Fast Five Shorts | Will Toys R Us Save Macy's?

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This is a podcast episode titled, Fast Five Shorts | Will Toys R Us Save Macy's?. The summary for this episode is: <p>In the latest edition of the Omni Talk Fast Five, sponsored by Microsoft, The Alvarez &amp; Marsal Consumer &amp; Retail Group, Takeoff, and Sezzle, Anne Mezzenga, Chris Walton, and special guests hosts from the Alvarez &amp; Marsal Consumer &amp; Retail Group Hemant Kalbag and Jonathan Sharp discuss: Will Toys R Us Save Macy's?</p>
The Toys R Us brand and Macy's
02:52 MIN
The Toys R Us experience and footprint
01:42 MIN
Anne and Chris' thoughts on the Toys R Us news
02:53 MIN

Chris: All right. Let's keep moving. Let's roll to headline number two.

Ann: Oh yeah.

Chris: And believe it or not, I know you're going to love this.

Ann: Are we going to sing again?

Chris: No, I don't think we can sing today. I don't think, but our guests can definitely sing should they want to. It looks like we can all be Toys- R- Us kids again at Macy's.

Ann: Awe.

Chris: I know, right? Oh, wouldn't we want to be a Toys- R- Us kid? According to Retail Dive, Macy's will begin rolling out Toys- R- Us to all Macy's stores between now and October 15th. Just in time for the holidays. The store- in- store footprints will range between a 1000 square feet to 10, 000 square feet. And the larger footprints will be reserved for what the two companies together call flagship locations in Macy's large metropolitan areas, including New York, Miami, Atlanta, and Chicago. Haman, let's go to you first on this one. What do you think of this news? Do you like this for Macy's?

Haman: You know, it's amazing. So first of all, I have to say, Toys- R- Us as a brand, I mean, my God. I think this must be the third or fourth time it's made...

Chris: Yeah. It just won't die. Right?

Ann: It said that in the article too.

Chris: It's like the knight in the Holy Grail. It just won't die.

Haman: It's just got this brand resilience that there is always people out there that see that equity and they don't want this brand to go away. I don't know if it's nostalgia, I don't know if it is a core business belief. So I am truly amazed that yet again, Toys- R- Us is rearing its head. So interesting. Now, if I think about this from the Macy's standpoint...

Ann: Yeah.

Haman: ...I think there has been a consistent challenge for department stores over the last decade to think about giving consumers a reason to walk into a store. Most department stores are very careful about sharing traffic numbers, but if you look at mall numbers in general, there has probably been somewhere between a 7 to 12% traffic decline year- over- year, that's been compounding. And so the reason for existence for department stores has to evolve. And just having everything under one roof and really kind of becoming apparel- led has not been sufficient. And direct- to- consumer brands have been taking away share, off- price has been taking away traffic share. So I think this is an interesting experiment because really this is about driving traffic into the stores. This is about giving a new destination that'll get new consumers coming into a Macy's store. So I think it makes a lot of sense. And if you remember when Toys- R- Us, the stores, were around they actually did well on traffic. I think there was some systemic business problems around margin, et cetera, that ultimately got the retailer into trouble, but it was not because of traffic. I mean, especially the iconic locations that you would go to, there were times there was lines outside. So I think this is a smart move.

Chris: So net- net, you like this move. That's your take. Net- net, you like this move for Macy's?

Haman: I do. I really do.

Chris: Okay. Interesting. The other point too, that I would make too, and I'll get Jonathan's thoughts on this, is the Toys- R- Us experience was much larger than 1, 000 or 3,000, whatever it was, square feet, even 10,000 square feet, which I think is an important thing to think about, but Jonathan, do you agree with Haman here, or what color would you add?

Jonathan: Yeah. Okay. Strike this one down, keep the tape, I agree with Haman.

Chris: Oh my God.

Haman: I want a copy of that recording please.

Ann: Yes.

Chris: Yes. This will be...

Haman: I'm going to make that into a meme, going on our company website.

Ann: A TikTok just boomeranging of Jonathan." I agree with Haman, I agree with Haman."

Jonathan: Stuck in my mouth that did, but anyhow. Yeah, look, a few things. The thing that struck me when I read this was, it's the return of the department store. The department store is back. All the categories that they exited over the last 20 years, I mean, what's next? Is furniture coming back? Is luggage coming back? Electronics coming back? Interesting actually. A whole bunch of categories that are challenged on their own, big box, Amazon hollowing them out, actually aggregate them back in a thing called the department store and create more reasons to shop. I mean, the reason this is important is that you can see it again in our consumer sentiment survey. In particular, amongst younger consumers, particularly millennials, who just do not regard mall shopping as a leisure pursuit. And so you're going to have to create lots more reasons for them to visit because it's not instinctively an attractive proposition for them. So I kind of get it. The question it raises for me is exactly what's next? Who are the next ones coming store in store?

Chris: Yeah. What do you think, Ann?

Ann: I'm sorry to both of you.

Chris: Am I the only one that's jaded on this?

Ann: No.

Chris: Yes, thank God.

