NEW YORK — Federated’s "store of the future" is approaching the here and now.
While it’s far from a total reinvention of the traditional retail box, Federated Department Stores will implement 12 new technologies, shops and amenities to 45 doors during the fourth quarter. The program has been tested at the 240,000-square-foot Lazarus store in Easton, Ohio, since it opened in October 2001.
"Once we get the fourth quarter read, we’ll expand the program," said Terry Lundgren, Federated’s president and chief merchandising officer, Friday at the Goldman Sachs Global Retail Conference at The Plaza here. Since 1998, Lundgren has been leading the corporate charge to change or as he says, "reinvent" department stores.
Lundgren said the rollout will be across all Federated divisions —Lazarus/Rich’s, Macy’s East, Macy’s West, The Bon Marché, and Burdines — except for Bloomingdale’s, which strives to be distinct from mainstream department stores.
Another 45 to 50 doors could be included in the program next spring, he added.
Among the elements:
A fitting room complex. Instead of having one or two in every corner of the apparel department, there’s a cluster of fitting rooms, with a lobby, a seating area for significant others, monitors playing CNN and computer terminal jacks to get online. Depending on what a shopper is after, she might have to walk farther for a fitting room, but it’s obvious and easier to find.
Price lookup, so customers and sales associates can scan a bar code and get the latest price on items.
Larger signage, reminiscent of discounters, so it’s easier to see the department. Directories are no longer necessary.
Children’s shoes, with half the business under Federated’s own Green Dog label. Federated had long ago gotten out of the category, but it’s seen as a potential lift to the entire children’s apparel and accessories business.
New junior concepts with young men’s merchandise in an energetic area featuring video games, snacks, a photo booth so shoppers can show friends their latest finds, and a cyber café. It’s been successfully tested at some divisions.Simplified pricing, so all the markdowns and percent-offs are calculated for the consumer. Products will be priced "best value," designating low prices as soon as products appear on the shelves.
Internet work stations.
The program strives to attract younger customers, where department stores have lost major market share, while making shopping easier for adults. Department stores have long been criticized as being difficult to shop and lacking innovation on many fronts, though Federated isn’t the worst offender. It’s been ahead of the pack in private label development for merchandise exclusivity, and in coming up with more specialized store formats, including home stores for Bloomingdale’s and apparel and accessories-only Macy’s stores in a few locations. Federated’s private Charter Club brand is "right on the edge of becoming the single-largest brand in the store, ahead of Estée Lauder and Polo," Lundgren said. Private label overall represents 16 percent of Federated’s total mix, and closer to 20 percent, excluding cosmetics and furniture, where there is no private label merchandise. Lundgren said private label could ultimately represent 24 to 25 percent of the mix, excluding cosmetics and furniture.
In other changes, Federated stores are implementing overnight deliveries so they are better prepared for the day’s business. There will be a better balance of fashion and promotional advertising, and the company is experimenting with furniture stores under the Gallery banner, but is challenged by the costs of logistics.
"The big issue is sales. It’s the most complicated subject to predict," Lundgren said, though he reaffirmed previous projections of 1 to 3 percent comp-store growth for the fall and fourth quarter. "There’s not high volatility in the numbers we forecast."
The store of the future rollout is being funded out of Federated’s $700 million capital expenditures budget. Federated shares moved up $1.21, or 3.4 percent, to close at $36.51 in New York Stock Exchange trading Friday as the Standard & Poor’s Retail Index advanced 3.6 percent.
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