Re: Whither Marshall Field's? The Debate Rages On

From: Steven Swain
Sent: Tuesday, August 09, 2005 3:52 PM
To: 'Mitch Glaser'
Cc: 'Mike Meckler'
Subject: Re: Whither Marshall Field's? The Debate Rages On

Mitch & Mike:

I need to clarify my position on the future of the department store industry, because I don’t want Mr. Glaser to come away thinking that I agree with all the points of Mr. Meckler’s plan to save Marshall Field’s or disagree with Mr. Glaser’s assertion that adding a middlebrow chain to the Federated roster will eliminate many of the marketing and financial savings realized by the merger.

I will say before I begin that I have a strong sentimental attachment to the name “Marshall Field & Company” and the allure of its Chicago stores. Marshall Field was a brilliant merchant and his retail and wholesale companies were some of the most influential in consumer history. The State Street flagship, and to a lesser extent, their Water Tower Place store, are the epitome of department store retail done right, even after being forcefully remade in the Dayton-Hudson mold a decade ago.

Mr. Meckler’s plan, as I read it, would offer consumers an alternative to the promotional stature of Macy’s and the fashion-forward stature of Bloomingdale’s. His point that even a national, high-profile Macy’s will be forced to sink to the level of Kohl’s and JCPenney in presentation, brands, and stature to stay afloat are not entirely wrong, because I think that as retail has evolved to its current state, a situation like this is not entirely impossible.

That said, Mr. Meckler’s plan misses some important points smart retailers must pay attention to more than Midwestern bloggers. Like you pointed out in your response, trying to create a middle ground between Macy’s and Bloomingdale’s would be hard, especially with an unproven regional name, however storied. Nordstrom was able to succeed with a strategy similar to this, but comparing Nordstrom’s customer service-based, “store as brand” business model to that of traditional Federated would be like comparing apples and oranges.

Keeping Marshall Field’s as a regional or Chicgoland nameplate only makes no sense from a marketing standpoint either, as you pointed out. The small benefits of pleasing a few thousand sentimentalists compared to the millions of dollars it would take to implement the strategy amplify the futility of that plan.

I would suspect that Mr. Meckler is not a shopper, but rather a sentimentalist. Admittedly, I am one as well, though as a rationalist and student of history and retail theory, I try to make decisions based on logic as much as possible.

Sentimentality has its place, and I personally believe that Terry Lundgren and company have robbed America of some of its last vestiges of hometown retail identification, not to selflessly save the industry, but to selfishly save Federated Department Stores. That said, if Federated wouldn’t have done it, the big-box, “extra low prices at all costs” marketplace would have killed the ailing, inefficient May Department Stores Company eventually.

I wrote an essay in January stating the position that the department store industry is in trouble, regardless of the name over the door, because it has given up its leadership position to other retailing formats, which in turn have developed into quasi-department stores, while department store themselves have turned into large, inefficient clothing stores. This stance, despite Federated’s claims of supposedly “reinventing” its retail model over the past decade, will not ensure long-term survival, whether the store is called Macy’s, Hecht’s or any other name.

The future of the department store lies in diversification and not mergers. Federated, especially in its Macy’s division, needs to bring the energy and breadth of merchandise of their largest stores to its smaller markets, making those stores more compelling to shop and a real alternative to their competition. The former May Company stores need to broaden their product selection beyond the basics and embrace both higher-fashion and higher-quality goods along with a more developed presentation in their home store.

All department stores need to embrace food and leisure items and its possibilities for shopper retention and awareness. In addition, across the board, department stores need to learn how to take better care of their employees, customers, local communities, and physical plants so that customers will find familiar and helpful people in-store, employees will feel appreciated enough to learn the skills needed to be better retailers, and communities will be able to once again link the large retailers of their towns and cities with impressive buildings and even more impressive community involvement.

Without substantive changes, the department store industry as a whole will become less relevant with passing time. While the public at large may not miss them in the long term, the short term will prove disastrous for the real estate and job markets. Millions of square feet of retail space could be left empty and thousands of jobs could be lost if Federated refuses to diversify or this merger fails.

While department store competitors like Belk, Bon-Ton, and Gottschalk’s could absorb some of the losses as growth to their business, the same companies suffer from many of the same problems that the giant chains do.

Many of the latter day rules for retailing no longer apply, so an embrace of the founding principles that made department stores great in the first place could revive the industry. Simply staying the course and merging into larger and larger concerns will eventually lead the industry to ruin.

Respectfully,
Steven Swain
of steve’s blog