Ann: I love that Jonathan gave us that entry point into this conversation, because I agree, you have got to get those millennial and gen Z, this next generation of customers who, Toys- R- Us does not mean squat to these people. They don't have the nostalgia that we all had of what that Toys- R- Us was. And in order to get that group of people into your Macy's store, I don't think it's with bringing Toys- R- Us in, in a very small footprint. I don't think it's the Market at Macy's concepts that they're expanding. I think I look at what we just experienced, Chris, at Zara in Madrid.

Chris: Okay. Yeah. Right.

Ann: I look at how seamless that experience was to shop a traditional... I mean, it's the size of a department store. It's four floors, 82,000 square feet.

Chris: There's 80, 000 square feet. Yeah. A hundred percent.

Ann: That shopping experience has got me in. I can shop a variety of ways online and offline. I can check out myself. Macy's, this is where you should be investing your money. It should not be in these one off things, trying to save your brand by bringing in other brands it's by creating the better shopping experience that will get that customer in to buy the things that you have, the tertiary things, whether it's Wetzel's Pretzels or Toys- R- Us, you need to start with that element first, before you start trying these things, it's just wasting money and time and resources at this point.

Chris: A hundred percent agree with you. And the point I would make against what you guys were saying too, would be, yeah, it's maybe a rebirth of the department store, but the department store went away for a reason, right? Why do we suddenly want that version back? So the history is not on the side of this idea in some ways. And the other point I make too, is the devil's in the details of how you execute this. Macy's has shown no ability to execute any of these ideas from story. I've been in the stores that have the first rollout, like they rolled it out to 3 to 400 stores, this Toys- R- Us concept, it looked atrocious. I would argue it wasn't even shoppable. It looked like they hadn't done anything. And then my other point would be, if you're going to do this, if you believe in this idea of re- imagining a department store going back to what it used to be, why do you need Toys- R- Us to do that? Why do you need to pay a licensing fee to Toys- R- Us to put this in your stores? Why don't you just put toys into it? And according to the article, like the Macy's merchants are still very involved in the decision making. So if you've got merchants, why do you need to pay Toys- R- Us for this? Why don't you just put toys in your store, put it in there because your point, the seven, eight year olds that are going to be shopping for this, don't even know what Toys- R- Us is.

Ann: Or Macy's.

Chris: So who cares? Right. So that to me doesn't make sense. And so my prediction Ann, is this might get good press in year one. It's going to show signs of struggling in year two. And by year three, it's going to be disastrous and people are going to be like, what the hell did we do here? But that's my take, but I got to go back to you guys since we disagreed with you. I got to imagine you guys have a retort on this one a hundred percent. So who wants it first?

Haman: Yeah. I mean, listen, I understand your perspective. And I think, there is going to be many experiments that Macy's and other department stores do that may get a C minus or below on the report card. I don't think this is one of them. And I think about what you said, right? Why do you need Toys- R- Us to do it? It is because that brand still means something and it's the fact that it's passed on from generations and in the end, parents have a great amount of decision making influence around where to take their kids for shopping. And that brand for parents still mean something. And as long as that nostalgia exists, I think that is going to have pull. And then the other part of it is also, I think, again, for the record books, I agree with Jonathan too. I think this is about testing concepts, right? So if this works, it's about them thinking about what is the next specialty category I can bring into my department store that I don't have to manage entirely on my own with merchants that don't consistently make good calls, but thinking about category specialists, can I imagine a better luggage buying experience within a department store? Can I imagine a better electronics buying experience than you get today? So I think that's kind of where it's headed. I do think at least for the next year or so, I agree with you Chris, this is about creating a little bit of excitement around the narrative. So anyway, we should talk in a couple of years about this and see how it's going.

Chris: Oh, and I'm going to be checking this one out too. And I know the Market by Macy's too is coming to St. Louis and we're driving down to check that one out as soon as it opens but Jonathan, I kind of digged your point a little bit. So I feel like I've got to give you the last word on this one.

Jonathan: Yeah. I guess my only response is it's a bit of a counter causal which is a sort of alternative history kind of question, which is, you want to do toys, if not Toys- R- Us, who? What? You want to reinvent the department store, what else are you going to do? I mean, I think you've got to give them high marks for effort. Now let's see what their sort of execution is like, but I'm kind of struggling with what else they should be trying. And I think to Haman's point, and actually I think it was Ann that also raised it, which is we will know whether this is a success if there are two or three that work after this one. Right? So I think our view on this is very contingent.

Chris: Well, I think that's funny, my last word on this one. And before we move to headline number three is I think that's always the point that gets brought up when we talk about the department stores, it's like, what else are they going to do? So therefore we like this. But in reality, it doesn't answer the question of, this is the right thing to save the department store. And so I think that's an important psychological thing to look at in terms of our commentary on the department store industry in general.

Ann: Let's see how long you have to wait in line to buy one of the toys. Or if you can find somebody at Macy's to buy one of the toys once you buy it.

DESCRIPTION

In the latest edition of the Omni Talk Fast Five, sponsored by Microsoft, The Alvarez & Marsal Consumer & Retail Group, Takeoff, and Sezzle, Anne Mezzenga, Chris Walton, and special guests hosts from the Alvarez & Marsal Consumer & Retail Group Hemant Kalbag and Jonathan Sharp discuss: Will Toys R'Us Save Macy's?