November 4, 2011
The upcoming $400 million renovation of Macy's Herald Square flagship store in New York is an opportunity for the department store to reach a higher caliber of clientele. However, what exactly Macy's is trying to accomplish through a luxury-dedicated floor is still debatable, given that the Bloomingdale's department store chain is its upscale sibling.
No doubt the luxury brands featured in Macy’s Herald Square renovation will benefit from the highly-trafficked store and tourist hotspot. In light of the downturn, Macy’s may be trying to get a piece of the action where recent retail performance is more stable -- the luxury end.
“This facelift is long overdue,” said Pam Danziger, president of Unity Marketing, Stephens, PA.
“The fact that Macy's is more aggressively targeting the affluent customers through their hall of luxury is a trend we are going to see more of in the future, as marketers and brands that traditionally targeted the middle class find the new post-recession opportunity lies squarely among the affluent and not the middle class anymore," she said.
Macy’s did not respond by press deadline.
The Macy’s Herald Square location will undergo a facelift that will add new luxury retailers, a brew pub and a sit-down restaurant.
More than 100,000 square feet of new retail space will be added in addition to a new “hall of luxury brands” in the Broadway building that will feature shoes and handbags.
The series of two- and three-level shops to be announced will provide a better shopping experience for luxury brands and will also house the current Louis Vuitton boutique that itself will be updated and enlarged to multiple floors.
In addition, Macy’s Herald Square is claiming that it plans to build the world’s largest women’s shoe department at 39,000ft offering as many as 300,000 pairs of shoes, according to the store. The shoe department will provide access to the luxury stores.
Most retail experts do not believe that Macy’s has the desire – and, quite frankly, the clout – to position itself as a luxury retailer.
“Selling luxury brands does not make you a luxury retailer,” said Doug Fleener, president and managing partner at Dynamic Experiences Group, Boston.
“It's a combination of the products, the brand and the store experience," he said. "That isn't and won't be Macy's.”
However, the point may not be that the Macy’s brand is on its way to luxury – just the Herald Square location in midtown Manhattan.
“I think it’s brilliant, actually,” said Paula Rosenblum, partner at RSR, Miami. “The Herald Square location is iconic, and is a destination for many foreign travelers.
"Let’s not forget that Bergdorf Goodman is a single chain that does quite well, thank you very much,” she said. “In other words, Macy’s can generate a whole lot of revenue with its flagship location.”
Another component to consider is Macy’s trendier, upscale sister Bloomingdale’s. Where does it fit into the picture with this new move?
Flagship Bloomingdale's store in midtown Manhattan
“Macy’s and Bloomingdale’s have developed two distinctive customer profiles, of course with some overlap,” said Courtney Albert, consultant on marketing and branding for Parker Avery, Atlanta.
“I think that it only makes sense that Macy’s will offer luxury goods at the Herald Square location that are not even available at other Macy’s flagship locations, because the merchandise will have to match the proposed level of store renovation and luxury,” she said.
Indeed, where midstream retailers have been struggling, luxury retail has been blossoming even during the economic downturn.
“The middle of the line has been vacated – it’s what is known as an hourglass effect,” said Chris Ramey, president of Affluent Insights, Miami.
“Because of the bifurcation of the market, there is only a higher end and a lower end and you have to pick one in order to be successful,” he said.
Rather than slashing prices and going the mainstream route, Macy’s could be testing the waters in the more affluent top of the hourglass.
In fact, some experts think that this is just one example of a growing trend.
“The middle class came out of this recession in a much weaker position as consumers, with incomes down and budgets challenged with day-to-day expenses, with little left over for discretionary purchases that a store like Macy’s largely represents,” Unity Marketing's Ms. Danziger said.
“So for Macy’s and so many other traditional mass marketers, the luxury sector is the one where they are hoping to find growth,” she said.
Rachel Lamb, associate reporter on Luxury Daily, New York