We have in the past written about some of the challenges and strategies of running modern department stores. Macy’s has been trying to tailor its product assortment to regional needs and tastes; J.C. Penney has been trying to move toward fast fashion. Now we have reports that things are paying off for Macy’s while Penney is looking for help.
For Macy’s, the folks in Cincinnati (saying that just seems wrong) reported goods earning this quarter and claim that much of their success comes from their ability to tailor offerings for each region (Macy’s Tailored Merchandise Pays Off, Aug 12, Wall Street Journal).
Macy’s Inc. is benefiting from a plan to tailor merchandise to local markets, an effort that helped push its fiscal second-quarter earnings higher. … The company on Wednesday reiterated that the effort to tailor merchandise to local tastes, dubbed My Macy’s, is paying off, with major changes behind it and the opportunity ahead to push hard at driving sales. The company stocks items based on individual market needs as part of the initiative, pilot-tested in 20 markets in 2008 and rolled out nationally in mid-2009.
During the company’s earnings call, Chief Financial Officer Karen Hoguet said private-brand and exclusive products also are helping drive growth. … Ms. Hoguet said that on a two-year basis, the strongest regions for the department store giant were the North and the Midwest, both of which were original My Macy’s pilot regions.
So what kind of regional variations are we talking about? Would you believe shoe sizes?
Jim Sluzewski [Macy's spokesman]: In Chicago, for example, we find that there is a much higher demand and preference for large sizes in women’s shoes, size 11 for example.
Macy’s doesn’t know why there are more big-footed women in Chicago, but it’s stocking and displaying more big-sized shoes in it’s store there.
(The quote’s from Retailers tailor products to shoppers, Aug 11, Marketplace) I have to admit that this example struck me as a little surprising. I was expecting “people in Texas love wearing orange.” That would be something that reflects a matter of taste and it could be hard to pick out given a standard nationwide assortment. That is, with only a few orange items in the offerings it could be hard to pick that preference up. Shoes are a different matter. That isn’t a question of taste but of necessity. It strikes me as surprising that it has been noticed before. On the other hand, I wonder how far they take this. Do women with large feet prefer less flashy shoes? That is, do they use this information to make real merchandising decisions or just to alter the mix of sizes?
As for Penney’s the Wall Street Journal reports that they have signed a deal with Mango MNG Holding SL, a Spanish retailer. Mango is a fast-fashion firm in the line of Zara or H&M. They supposedly can take a design from its studios to its stores in four weeks. Mango however does not have much presence in the US (12 stores) but that could change fast as they will produce exclusive designs for Penney.
The exclusive-to-Penney brand, called MNG by Mango, will launch at 77 stores on Aug. 18 and roll out to 600 of Penney’s 1,100 stores by next fall. Penney is investing in fixtures such as hardwood floors, black chandeliers and modern tables that showcase looks like skinny jeans and lace-embellished blouses. In-store boutiques, averaging 1,000 square feet, will be refreshed every other week—twice as fast as Penney’s other brands. Prices will be in the mid-to-upper tier of Penney’s offerings, with skirts ranging from $50 to $100, and jackets from $60 to $160.
Penney already has some lines that conform to (or at least aim for) the fast-fashion approach:
Last year, the company unveiled what was then its fastest brand, a juniors line called City Streets, which was able to go from factory to stores in a matter of 12 weeks. Ms. Sweney said that with the success of City Streets’ cycle-time reduction initiatives, “we knew we could get it done” with Mango.
The question I have is how the Mango-Penney supply chain will work. Mango will do the design and Penney will take the customer’s cash. Other than that, the article is a little vague on where activities will switch from one firm to the other. Filling up 600 stores far from its European base within a year is a pretty tall order for Mango. Penney clearly has a network of warehouses capable distributing nationwide so presumably they will handle the logistical end of things. That leaves manufacturing. It is probably a safe bet that Mango does little or no manufacturing in or near the US. So that is an interesting strategy decision. To what extent do you go with your current supply base because you know them and their capabilities as opposed to developing new suppliers in order to shorten lead times?