Federated sets new strategy for Macy's, Bloomingdale's Web sites

Makeovers are coming to Macys.com and Bloomingdales.com early next year as part of an e-commerce restructuring under way at parent company Federated Department Stores Inc.

In an announcement yesterday, Federated officials said the Bloomingdale's Web site will be pared back to become a marketing site for brick-and-mortar stores, while Macys.com will eliminate slow-selling merchandise categories and expand more popular offerings. The merchandise being eliminated includes petite and larger-size clothing, career wear and swimwear. Housewares, gifts and jewelry -- the most popular categories -- will be expanded.

About 100 workers, including approximately 33 IT support and programming staffers, will lose their jobs as part of the changes, which take effect Feb. 1, according to Federated.

Carol Sanger, a spokeswoman for the Cincinnati-based company, said the site realignments will allow Federated to exploit the strengths of each store chain while eliminating unsuccessful ventures.

"Our goal from the outset has been to break even in this [e-commerce] segment by 2003," Sanger said. "These actions, by reducing losses and capital expenditures, will allow us to do that."

Though Bloomingdales.com will no longer sell merchandise, it will retain its popular online bridal registry, which will be available through a partnership with Los Angeles-based online vendor WeddingChannel.com. Bloomingdale's will also continue to operate its mail-order catalog, established in 1982. Macy's, however, will drop its 3-year-old catalog offering because of lagging sales.

By keeping the Macys.com site and the Bloomingdale's catalog operation, Federated retains the strongest pieces of the mix, Sanger said. "Those are the two vehicles that worked best for us in this environment and economy," she said.

James Zimmerman, Federated's chairman and CEO, said in a statement that the company "learned a lot in that process" of developing online ventures for the two well-known retailers during the past three years. "We remain committed to pursuing our Internet strategies," he said.

Analysts said the coming changes make sense.

Harry Wolhandler, an analyst at ActivMedia Research LLC in Peterborough, N.H., said Federated's problem was that there were few differences among the goods sold by the competing Web sites.

"Cyber Street is not as broad as Main Street, so you can't afford to have more than one site address a market niche," Wolhandler said. "In hard times like this, it's going to show."

Carol Baroudi, an analyst at Baroudi Group in Arlington, Mass., said reducing product lines often makes sense for retailers. "You can't just put everything up there and have a viable business," because inventories are costly to maintain, she said.

Revamping the sites also makes sense, Baroudi said, because both were created in 1998 when fewer innovations were available to bring in shoppers and bottom-line sales. "This is a good time to simplify things before the traffic gets high," she said.

Bruce Guptill, an analyst at Robert Frances Group Inc. in Westport, Conn., said Federated is making the changes now to correct flaws introduced when it established the competing sites in 1998.

"Federated as an operating company has retained the worst of its management practices when it comes to doing business online," Guptill said. "They, along with most retailers, misread the market and dumped way too much money into the wrong efforts, like trying to sell trendy clothes to teenagers."

Federated will take a one-time charge of $50 million to $60 million in the fourth quarter of 2001 to cover the costs of the changes, including a $40 million noncash write-down for the fixed assets and software used by the two Web sites, according to the company.

Federated is one of the nation's largest department store retailers, with annual sales of more than $18.4 billion and more than 450 department stores.

Related stories:

Copyright © 2001 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon