
Macy's Inc.'s strategy for May Department stores, which it bought in a 2005 deal valued at $18 billion, was never going to be easy. As we discussed in a December 2005 Corporate Dealmaker piece, CEO Terry Lundgren's plan was to
convert all the acquired chains to Macy's, including such storied names as Chicago's Marshall Fields. That would enable the stores, many of them beset by declining sales, to benefit from synergies in national branding and ordering, among other things.
The downside, we noted, was potential damage to the deep affinity that people in Chicago and elsewhere had for stores that were deeply embedded in the local scene. Lundgren was sensitive to the issue, promising, for example, that the supply of Marshall Field's signature Frango mints would continue uninterrupted.
But according to an article in Monday's Wall Street Journal (subscription required), Macy's now thinks
localization must go even deeper. With 2007 sales off 2%, it is reconfiguring its executive ranks and taking other measures to try and stock goods more attuned to local tastes. The article notes that Macy's is thus following the lead of Best Buy Co. and other retailers who have figured out how to be national and local at the same time.
As retail aficionados know, the approach that Best Buy has used so successfully goes by the name of "Customer Centricity," and was put forth by finance professor Larry Selden in a book he co'wrote with Geoffrey Colvin, called "
Angel Customers and Demon Customers."
It's funny to think that these giant company's need an elaborate intellectual framework and attendant systems to implement insights that Mr. Field, Mr. Macy, and Mr. Schulze (who founded Best Buy) probably knew in their bones. But in business and even in social exchanges this is perhaps the central trade-off of our age. With scale you gain power, but you lose something too -- whether it's a sense of credit quality in mortgage lending, a sense of
deeper friendship when you're keeping up with 200 friends on Facebook or a sense of what individual customers care about when you're running 800 or so stores.
- Kenneth Klee
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Localization efforts, eh? Lundgren missed the boat the first time around by deep-sixing LOCAL NAMEPLATES. While his efforts may seem wise on the surface, I doubt they will ever succeed in bringing business back to the places whose customers were alienated by his first blunder.
There's really no nice way to say it.