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It Worked at Target. Maybe It'll Work at Macy's.

Sarah Halzack
It Worked at Target. Maybe It'll Work at Macy's.

(Bloomberg Opinion) -- When Macy’s Inc. laid out its 2019 strategic priorities on Tuesday, many of them were continuations of last year’s efforts: It would renovate 100 more stores, for example, and further expand its selection online.

One new initiative, though, stood out. Macy’s said it would invest in what it dubbed “destination businesses,” the departments in which it commands particularly robust market share, such as dresses and fine jewelry.

It caught my attention because “destination businesses” sounds an awful lot like Target Corp.’s “signature categories” strategy, which has been the bedrock of the big-box chain’s turnaround under CEO Brian Cornell. If Macy’s can find a way to execute as well on such an initiative as Target has, it could prove to be just the turnaround accelerant the beleaguered department store needs.  

For a moment, let’s rewind to 2014, when Cornell took the top job at Target. The chain had lost some of its “Tar-zhay” sparkle after, in a more fragile economic moment, it had focused heavily on value. A headline-grabbing data breach didn’t help. Cornell decided to try to fix Target by focusing relentlessly on a few areas he called “signature categories,” the ones he thought Target should be famous for: fashion, home, kids, baby and wellness.

Target then put intensive effort into freshening up these departments. Mannequins were added to clothing sections, helping drive sales by showing garments merchandised as outfits. Home goods weren’t just piled on shelves; they were showcased in displays that looked more like what you’d see at specialty retailers. The retailer killed tired private brands such as Merona and Mossimo and built a stable of fresh new ones with more distinctive personalities.

Nothing has been more important to Target’s turnaround than this work on signature categories. And you can easily see how Macy’s could benefit from a similar approach.

Target’s playbook acknowledged that in categories like home and fashion, very few retailers are positioned to win on eye-catching prices alone.  The distinctiveness of the product and the way it is displayed are key. Macy’s won’t be able to go about spiffing up its product and merchandising in the exact same way that Target did; it has a different customer. But a deep focus on making more covetable, unique items – and merchandising them in more aspirational displays – could go a long way toward restoring relevance. 

Also, Target’s strategy has relied heavily on a strong private-label offering, and Macy’s could easily benefit from focusing in this area, too. That’s not just because private-label pieces tend to offer fatter profit margins. They would help Macy’s stand out from other department stores or off-price players that carry the same roster of national brands. And they would allow the department store giant to play defense as prominent apparel and accessories brands try to do more selling through their own stores and websites. Nike Inc. and Under Armour have both moved in this direction, as have Ralph Lauren Corp., Michael Kors and Kate Spade.

Macy’s said its destination businesses were dresses, fine jewelry, men’s tailored apparel, women’s shoes, beauty, and “big ticket,” which it didn’t define, but presumably includes pricey items such as mattresses. It didn’t offer much detail on what investments it would make to improve them. But if its approach indeed ends up taking shape like Target’s, it could majorly help Macy’s.  And as Macy’s latest quarterly results and annual guidance clearly demonstrated, it needs to turn up the heat on its transformation efforts. 

To contact the author of this story: Sarah Halzack at shalzack@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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