Your choice: Macy's or, alternatively, Macy's
Last year, in a $11 billion deal, the two leading US department store chains, Federated and May merged. The fallout from that merger has been an orgy of pseudo-variety, as many suburban malls feature not one but two Macy's as shopping alternatives.
According to a Wall Street Journal article ("Department-Store Giant's Dilemma", 9/5/06), the new, improved Federated Department Stores is in the process of converting some 400 acquired department stores into its Macy's chain. In doing so, it is cannibalizing other nearby Macy's stores, sometimes in the same the mall. These newly converted stores include such historic regional names as Marshall Field's, Filene's, Robinsons-May, and Hecht's, all accumulated by one of the two big chains over the past 20 years.
In many cases, Federated is stuck with leases that make it difficult to back out, and the company still wants to aggressively pursue the Macy's branding program. About 85 malls, according to the article, will have two Macy's (or is that Macies'?)
In most cases, according to the article "the company is planning to sell largely the same goods in both Macy's stores." And the duplicate department stores aren't happening just in the most massive malls like Minnesota's Mall of America, they are also happening in midsized locations. It's as if they offer a Starbuck's in the mall and, in case you don't want to drink your coffee at Starbuck's, they feature another Starbuck's... (Oh wait, that already happens.)
In some cases, the chain will use the extra store to sell some categories it doesn't sell in the other store, say home furnishings or plus-sizes. But that could lead to serious problems: "Oh! You want the other Macy's at the other end of the mall; we only carry up to size 14."
Federated's motives for this risky policy, and the original motivating factor for its buyout of May's, come from the precipitous drop in sales at once-dominant department stores. As the article states, "While overall retail sales rose some 24.2% over the past six years to $2.2 trillion, department-store sales declined nearly 14% to $86.7 billion last year from $100.3 billion in 2000, according to the National Retail Federation, a Washington trade group." For Federated management, desperation and fear have to be part of the mix. As much as having too many undertrafficked stores is a bad thing, having those mall anchors occupied with new competitors might be worse.
Other motives were the desire to decrease the amount of expensive newspaper advertising in which department stores went head-to-head, and there's also the leverage over the suppliers both in terms of costs and offerings. Another consideration was size, where most department stores are far smaller and have fewer goods (SKUs) than the Wal-Marts and Targets they often compete against.
American consumers aren't going to die from lack of choice, even with the faux competition and pseudo variety to be offered by competing Macy's stores. But it is curious to see the Federated using the blackjack strategy of doubling down. - the thinking must be if they aren't shopping at Macy's, we'll give them a Macy's as an alternative.
12:42:53 PM 
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