.

"They wanted to build a national brand, and it wasn't working," said Eli Portnoy, founder of Portnoy Group Inc., a brand marketing consulting firm.

"There is no question Macy's didn't live up to the expectations," said Kurt Barnard, a retail consultant based in Nutley, N.J. "The company generated a great amount of animosity with consumers."


Duh. Clearly, nobody was paying attention when the geniuses at Federated proposed the mindless plan to simultaneously destroy long-lived, valuable regional brands for the sake of standardization. It became more of the same old Let's-Cut-Costs-And-Ignore-The-Brand routine. The same problem that has brought down some of America's greatest, most valuable brands.

Even if Macy's is gobbled up by buyout behemoth Kohlberg Kravis Roberts, there's no great chance of ever turning back the clock. There is, however, a tiny glimmer of hope. Because at the time of this writing, the brands Federated attempted to kill off aren't really dead. They're simply comatose in the minds of their long-time loyalists, who like the most ardent Elvis fans, insist that the brands they grew up with aren't dead at all. They're just waiting for a comeback.

Those fans aren't altogether wrong. A major trend has been gathering steam in the branding world, where grandsons of brand creators are exhuming their progenitors' and re-launching them to the boomers who grew up with them. These guys are finding out that the weak brand management of the last few decades can't stand up to the staying power of their forefathers' creations. So they trim the hippie clippings from Clairol Herbal Essence shampoo and re-cast it as a sexually-enhancing hair care product. Boomers click with their nostalgia and ka-ching go the cash registers.

Gee, do you think it takes a brain surgeon to figure out what to do with Marshall Fields, Filene's Basement or any of the other brands' millions of dollars of brand equity torched out of existence by Federated? They may not be able to put Humpty Dumpty back together again, but you can bet this whole experience will leave Federated with plenty of egg on its face.