Macy’s decision last month to close 16 of the 36 Story shop-in-shops it had opened only a year ago left many retail insiders scratching their heads. In 2018, when the retailer acquired Story, the concept shop with a rotating cast of brands, many lauded the decision, noting that Story’s ever-changing assortment of product would inject the struggling Macy’s with just the right dose of excitement and destination appeal. And as Macy’s rolled out the smaller in-store locations, such predictions appeared to come to fruition—the brand’s Herald Square flagship unveiled a Crayola partnership that was awash in both colors and shoppers.
Macy’s now says the Story closures, and what will come next this spring, is all part of the plan. The company had always expected to learn, react and iterate, says Rachel Shechtman, Story’s founder and chief experience officer of Macy’s. That iteration includes a more flexible, gifting-focused format moving forward that will be supported by a marketing campaign rolling out next month.
“When we went back and looked at the business, we saw what people were buying,” says Shechtman. “What came through loud and clear, even if we weren’t saying ‘gifts,’ we were becoming a gift destination and that was our value proposition.”
To that end, Story—while still using the tagline “A store to explore”—will primarily focus on gifting in its messaging and brand purpose. This messaging will revolve around three categories—big days, like a graduation or birthday; holidays such as Christmas and Mother’s Day; and “everydays,” including things like National Doughnut Day. While Story will still host seasonal rotations with brand sponsors, the new direction opens the door for larger, and longer, underlying sponsorships with a greeting card company, for example.
“This allows us the flexibility of access to many more partners,” such as a sponsor for Mother’s Day and a different sponsor for Father’s Day a month later, says Shechtman. Story is also expanding its e-commerce offerings, which it debuted late last year.
While 20 shop-in-shops will remain, including at Herald Square, Shechtman says Macy’s can install temporary Story fixtures, like a gifting tower, in hundreds of other stores throughout the year.
“It’s not black and white—we have a menu of options,” she says.
By nature, the shop-in-shop format has never been a one-size-fits-all strategy for retailers. While hosting shops for marketers with existing followings, like Apple at Macy’s and Sephora at JC Penney, has resulted in strong demand, other smaller concepts might not be as fruitful in all locations, particularly those that are not tourist destinations, experts warn.
Macy’s isn’t the only retailer struggling to find the perfect fit—department stores in general have been plagued with declining sales. Kohl’s and JC Penney recently reported drops in same-store sales during the crucial holiday shopping period. Sears has been on the wane for years.
Of course, some retailers have found success with ideas similar to Story. Nordstrom pioneered the discovery concept several years ago with its [email protected] rotating shop that offers exclusive products. Homing in on fashion and trends, the Seattle-based chain has also partnered on shops with popular direct-to-consumer startups such as Everlane and Glossier. Nordstrom recently announced a new creative project, “See You Tomorrow,” which will feature a resale shop of merchandise from luxury brands within its new Manhattan flagship and online.
Similarly, Target’s shop-in-shop with Disney, begun last year, was so lucrative that it is expanding this year. The locations offer interactive games and seating areas for kids shopping with their parents.
Late last month, Macy’s reported fourth-quarter sales results that beat analyst expectations, though they were still on the decline. The company generated net sales of $8.3 billion, a 2 percent decline over the year-earlier period, and same-store sales fell 0.5 percent. Macy’s reported a profit of $340 million, less than half of its profit from the fourth quarter of 2018.
On a recent call with analysts, Macy’s CEO Jeff Gennette said, “Taken as a whole, 2019 did not play out as we intended.”
Analysts remain concerned. Over the holiday period, locational intelligence company Cuebiq reported that foot traffic at Macy’s locations was down 13 percent in the fourth quarter of 2019 compared with 2018. Macy’s also announced it will be closing 125 more stores—one-fifth of its fleet—and eliminating 2,000 positions over the course of the next three years. Shortly after, Standard & Poor’s downgraded Macy’s credit rating to “junk” status.
“Macy’s claims that it executed holiday well are a partial truth: In some stores, holiday assortments were good, but in most execution was dire, and inspiration was thin on the ground,” Neil Saunders, managing director of GlobalData Retail, wrote in a recent research note.
A dash of inspiration
The chain is hoping Story’s new gifting-focused strategy will help add that inspiration. A growing team that includes a new head of marketing for both Story and Market by Macy’s, a new community-type retail concept that recently debuted in Texas, as well as a head of in-house creative, will bolster the efforts. Macy’s is working with Brooklyn-based agency Center on an advertising campaign for Story that will run outdoor, in digital channels and through direct mail. The push will cover Story’s spring focus, which is around the theme of celebration.
With any in-store experience, it’s important that marketers like Macy’s understand the who and the why behind their customer, according to Denise Lee Yohn, a branding consultant and author of “What Great Brands Do.” In this age of social media, it’s easy to forget that consumers are often visiting a store to shop, and not always to experience something they can photograph and share on the internet.
“People go to a department store to shop, and while the company likes to think it’s an emotional and fun experience, it’s still quite functional,” says Yohn. She says that Story’s placement in Herald Square makes sense as it’s already a tourist destination. But it’s hard to justify putting such shops in other Macy’s locations, she says.
“Companies are trying to insert themselves into the social media conversation by doing something exciting and different,” adds Yohn. “But if people aren’t going to your store for that, it’s like you’re trying to create demand and create something that isn’t there.”