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The voice of the brand strategy consultancy, The Portnoy Group Inc.

The Brand Man Speaks is a dialogue about the consuming world in which we live and a guide to successfully navigating it. The goal is to educate people and companies about branding, the most powerful yet misunderstood business tool.

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Macys going private-by Eli

Former Federated Department Stores now called Macys Inc. is going private with a buyout offer from KKR, one of the country's leading private equity firms. The company is parent to Bloomingdales and Macys retail brands.

The Brand Man Speaks reported this story a couple of weeks ago based on information from the Wall Street Journal and empirical evidence that the Macys' organization needed help.

In a move similar to Target some years back (it was originally the Dayton Hudson (dept. store) Company), Federated changed its corporate name to its lead retail brand, Macys a few months ago primarily to bolster its awareness level on Wall Street and to individual investors.

The company has been trying to build a national brand under the Macys name by buying up or incorporating notable regional retail brands including Burdines in Florida, Marshall Field's in Chicago and Filene's in Boston. The goal to build "America's (Department) Store" and establish nationwide economies of scale (from marketing to merchandise) was not fairing well because many consumers loyal to the old regional retail brands, especially Marshall Field's, have not warmed to the changes and have been unwilling to accept the Macys brand and its perceived New York City orientation.

The Brand Man Speaks contributed to a report in today's LA Times about this buy out plan. There are two avenues this buy out may take. One direction might be for Macys to have access to financial resources without being under the microscope of Wall Street and investors to restructure the entity, invest in store redesigns, create new in-house brands or showcase up and coming designers and increase compensation for sales people.

A couple of years of losses (due to heavy re-investment) while private might lead to strong profitability in three to five years.

On the other hand, private equity firms generally pick through an organization keep what's profitable or what has potential and sell off what is not. This might lead to a smaller, leaner, "meaner" retail entity with fewer stores and a more focused point of view.

Consumers' chief complaint about retail today is the "sameness" everywhere and the Macys retail brand contributes to this problem. It lacks a distinctive point of view and carries many of the same looks and brands found elsewhere. I call it the "Gapization" of American retail--boring, dull, undistinguished, uninviting and sold everywhere.

In the past consumers were excited to travel to other US cities to shop for items that they could not find in their own hometowns. Today retail is more similar than dissimilar across the US with a few exceptions.

Most department stores have lost their way in recent years trying to be everything to everybody. A few like Nordstroms, Saks and Neimans are finding ways to differentiate themselves but they are less like department stores and more like specialty retailers today than they were just a few years back.

I do believe the private buy out plan will one way or another lead to a better, stronger Macys organization (or whatever it might be renamed) and consumers will benefit in the long run.

Watching out for you everyday.



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