Whither Marshall Field's? The Debate Rages On

Marshall Field's flagship store on State Street in Chicago

Yesterday I was lamenting the fact that Paradox Unbound has focused so much on retailing recently -- I had intented it to be a forum discussing a myraid of issues. I suppose the Federated-May merger triggered this trajectory. I had to wonder if anyone (besides Steven) wants to read this kind of stuff. The fact that it's my blog and that I can use it to post whatever I want was not much consolation.

I was quite pleased to find an e-mail sent to me this morning by a blogger in Ohio that indicated there are indeed others in this world who are interested in the current state of retailing in this country. The blogger's name is Michael Meckler and he operates a Web Site called www.red-state.com -- I kid you not. While I may not agree with the man's politics, I found the column he published today about Marshall Field's to be quite engaging. Here's the text of the e-mail he sent to me (and, not surprisingly, to Steven as well):

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From: Michael Meckler

To: Mitch Glaser, Steven Swain

Subject: Marshall Field's

Date: Mon, 8 Aug 2005 09:18:54 -0400

Concerning blog entries about attempts to preserve the Marshall Field brand after the Federated takeover of the May Company:

I suggest in today's online column (http://red-state.com/0805/080805.html) that Federated would be better served by abandoning their two-tier retailing plan (Macy's at the bottom tier and Bloomingdale's at the top tier) and replacing it with a three-tier plan that place Marshall Field's in the middle. Such a plan would free Macy's to compete with Target and Kohl's as price-based retailers, while allowing Marshall Field's to present a higher level of price and quality in merchandise, as well as customer service (which is lacking at Target and Kohl's, and might as well be lacking at Macy's).

I realize that this is a different approach to the preservation of regional brands you have been advocating, but I thought you might be interested in the column nonetheless.

Sincerely,

Michael Meckler
http://red-state.com

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Of course, I felt compelled to respond. As much as I enjoy discussing retail's history, I love to speculate on its future. Make sure that you read Michael's column on Marshall Field's before you read the following e-mail I sent him earlier tonight.

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From: Mitch Glaser

To: Michael Meckler

Subject: Re: Marshall Field's

Date: Mon, 8 Aug 2005 21:56:23 -0700

Michael:

I want to thank you for taking an interest in “Paradox Unbound” and my posts about the state of retailing. I am relatively new to the blogging game and have found interacting with others in the blogosphere to be thoroughly enriching (where else can a Red State conservative and a Blue State liberal discuss retailing). I enjoyed your column about the future of Marshall Field’s and see that you raised many excellent points. However, please allow me to respectfully respond to your post based on my own perception of the current state of the department store business. I will be posting this response on my own blog later this evening. Consider it food for thought.

Department stores have held on to an increasingly shrinking piece of the American retail pie over the last 30 years. They’ve felt pressure from below (Kohl’s, Target, Wal-Mart, and other big boxes) as well as pressure from above (Neiman Marcus, Nordstrom, and other luxury retailers).

The “national brand” strategy adopted by Federated makes sense when you consider that they’re competing against big boxes and luxury retailers with a national presence and/or a national reputation. It’s logical to market only a couple national brands through nationwide media than to market dozens of regional brands through local media (indeed, newspapers stand to be the biggest “losers” when Federated’s plans are executed). The company’s merger with May is an attempt to dominate the department store business, even if it’s shrinking in relation to the entirety of the nation’s retail business. Federated believes that a combination of massive size and national presence in the department store sector may be a winning formula for growth in today’s retail landscape.

Department stores were once “all things to all people.” Each city’s identity was intertwined with its handful of grand emporia conscientiously operated by civic-minded merchants. Those days are over. Department stores offer far fewer categories of goods than they used to and are owned by a handful of national conglomerates with almost identical stores located in almost identical malls from coast to coast. The drive to preserve regional names rises from nostalgia, not from any realistic assessment of the state of retailing today. Mergers and consolidation have changed the names of many a department store over the last few decades – people get over it and keep on shopping.

Your position – that Federated should move from a two-tiered national strategy of having Macy’s stores being “good” and Bloomingdale’s stores being “better” to a three-tiered national strategy of having Macy’s stores being “good,” Marshall Field’s stores being “better,” and Bloomingdale’s stores being “best” – seems logical. However, there are many problems with making Marshall Field’s a national brand with a target customer between those of Macy’s and Bloomingdale’s that you ought to consider.

