Mini Macy’s Risks Missing Its Mark

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Prototype test stores are a curious phenomenon in the world of retailing. They excite investors, intrigue management and even occasionally provide some new bits and pieces that can be rolled out elsewhere in the organization. But as the best use of time, resources and brainpower, they leave much to be desired.

The history of retailers opening prototype stores is littered with examples of tests that turn into dead ends and ultimately don\’t do much for the parent company. Now, with the opening of its second Market by Macy\’s small-scale store in Fort Worth earlier this month, it\’s a fair question to ask the giant department store which direction it will go in the future. The real issue is what do about fixing its 600+ full-size locations. The answer may not be easy.

Prototyping

The first Market by Macy\’s location opened a year ago just north of the Dallas-Fort Worth metroplex, a 20,000-square-foot specialty store-style format with mostly apparel, some beauty and a Starbucks wannabe coffee shop. Robin Lewis applauded Macy\’s with its innovative new direction when the prototype first opened. It appeared that Rachel Schectman\’s creative hand on expanding the STORY concept into a small specialty store had great possibilities and would refresh Macy\’s image and operations with a new model that could rejuvenate the brand on a local level, and potentially be rolled out in neighborhoods across the country.

[callout]Prototype test stores are a curious phenomenon in the world of retailing. They excite investors, intrigue management and even occasionally provide some new bits and pieces that can be rolled out elsewhere in the organization. But as the best use of time, resources and brainpower, they leave much to be desired.[/callout]

That Southlake location, in an open air \”town center\” shopping district, has now been joined by a similar store in the WestBend shopping area southwest of Fort Worth. In announcing the opening, Macy\’s said it had \”maximized learnings\” from the first store and had a more \”scalable store format\” with its second location.

Going to Market

In fairness, the second store had not yet opened when we visited the original location earlier this month. It is indeed located in an upscale shopping area with all the prerequisite — Trader Joe\’s, Peloton, Casper, Sundance Catalog and even Tesla — trendy neighbors. Inside the Market, the predominant department is devoted to women\’s fashion with a heavy emphasis on accessories. There is a health and wellness-oriented beauty apothecary department, a menswear department, shoe department and a coffee bar with some gifty housewares merchandise.

So, this is where the Market concept veers back to a mini-Macy\’s. Rather than integrating across categories or showing by style, color or any number of other trending options, it is set up a little like a shrunken version of your typical suburban mall Macy\’s. Even if fixturing and décor options suggest more Anthropologie than Herald Square, the overall feeling from the store is not as a local \”general store,\” but more as if the merchants just skimmed off a layer of a regular Macy\’s. The company admits as much in announcing the new store, saying it\’s merchandised with \”an edit of brands and items available at full-line Macy\’s stores.\”

All of which raises the obvious question: Does Macy\’s need a smaller version of the conventional store, several of which are within a 20-mile radius of the Southlake store? On the one hand you applaud Macy\’s for trying something different. But the bigger question: Will Macy\’s phase out its existing giant footprint and transform to smaller, more focused specialty stores?

The Test Store Conundrum

That sparks the immediate question: what do these smaller Macy\’s formats mean to shoppers when you have more than 600 very large locations with long leases, heavily invested footprints and a customer base that to date, expects to see a full-size department store when they eye that big red star logo?

Clearly the department store format in the retail industry is in deep trouble and needs a serious reinvent. CEO, Jeff Gennette and company know they need to fix this thing…before it fixes them. But the Market prototypes beg the question whether Macy\’s has fallen into the classic test store trap? If so, they wouldn\’t be the first retailer to do so.

  • Decades ago, in its waning days, Woolworth opened a prototype store outside of Philadelphia that was just short of brilliant. It took the best parts of the Woolworth business and merged it with what the giant drug chains, the up-and-coming dollar stores and some good specialty retailers were doing, combining them in a reinvent that might have saved the five-and-dimer from doom. Unfortunately, there was only one of these stores and 399 really bad, really old Woolworth stores. Without the working capital or corporate fortitude to do a major overhaul the retailer was totally shut down within the next year.
  • May Co., before its takeover by Macy\’s, knew the shopping center location strategy was not right for all its stores as it watched Kohl\’s eat into its business. So, it tested a free-standing, full-size May location in Greensboro, NC in a multi-strip-center shopping area. It had shopping carts, central check-outs and a shopper would have been hard-pressed not to think they were in a Kohl\’s…or at least a new JCPenney. Again, the problem was one of the numbers. This was one store and May Co. had hundreds of locations in malls and no way to make the kind of large-scale change to a new strategy even if this free-standing store had been the answer to all its problems. When Federated bought May Co., the store was one of the earlier ones to close and when last seen had been vacant for years.
  • More recently and coincidentally, JCPenney under just-deposed president Jill Soltau had opened what it called a \”lab\” store not too far away from the Market by Macy\’s store, just south of DFW Airport. It converted an existing location and did a top to bottom refresh that opened sightlines, pared-down merchandise clutter, brought in multiple food and beverage areas and took a contemporary, light approach to signage, displays and the overall tone of the store. It\’s a very well-done store and much closer to where Penney needs to be versus the wild, impractical makeovers from the Ron Johnson days. But that store has been open for more than a year and even before Covid struck the retail world there were no signs that anything from this location was being rolled out chain-wide, save for some cleaner in-store typefaces.
  • And in the box-box arena, Target has taken a different approach, opening smaller-scale stores, primarily in urban areas. This has been a way for it to expand its footprint into trading areas where its traditional big box just wouldn\’t fit. As such these locations are not meant to replace the conventional stores, only supplement them. Walmart has done the same thing with its neighborhood grocery stores. These would appear to be different strategies from what Macy\’s is testing with its Market concept.

Re-dos Done Right Are Rare

When you really get down to it there are very few retail chains that have managed wide-scale re-dos based on test stores. Abercrombie & Fitch, Banana Republic and Best Buy have all done pretty drastic reinvents but these have been chain-wide rather than after extensive individual tests. The list is very short.

And that\’s the challenge Macy\’s faces. If the Market format proves to be the greatest thing since sliced SKUs and a viable new model, what does it mean for all those locations that are ten times its size and are the core of its business? The Market concept was developed under the tenure of Shechtman, who joined the retailer when it bought her Story specialty store and she was charged with developing new formats within the Macy\’s framework, including Story areas in some stores. She left the company mid-year last year and STORY has become a shadow if its founder\’s vision at best. It appears her Market innovation is having a similar struggle, morphing from a local general market with regional products to a more traditional small-scale department store model. Bloomingdale\’s was able to pull this off in New York, but its specialty store branch in Soho opened more than 15 years ago and there haven\’t been any others since.

Prototypes Can Be Attractive

Prototype test stores are a curious phenomenon in the world of retailing. They excite investors, intrigue management and even occasionally provide some new bits and pieces that can be rolled out elsewhere in the organization. But as the best use of time, resources and brainpower they leave much to be desired. Faced with the challenges retail is grappling with, fixing your core business has to be your priority, Macy\’s has done a good job developing its ecommerce side, but its physical stores are still in serious trouble in a rapidly changing demographic shopping shift.

The Market in its evolving iteration may well be the Macy\’s of the future. But that future is a long way off and the current Macy\’s is the reality it needs to deal with.

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