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Innovation

The Big Store learns to sell on main street

For one of the nation's largest retailers, some operations are better off centralized; others are better off localized
Written by Joe McKendrick, Contributing Writer on

The original Big Store, Macy's, is getting a makeover. And we're not talking new merchandising or revamped displays -- the retailer is centralizing big time and going local big time -- both at the same time.

BusinessWeek's Matthew Boyle reports that Macy's has been against the ropes. The retailer is faced with intense, cutthroat competition from the likes of J.C. Penney, Kohl’s, and Target-- along with a soft economy.  In response, Macy's has been tearing itself down and rebuilding itself at the same time for the new retailing reality. In the process, it is centralizing some operations -- such as buying, planning, and marketing -- while empowering local managers with greater discretion over  merchandising decisions.

“We can’t wait around for the environment to improve,” says Macy's CEO Terry Lundgren. “You have to do something different.”

While Macy's achieved great efficiencies in centralizing its operations in Manhattan (to the tune of $500 million of savings), Manhattan-based managers couldn't cater to the tastes of local markets, Lundgren felt. And Macy's operates in more than 800 of these markets.

The decision was made to replace regional managers with more local managers. According to BusinessWeek, pushing more merchandising decision-making to local stores is paying off, with same-store sales in the 20 pilot markets close to three percentage points than stores not in the program.

When times get tough -- or even when things are percolating along -- an organization's greatest resource is the managers and employees that are close to the customers. It makes economic sense to consolidate and streamline processes that are standard across the enterprise -- and pushing decision making down the ranks is smart business because this brings new ideas to the surface.

This post was originally published on Smartplanet.com

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