Calculating the Cost at Macy’s Trial

The trial against Martha Stewart Living Omnimedia and J.C. Penney Co. continued Tuesday with testimony from expert witnesses for the defendants.

NEW YORK — Macy’s Inc.’s trial against Martha Stewart Living Omnimedia Inc. and J.C. Penney Co. Inc. continued Tuesday with testimony from expert witnesses for the defendants.

This story first appeared in the April 24, 2013 issue of WWD.  Subscribe Today.

Called “hired guns” at one point during the trial by presiding Judge Jeffrey Oing, the witnesses called by the defense sought to prove that in selling Martha Stewart wares at Penney’s, Macy’s would not be harmed. Typically, expert witnesses conduct surveys or examine data research to refute a claim made by opposing counsel.

For MSLO, Erich Joachimsthaler, founder and chief executive officer of Vivaldi Partners Group, a global strategy, innovation and marketing firm, maintained that Macy’s would not be injured should Penney’s be permitted to sell either branded or unbranded Stewart products.

Although Stewart’s brand is recognized by consumers and has a strong reputation, its brand identity is not clear to consumers. He noted that many consumers surveyed were confused as to where to buy Stewart wares, and that many still believed they could be purchased at Kmart, which no longer sells the goods.

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“A brand is like a box in someone’s head. It’s like a name or like a label,” Joachimsthaler said, noting that Stewart’s brand has “ample room to grow” in the home goods market. He also offered that a shopper usually thinks of need first over brand, and not the contrary, which Macy’s has claimed.

People don’t wake up in the morning and say, ‘I want to buy Martha Stewart,’” he said. “They wake up and say, ‘I want to buy a new pillow case.’”

The executive’s testimony spoke to whether any injury had been suffered by Macy’s. Once that is established, then the retailer can seek relief, MSLO lawyer Eric Seiler said, emphasizing that “no injury” has been sustained to date, as branded Stewart product has yet to be sold.

But Macy’s attorney Theodore Grossman read a passage from a book Joachimsthaler wrote in which the marketer said a brand would be “damaged” if it opened up lower-tier distribution.

“It’s correct, generally,” Joachimsthaler said.

Macy’s has argued that by selling to Penney’s, the Stewart brand is being weakened. Macy’s has said during the trial that it has spent years elevating the home goods brand after Stewart’s deal with Kmart expired in 2009.

When asked how he could know, with the absence of sales data, if Macy’s wouldn’t be harmed by Penney’s sale of Stewart’s goods, the witness backpedaled. “It’s better to have actual sales,” he said, but “there’s a lot” of data on consumer behavior and “in this case it’s overwhelming.”