The Homa Files

Excerpted from Fortune, “Macy’s Quest for the Fountain of Youth”, by Suzanne Kapner, September 24, 2008

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After years of losing ground to the likes of Abercrombie & Fitch in the battle for young and hip shoppers, Macy’s is considering an overhaul of its flagship Herald Square store to lure the under twenty crowd.

It entails relocating junior apparel from the fourth floor to the basement, now known as The Cellar, which would create a club-like atmosphere in the basement, complete with dim lighting and pulsating music – it could be a key part of a strategy to reverse a prolonged sales slump at the department shore giant.

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Department stores have for years been losing ground to specialty retailers, which is one reason they are called aging dinosaurs. But the name goes beyond semantics. As department stores fail to attract younger shoppers, their customer base is literally growing older.

Marshal Cohen, the chief industry analyst for market research firm the NPD Group, estimates that department stores have lost 8 percent of their market share since 2003. He attributes a good portion of that decline to the migration of teens and young adults to specialty retailers (Abercrombie, Urban Outfitters, J. Crew, etc.).

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By giving teens a separate entrance and their own place to hang out – similar to creating a rec room in the basement – Macy’s is hoping kids will feel less self conscious about shopping where their parents shop.

But should the Herald Square store find success with its subterranean experiment, Macy’s may have difficulty rolling the idea to its other 850 stores nationwide, many of which do not have basements.

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Going after the youth market has other risks, notably an alienation of core, older customers. Gap lost its mainstay thirtysomething shopper when it tried to appeal to a younger generation earlier this decade and has been in a tailspin ever since.

Edit by DAF

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Full article:
http://money.cnn.com/2008/09/24/news/companies/kapner_macys.fortune/index.htm?postversion=2008092413

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