Will Macy's Go Far Enough?

New Local Focus Is a Good One, but to Make It Work, the Retailer Must Think Broadly

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Philip Alexander
Philip Alexander
Give Macy's Chief Marketing Officer Peter Sachse a high five for the giant retailer's plans to implement a localization initiative called "My Macy's." This recognition that Macy's must remember its local roots by tailoring each of its stores' products and promotions to local markets is welcome -- and overdue -- news.

But questions remain: Will Macy's localized focus go far enough?

Does it have the infrastructure and business methodologies to execute its localized plan effectively? How will it ensure that inventory matches local ad campaigns? Will it customize its marketing campaigns by market and in all media to be most successful?

To be sure, Macy's must also get the balance right. Too much localization can inflate costs, while too much standardization triggers staleness. A retailer must understand which business elements should incorporate localization, how costly they are to customize and how much impact they will have from store to store.
Macy's checklist
  1. Make sure local stores cater to local tastes

  2. Determine by store which items are popular and which are not

  3. Recognize local events, such as the start of Little League or hunting season

  4. Win over "selective" shoppers who seek value and basics

If Mr. Sachse can pull off this titanic and tricky marketing maneuver, he will prove to other major retailers that the familiar "all sales are local" adage still prevails. At the same time, he will show Macy's CEO Terry Lundgren -- who trimmed local advertising to pour tens of millions of dollars into his national advertising campaign "The Magic of Macy's" -- that a retailer's core customers favor their particular store's differentiation, not sameness.

Winter coats in Miami
For a long time, Macy's and other major retailers such as Wal-Mart took one-look-fits-all approaches as they fine-tuned store formats, merchandise mixes, operations and marketing. That explains ads promoting winter coats in Miami or bathing suits in December in Detroit. But the pendulum is swinging back as customers have made it plain they want their local stores to cater to local tastes.

And with today's sophisticated technology, a retailer like Macy's can determine by store what's popular and what's not. Take sweaters. Macy's can determine how the volume, type and color of the sweaters it sells differ by store (and rest assured, each store is different -- even within the same city). With this tracking data, Macy's can make sure that enough of each store's best-selling varieties of sweaters are available and replenished when supplies shrink.

Philip Alexander is president-CEO and founder of BrandMuscle, a marketing-services firm that helps marketers develop customized, locally relevant online and offline advertising.
Macy's should look to Wal-Mart's "Store of the Community" concept as an example of how this localized approach works best. Under the Wal-Mart concept, each store is stocked based on a combination of consumer purchasing data, area demographics, customer preferences and input from store associates. That way, Wal-Mart places significance on enhancing the customer's store experience and also on becoming a better neighbor.

As for recognizing local events, store and other managers each year submit information on when the Little League baseball season begins, when local schools start and when hunting season starts. This local knowledge and intelligence lets each store differentiate its department size, shelf-space allocation and departmental adjacencies. This improves inventory distribution while also increasing sales, reducing markdowns and lowering inventory investment in the system.

Fitting in
What Wal-Mart and, presumably, Macy's seek are the "selective" shoppers who visit far less frequently than "loyalist" customers. Selective shoppers usually are career-driven, time-starved, and shop for value and basics. By localizing stores, Macy's can make them fit better into their communities.

Macy's must look to technology advances to succeed. The retailer has been investing in new systems for capturing localized data and making sure the right inventory gets to the right store. Time will tell how well the new systems work. Britain's supermarket leader Tesco has done this well. Using common information systems, supply-chain logistics and purchasing processes, Tesco has tailored its grocery stores to different communities and, in the process, improved margins and service.

Marketing, of course, must assume a local bent in a big way and embrace the full range of media, not just the local newspaper. A retailer's website, for instance, can highlight individual stores, perhaps by using customers' ZIP codes to send them to local stores' sites, where local sports teams and events as well as other services and products can be promoted.

Macy's can team with ShopLocal and similar city-specific websites, often run by local newspapers, to promote each of its stores. When consumers go to shoplocal.com, their ZIP codes automatically take them to the ShopLocal page for the nearest city the website serves. At Chicago.com, a separate shopping link furnishes the websites for retailers such as Macy's.

Macy's quest is to distinguish itself as a top retailer, and it has signaled that it can do this best by providing consumers with a "My Macy's" experience. It should spark innovation, letting managers test original solutions to local challenges and enhance their standing in their communities.

I'm eager to see if Macy's will get the formula right, delivering a whole new magic to the retailer's performance.
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