Macy’s picking the bones of fallen retailers

May 15, 2009

DISCUSSION TOPIC

Other’s Loss is Macy’s Gain 5/14/09

TOPIC SUMMARY:

Macy’s has developed a strategy to take advantage of the misfortunes (specifically the move into bankruptcy and liquidation) of competitors such as Fortunoff, Gottschalks and Mervyns so it can pick up their customers.

“Wherever there is a store that has gone out of business, we are honing our sights on that customer,” Terry Lundgren, chairman and chief executive officer of Macy’s, told The Wall Street Journal.

Macy’s strategy, as The Journal article points out, is nothing new in retailing circles. In New Jersey, for example, even though Walgreens purchased prescription files from the failing Drug Fair chain, every pharmacy within miles of the former chain’s stores have signs posted letting consumers know their business is welcome.

Picking up a fallen rival’s customers is more important than ever considering the realities of consumer spending at this time. According to Deutsche Bank, closed chains in the clothing, electronics and home furnishings businesses left behind roughly $21.4 billion in sales this year.

Macy’s, as an example, is considering adding patio furniture to its stores in the New York area following Fortunoff’s collapse. Outdoor furniture, according to The Journal, was the most successful category for Fortunoff. The company has even talked with former execs at the chain about participating in an online launch of patio furniture this year with product to reach stores in 2010.

Discussion questions:  Has market share become more important for a chain or independent’s success in the current market than it has in the past? What are your thoughts about the opportunity for retailers to pick off the bones of fallen competitors in the current market?

My post: 

Macy’s is well positioned to grab market share from the demise of Gottschalks and Mervyns and other retailers selling the core product categories like apparel, home furnishings and cosmetics.  I do question the idea of going after categories that may not be in their stable of core competencies – like outdoor furniture.  This could prove a distraction they don’t need.  History has shown us that retailers who understand their customer and where they shop can devise effective market share strategies.  The key is to understand those customers who are shopping with you and with your competition.  Macy’s has the best chance of grabbing more of the customer’s dollars for categories they already bought at both Macy’s and the failed retailers.

Mike Osorio, your Dare to be Contagious! ™ strategist

www.OsorioGroup.com

What do you think?  Please add your comments and add to the discussion!

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13742

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Gift cards become worthless plastic in retailer bankruptcies

March 7, 2008

DISCUSSION TOPIC:  Bankrupting Gift Cards

TOPIC SUMMARY:

That gift card you’re holding might not be worth the plastic it’s printed on. As it turns out, one of the casualties of retailers filing for bankruptcy protection are gift card balances that get zeroed out in the process.

Brian Riley, senior analyst at The Tower Group, told the AP that consumers could lose more than $75 million from stores and restaurant closings this year.

Not honoring gift cards can come back to bite retailers who find customers have moved on to other stores.

Brookstone has sought to take advantage of the ill will created by Sharper Image’s refusal to accept its gift cards by offering 25 percent off any purchase to consumers who hand over the now worthless plastic at the time of purchase.

Sharper Image has said that it intends to reinstate the cards at some point in the future although it did not provide a date when questioned by the AP.

Not all companies that go into Chapter 11 immediately void their cards. In the recent case where NRDC Equity Partners bought Fortunoff, the new owner decided to honor the gift cards.

Discussion questions: Is there any way for a retailer to rebound from the bad taste it creates by refusing to honor gift cards? Do you see consumers losing confidence in buying gift cards this year due to news of retailer bankruptcies and closings?

My post:

There is no logical reason for a company that expects to emerge from bankruptcy protection to choose not to honor their gift cards.  It goes beyond lack of common sense to pure stupidity.  Kudos to the new owners of Fortunoff to have the vision to honor their gift cards.  Sharper Image has made so many common-sense errors in recent years that it does not surprise me that they would decide in their filing not to honor their gift cards.

However, the part we may not understand is the bankruptcy court’s attitude on this issue.  The idea of a bankruptcy filing is usually to ensure maximized value for the bond holders and the preferred share holders – not the common stock shareholders and certainly not the consumer.  So it may make sense to cancel the gift card liability as part of the value-maximization effort.  Regardless of this financial necessity, it is suicide to good customer relations and likely guarantees an eventual failure for that retailer.

Mike Osorio, your Dare to be Contagious! TM strategist

http://www.osoriogroup.com/

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GO TO THE FULL DISCUSSION AT RETAILWIRE.COM:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12805

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Lord and Taylor Buys Fortunoff

February 19, 2008

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DISCUSSION TOPIC: 
Lord & Taylor Buys Fortunoff

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TOPIC SUMMARY:

Famed New York City jeweler and home furnishings retailer, Fortunoff, last week agreed to be bought by the owners of Lord & Taylor. The sale to NRDC Equity Partners LLC is expected to close in early March, subject to bankruptcy court approval and other conditions. 

Plans call for the opening of branded Fortunoff jewelry departments as well as home and bridal registry areas in L&T’s 47 stores – including a 100,000-square-foot Fortunoff home furnishing department and smaller Fortunoff jewelry department within the flagship at 39th Street and Fifth Avenue in Manhattan. The New York Times said this could make L&T a bigger competitive threat to Bloomingdale’s and Nordstrom. 

Discussion questions: How would you rate the merger between Lord & Taylor and Fortunoff? What do you think of the plans to introduce Fortunoff departments in L&T and to reposition Fortunoff more as an upscale retailer? 

My post:

As a long-time admirer of Fortunoff, and a recent admirer of the amazing ascension of L&T under the current ownership, I am thrilled with the merger.  Fortunoff has phenomenal talent in place for Baker, Elfers, et al to partner with.  The combined talent pool will be able to execute this merger effectively and I predict a rare 1+1=3 result.  I’m looking forward to shopping at L&T on my next trip to New York!

 Mike Osorio, your Dare to be Contagious! ™ strategist www.OsorioGroup.com  

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GO TO THE FULL DISCUSSION AT RETAILWIRE.COM:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/12754      

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 Thank you for visiting my blog!  Please subscribe using the RSS button and comment on my postings.  Comments are the life-blood of any blog and I appreciate yours!