Macy’s acquires Story: Game changer or much ado about nothing?
Last week Macy’s announced it had acquired Story, a New York-based concept store, and appointed founder Rachel Shechtman to be its new “brand experience officer.” And, for the most part, enthusiastic gushing ensued. Let’s simmer down, people.
As I regularly write and speak on retailers’ need to innovate and embrace a culture of experimentation, I would be a complete hypocrite if I failed to applaud Macy’s (and newish CEO Jeff Gennette’s) willingness to take bold steps. Yet before we jump on the silver-bullet train we might wish to consider a few important points.
Is Story Successful Beyond Generating PR?
There is no question that Story is cool and innovative. There is no question that Story has punched way above its weight when it comes to generating industry and media attention. And the notion of “store as media” is an intriguing one that is appropriately starting to change the way brands must think about their brick & mortar experience.
But lest anyone forget, Story launched in 2011 and has never expanded to another city, much less another location in the New York area. It’s pretty difficult to make the argument that Story has the potential to “reinvent retail” on any significant scale when after more than six years the number of customers it has validated its impact upon is teeny tiny. Every other truly interesting “disruptive” concept I can think of that launched around the same time (or even later) has attracted significant investment capital and is well into their expansion plans. So, to be blunt, there is far more evidence to suggest that Story is a way cool Manhattan phenomenon than there is to suggest it has any real ability to be relevant to Macy’s customers — and ultimately material to Macy’s strategy.
Do You Know How Much Macy’s Paid?
No, I didn’t think so. So how can you say it’s a genius deal? I happen to own a pretty nice car. But if you were willing to pay me $100,000 for it you would be the opposite of a genius. Perhaps Macy’s paid less than it would cost to hire Shechtman as a consultant for a couple of years, in which case that sounds like a bargain. Maybe it paid millions for something it could have done itself years ago, in which case that sounds more dumb and desperate. Maybe we should say “who cares?” as regardless it’s probably chump change to a huge company like Macy’s. In any event, we just don’t know. So please hold your applause.
Macy’s Problems Run Deep
Macy’s has two huge and fundamental problems to address. First, it sits in a sector that has been in decades-long secular decline — and there is no reason to think that will change anytime soon. In fact, as Amazon and the off-price sector continues to expand aggressively in Macy’s core categories, it could easily get worse. Second, while Macy’s does a bit better than most of its department store brethren, it is still part of the epidemic of boring, struggling to carve out a sustainably relevant and remarkable position. It has a lot of expensive, risky and time-consuming work to do on both the customer-facing experiential parts of their business and their technological infrastructure. This all comes at a time when the company’s profits have stalled. That’s a very tall order and no one strategic initiative is likely to make a dent.
Does This Deal Fundamentally Change The Macy’s Story?
While Walmart paid silly amounts of money for Jet.com, Bonobos, et al., it now seems clear that the injection of “digitally native” senior talent has helped take the moribund retailer to an important new level. It also earned them some street cred. So acquisitions like Story can certainly contribute to an enterprise well beyond their straight discounted cash flows.
While some have referenced Macy’s earlier deal to buy Bluemercury as an analog, my guess is that if Story is to make a real difference it will be more similar to Nordstrom’s acquisition of Jeffrey over a decade ago. As that played out, it was founder Jeffrey Kalinsky’s impact on Nordstrom’s overall fashion strategy that was the source of value rather than the expansion of his eponymous stores.
The key in this situation will be whether Macy’s gives Shechtman the latitude to impact the trajectory of Macy’s brand to any material degree or whether the culture will eat her up and spit her out. And even if she gets that latitude, it is no easy task for even the most talented and experienced executive to make a big difference within an insular culture. There are far more examples of experiments that have gone awry than have worked out. We will have a far better idea about this critical dimension a year from now. Regardless, it won’t be easy.
The Opposite Is Risky
To be sure, retailers like Macy’s got into trouble because they mostly watched the last 20 years happen to them. Consciously or not, they acted as if deciding to embrace innovation was risky when, as it turns out, their reluctance to take chances was the riskiest thing they (and so many others) could have possibly done. The simple fact is, as Seth Godin reminds us, “if failure is not an option than neither is success.” The key is not to avoid failure, it’s to fail better.
Macy’s, like all those risking “death in the middle,” are desperately in need of a transformation. And that unequivocally means placing multiple bets in the hope of creating a vastly different future. Viewed from this lens, the acquisition of Story — and giving Shechtman a chance to impact the Macy’s culture and brand — is likely a pretty decent bet. As it’s highly unlikely to materially change Macy’s overall fortunes all by itself, it needs to be the first of many such wagers.
A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.
Originally published at stevenpdennis.com on May 8, 2018.