Macy’s: A Mall Within A Mall
Is the rejuvenation of retail going to be the idea of a mall within a mall?
While some retail establishments bit the dust after years of overwhelming debt and pressures from coronavirus, some surviving stores are giving up the old “department” store approach for the idea of a store within a store. And, logically, as more retail establishments give their space to other retail concepts, the old department store is becoming more like the mall it anchors.
Macy’s is leading the way.
Just this year, Macy’s decided to offer prime space in all of its stores to Toys R’ Us. According to the recent press, this brand within a brand has been successful. Macy’s states that the customers who visit Toys R’ Us are younger than Macy’s core customer base. And, these toy shoppers are cross-shopping by visiting other parts of Macy’s and buying. Now, Macy’s is offering space to Claire’s, a tween fashion-and-accessories store, in 21 of its stores. The hope is that even younger shoppers will frequent Macy’s to visit Claire’s.
The department store has been an American fixture since 1824 when Lord & Taylor opened its doors. Soon after in 1825, Arnold Constable opened. Marshall Field’s and Wannamaker’s followed. The department store offered a wide variety of goods in different areas of the store, hence departments. In 1858, Rowland Hussey Macy founded R.H. Macy & Co.
Macy’s first New York store grew by expanding its footprint into neighboring buildings to accommodate all of its departments. In 1902, Macy’s moved into its new building at Herald Square. Through all of its ups and downs, Macy’s proved it was a survivor. Macy’s outlasted its neighboring department store on Fifth Avenue and 34th Street, B. Altman’s. B. Altman’s, like Macy’s a high-end retailer, went bankrupt in 1990. Macy’s also outlasted Lord & Taylor, again a nearby Fifth Avenue & 38th Street establishment. (Lord & Taylor is now reincarnated as a digital-only department store.)
The difficulties in navigating the fast-paced changing retail environment have sapped the energy from many stores including Macy’s. Amazon’s digital super store changed shopping. Discount stores changed shopping. And, of course, coronavirus changed not just shopping but the supply and variety of items in the store. Many stores, such as Bed, Bath & Beyond, had either too little inventory or the wrong inventory or both.
Some of the current retail winners are stores that have figured out the successful marriage of brick-and-mortar and digital. Behemoths such as Walmart and Target have been able to offer the best of both brick-and-mortar and digital.
Macy’s, however, appears to be experimenting with a different approach to relevant differentiation of its brand. Rather than opening a new “department’ or a new channel, Macy’s is allowing existing retail brands to become those new departments: a store-within-a-store, turning Macy’s into a mini-mall.
The idea is not new. Sears tried this when it offered financial services through Dean Witter and real estate services through Coldwell Banker, brands that Sears owned. Unfortunately, these brands were not a good match with its core customer base. Furthermore, the focus on these peripheral brands took management attention away from the Sears brand, hastening Sears’ decline. (Interestingly, Sears created Allstate Insurance in 1931 and placed Allstate insurance agents in the stores. Allstate was spun off in 1993 and became completely independent of Sears in 1995.)
Macy’s approach is component branding. Component branding is when a brand is inserted into a host brand, in this case, Macy’s. The main benefits of the host brand do not change. However, the perceptions of the host brand are enhanced. The component brand – in Macy’s case, brands Toys R’ Us and Claire’s – is given the space to generate familiarity and sales within an established brand.
Basically, this is a modern version of the department store. But, unlike Sears, the brands within the Macy’s brand are not owned by Macy’s. These brands within the Macy’s brand are already well-established retail brand names. And, these are brands with loyal followings.
Macy’s appears to be doing something bigger than remaking the idea of a department store. Macy’s also appears to be remaking the idea of a mall. What if the mall were within the store instead of the store being inside the mall? It is an intriguing question. Malls have been facing hardships as anchor stores and smaller stores closed during the last recession and then recently during the coronavirus lock-downs.
Imagine, people might stop saying, “Let’s go to the mall and shop the stores.” People may start saying, “Let’s go to Macy’s and shop the stores.” What if Macy’s became the draw rather than the mall? It used to be that way at Wannamaker. People would meet under the eagle in the main court area. What if Macy’s becomes the center of the retail experience rather than the mall itself? What if Macy’s itself becomes the hub for conversation, conviviality and connections? That would be a return to the ancient Greek concept of the agora. The agora was the heart and soul of the city. It was the meeting place; the place where people gathered, listened, spoke and shopped.
Whatever the case, Macy’s has a good idea. Making Macy’s a destination for shoppers looking not just for Macy’s items but for toys and accessories adds relevant differentiation to the Macy’s brand without changing Macy’s core brand. Relevant differentiation is the name of the game. Macy’s brand-business game plan seems to be a winner.