The Consolidation Opportunity

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Dozens of established retail names -- some, like 150-year-old Filene's, venerable old brands that were fixtures in their communities -- have been disappearing from the retail landscape. All are being converted this year into Macy's, along with such other old retail banners as Famous-Barr, The Jones Store, L.S. Ayres, Meier & Frank and Robinsons-May.

As consumers, we've known it was coming since last February, when Federated announced the acquisition of May Company, and thus the further consolidation of the department store industry. Knowing it was coming, however, won't make it any easier. These are department store banners that we've grown up with, and in an ever-changing world they were one small piece that stayed the same. Not anymore. This week, many of the Filene's stores are beginning liquidation sales to make way for the transition.

There has been much written about the declining fortunes of the department store industry. One characteristic that's never received quite enough attention is that their customers can be fiercely loyal. And parochial. Once upon a time in New England, there were Filene's customers and Jordan Marsh customers, another long time New England retailing institution. They may have shopped in the other store, but they had a clear preference. After the Jordan Marsh stores were converted to Macy's nine years ago in an earlier consolidation, many of their customers shifted their allegiance to Filene's. Both Jordan Marsh and Filene's were quintessential New England department stores, in both their feel and assortments. Macy's is not.

Federated's move to consolidate their department store operations under the Macys banner is thus in many respects a watershed moment in the department store industry. In our local mall, where there is both a Macy's and a Filene's, Macy's will move into Filene's more desirable space and another retailer will eventually take over Macy's space. But make no mistake, that other retailer will also be a national company. And so it goes in all of those other markets as well, wherever you may be reading this. The era of the regional department store chains is ending, and with it the local touch, the comfortable, familiar feel. What's a loyal department store customer to do?

The moment presents a unique opportunity for many small specialty retailers. The typical department store customer is most interested in higher quality goods, and knowledgeable, helpful customer service. This is where many smaller retailers excel. As those customers have continued to shop at department stores they've also grown increasingly comfortable shopping at smaller stores that offer them a relaxed, comfortable experience.

If you carry specialty apparel or accessories, giftware, home goods or any other category that department stores have traditionally carried, consider inviting these customers into your store as they begin to adjust their shopping habits. Here are just a couple of ideas to think about:

  • Develop a limited, but highly focused and targeted advertising campaign. Let those potential new customers know that you've got something that might interest them. Time it to run shortly after the change in banners. Limited your message to one or two key categories of strength where you feel you have the opportunity to attract the attention of potential new customers. If you limit it to a single key vendor, you also may be able to squeeze out some one-time extra co-op advertising dollars. Keep in mind that your purpose is to introduce yourself, not necessarily to run a sale.
  • Review your loyalty programs. You may want to layer in a one-time incentive for new customers, or for existing customers who refer a new customer to you. A referral bonus has the added benefit of being able to cost effectively e-mail your message to your best marketers, your existing customers.
  • Build in-store merchandise presentations that emphasize those key categories of strength, in both breadth and depth of assortment. Feature those presentations in high traffic areas near your entrance. Make a great first impression.
  • Now may be a good time to test that new item or category or collection that you had been considering. In fact, it's always a good time to be testing, but there may be something you've been thinking about that may have particular appeal to those new customers you hope to lure through your door.

You may have ideas of your own, given the specific nature of your store. The key point is not to let the moment, and the opportunity, pass you by. There are many loyal department store customers who feel a little out of sorts right now, who aren't exactly sure what they'll do. As the changeovers occur, they're going to be open to exploring different shopping alternatives. Ask for their business, and greet them with open arms when they stop by the check you out.

Last updated: Feb 1, 2006




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