First, the Macy’s name was chosen for its national recognition, relying mostly on the yearly “Macy’s Thanksgiving Parade” and the classic movie “Miracle on 34th Street.” Marshall Field’s does not enjoy a similar level of recognition. It’s hard enough for Federated to bring the Macy’s name into new markets, and it would be far more difficult for the company to bring the Marshall Field’s name into new markets where no one has heard of it. Marshall Field’s is certainly well-known in the upper Midwest, but that’s it (Field’s had stores in Texas for a time, but they’re long gone).

Second, your anecdotal experience with Marshall Field’s in Ohio does not speak to how the brand is generally perceived. I believe Federated CEO Terry Lundgren when he says that Field’s and Macy’s target the same type of customer – a retailer is obligated to do its homework and know its customers, and I believe Federated has. Field’s State Street store is a relic of the past and not representative of the cookie-cutter stores it operates in Midwestern suburbs that are not substantially different than Macy’s suburban outlets in other markets. While Lundgren admits that “there is something different about Marshall Field’s,” he is alluding to the fact that Field’s means something special to those in Chicago. Alas, Jordan Marsh once meant something special to those in Boston, Bullock’s once meant something special to those in Los Angeles, and John Wanamaker once meant something special to those in Philadelphia, but those names are long gone and their shoppers have moved on to other stores.

Third, there just isn’t a market for the “middle” of the department store spectrum anymore. While Macy’s primary competitors are Sears, JCPenney, and the few regional and semi-national department stores still around (Belk, Boscov’s, Dillard’s, etc.), you’re right to point out that it’s also competing against Kohl’s and Target. Indeed, many of Macy’s California stores were recently remodeled to include large directional signs, shopping carts, and price-check scanners like those found in big boxes. You’re also right to point out that Bloomingdale’s competitors are Neiman Marcus, Nordstrom, and Saks. But then who would a Marshall Field’s positioned in-between Macy’s and Bloomingdale’s compete against? The answer is quite clear: Field’s would take shoppers from Macy’s with upscale aspirations and shoppers from Bloomingdale’s with a desire for bargains. Federated does not want to be in a position to compete with itself – it’s a zero sum game for them to have three chains vying for the same customers when they could simply have two.

I agree that Federated and most other retailing conglomerates are focused more on consolidations and cost-cutting than the classic art of “retailing.” The reason for this is simple – Wal-Mart and other big boxes have shifted the focus from the old way of specialized retailing to distribution and economies of scale. The growth of luxury retailers like Nordstrom is a response to this increasing focus on low prices at the cost of quality and selection but still relies on the strength of having a national presence. Macy’s will compete with the big boxes on a national scale, while Bloomingdale’s will compete with the luxury retailers on a national scale. The spectrum is covered – there just isn’t a “middle ground” anymore. Retail has changed.

I predict that the Marshall Field’s name will be scrapped in favor of Macy’s. If the Field’s name lives on, it will only do so only in Chicago. Even then, Federated will find itself with the added burden of advertising Field’s in the local Chicago media while advertising Macy’s on a national scale (Chicago is such a large media market that simply advertising for Macy’s would be far more cost effective). If the Field’s name is kept, its stores will eventually become Macy’s stores with another name slapped on the front anyway, so in due time Federated will consolidate it without an outcry from Chicago residents who consider it “different” – it won’t be “different” anymore.

I also predict that Lord & Taylor will meet the same fate. Lord & Taylor has lost its luster, and May pulled it out of several markets recently. At the current time, Federated is considering whether to sell it, revitalize it, or consolidate it. Selling it doesn’t make sense, since a new owner could make it a formidable competitor to Bloomingdale’s, at least on the East Coast and in the upper Midwest. Revitalizing the nameplate might make sense, but again, why should Federated have a chain competing against its own Bloomingdale’s division? Consolidation seems inevitable, with the weakest stores being closed.

Of course, I could be completely wrong about this. It’s an interesting subject to ruminate about, nonetheless.

Thanks again for sharing your thoughts on the Federated-May merger and the future of Marshall Field’s with me. I will continue to check “red-state.com” for your observations and insights.

Mitch Glaser
Los Angeles, CA

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In conclusion, blogging is a lot of fun. This exchange of observations and ideas across the world benefits everyone, even if they only concern department stores in the United States.