A few years ago, the industry ridiculed Kmart for believing, as its diminishing retail kingdom began to resemble the Austro-Hungarian Empire, that its biggest strength was its real estate holdings.
Eddie Lampert was thought to be just another failed executive, telling his Titanic passengers that dinner was still being served that night.
Of course, retailing is, above all, a business – with profits and losses, projections, expectations and shareholders – and you do what you can to keep feeding the beast.
Kmart comes to mind today with the news, on a sunny August morning, that Macy’s is closing another 100 stores, and acknowledging that its stores are more valuable as real estate properties.
No more miracles on 34th Street?
“Sorry, Santa, we’re selling the building, please pack up your toys. We’ll forward the reindeer.” It seems like a scene reminiscent of that “Saturday Night Live” sketch about the networks closing up the “Star Trek” set.
Terry Lundgren, the visionary reduced to spinmeister, insisted to CNBC that “we’re getting out in front of this” and calling it “just another bold move.”
“Whenever there’s been a setback in our company, we’ve been the first to take an aggressive stance,” he told CNBC, which is largely true. Except that aggressive stances haven’t always been enough to turn the tide.
There was a reason department stores were called “dinosaurs” 15 years ago. When the climate changed for the original dinosaurs – or asteroids hit, or the volcanoes erupted, scientists disagree about the cause – it choked off sources of food. The oversized beasts panicked, racing wherever they thought there might be sustenance. It turned out to be an unworkable strategy.
Kmart’s plan was based on the assumption that its stores would be gobbled up by someone. But they were big spaces at a time when that was no longer the optimal retail plan; and they tended to be in locations nobody wanted anymore.
Similarly, Macy’s real estate is only a tangible asset when someone wants to buy it. (I know, there are other aspects of real estate economics – tax credits, reported losses and the book value of those assets.) Macy’s spaces are also huge, and they’re mostly in malls – both good ideas when Macy’s, May Co., Dayton Hudson and Marshall Field’s first opened them.
One hopes Macy’s makes a go of it. It’s a proud old retail brand.
But who remembers Gimbels? It was a New York department store directly across Herald Square from Macy’s. For nearly a century, “Macy’s-and-Gimbels” was shorthand for a fierce rivalry – until Gimbels gave it all up in 1987.
Gimbels is now in retailer heaven, reading the trades and perhaps wondering how long it will be before Macy’s opens up on the cloud directly across the way.
As a journalist, writer, editor and commentator, Steve Kaufman has been watching the store design industry for 20 years. He has seen the business cycle through retailtainment, minimalism, category killers, big boxes, pop-ups, custom stores, global roll-outs, international sourcing, interactive kiosks, the emergence of China, the various definitions of “branding” and Amazon.com. He has reported on the rise of brand concept shops, the demise of brand concept shops and the resurgence of brand concept shops. He has been an eyewitness to the reality that nothing stays the same, except the retailer-shopper relationship.