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FEDERATED'S NEXT CHALLENGE RECAPTURE CUSTOMERS, DEAL WITH RAFT OF RETAIL BRANDS

By Published on .

Federated Department Stores' acquisition of R.H. Macy & Co. could blur the brand identities of the most venerable names in retailing-including Bloomingdale's and archrival Macy's-if the stores aren't marketed properly.

Federated's new marketing strategy will have to bring back disenfranchised, cost-conscious consumers who abandoned Bloomingdale's, I. Magnin and Bon Marche to slap the racks at value-price Sears, Roebuck & Co. and J.C. Penney Co.

"Too many of their customers were wooed away by moderately priced department stores," said Kurt Barnard, president of Barnard Retail Marketing Report, New York, who believes Federated's future marketing strategy will position all stores as more accessible and affordable.

The acquisition will make Federated the largest department store company, expected to consist of 12 chains and 450 stores-home to brand names ranging from tony Bloomies, I. Magnin and Macy's to the more value-driven Abraham & Straus and the Bon. One analyst warned that a blanket approach to marketing won't work with the enlarged Federated.

"It's going to be very important that they maintain their divisional differences," said Janet Mangano, retail equity analyst at Burham Securities, New York.

It's unclear whether Federated will continue to have each division handle its own ad creative and media locally, or consolidate at one agency.

With a total of $14 billion in sales from department and specialty stores in 35 states, a combined company may mean a fire sale in some areas as stores are sold or closed.

In addition to consolidating administrative and operations functions, Macy's and Federated's media ad budget will be slashed.

Last year, the combined stores, also including Bullock's, Rich's/Goldsmith's and Stern's, spent $391 million on advertising with about 86% dedicated to newspapers.

The prospect of cuts has media executives reeling.

July 14, the day the merger was announced, "was Black Thursday for all local media," said Alan Millstein, editor of The Fashion Network Report.

In New York City, where Federated's flagship Bloomingdale's store and the Macy's flagship compete directly, newspaper executives are sitting on pins and needles as they wait to hear where and to what degree the ax will fall.

"There is no doubt that the acquisition is going to affect us. Just how much I can't say," said Chiara Coletti, VP-public affairs for Newsday.

But if Federated closes Abraham & Straus stores on Long Island, as some sales reps believe they will, advertising in that market will focus on Macy's with The New York Times the expected beneficiary.

"We plan to institute a much more consultative approach to advertising," said Janet Robinson, VP-director of advertising at the Times.

She wouldn't detail specifics but added that "the newspaper is going to do everything in its power to retain and grow the advertising levels it has enjoyed from those retailers over the past few years."

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