Marshall Field’s is feeling the winds of change. The 150-year-old department store chain is invigorating its State Street flagship in Chicago with floor renovations, leased shops with limited distribution, adjacencies that defy industry convention and an eclectic assortment, from instrumental organs to organic health remedies.

Many in Chicago are bemused by the program — and Linda L. Ahlers, the president of Marshall Field’s, is well aware of it. “Some people are saying, ‘What is Field’s thinking, selling pianos and organs at State Street?’ Motorcycles, too, and lots of food concepts,” she said. “Much of what Selfridges [the London-based department store chain] has done has inspired us. It’s a different model that looks at leased businesses in addition to reinvented merchandise. We are bringing in partners in and outside our line of expertise. We wouldn’t have come up with this ourselves. But with all of these elements combined, by being able to provide a whole assortment of fun, unique, exciting and interesting merchandise, what we have created is like an emporium, with the kinds of things you see at Selfridges.”

During an interview about the future of Field’s, Ahlers outlined other programs, including extending the Marshall Field’s private brand to additional categories and relaunching the online registry in November with more stockkeeping units. Field’s also wants to “own” the color green, similar to the way its sister store, Target, has become identified with red. Green and green stripes now appear on ads, packaging and private products.

There’s also a new management mantra: providing the expected and the unexpected. It’s geared to encourage store buyers to shop for unique products and the marketing team to stage over-the-top special events, like when model-acrobats, supported by cables, rappelled down the facade of the flagship for a fall fashion promotion in September. The performance had the crowd awestruck.

Innovation comes none too soon. At the 62-unit chain, owned by Target Corp. and based in Minneapolis, there’s been a prolonged pattern of declining revenues and profits. Sales were $2.69 billion in 2002, down from $2.78 billion in 2001 and $2.97 billion in 2000. Sales per square foot fell to $180 in 2002, from $186 in 2001 and $205 in 2000.Operating profits also have been shrinking. Last year, they came to $135 million, representing 5 percent of revenues, against $133 million in 2001 (4.8 percent of revenues) and $190 million in 2000 (6.4 percent of revenues).

Nevertheless, the Marshall Field’s agenda has captured the imagination of the retail industry, even if its reinvent strategy — in advanced stages at the State Street flagship and possibly to be applied to branch stores in varying degrees — isn’t totally original. In the department store sector, reinvention has become necessary for survival, which is something Ahlers and the Target Corp. have come to realize after the last several challenging seasons.

What’s happening now at Field’s is partly an outgrowth of some of Ahlers’ earlier efforts while leading the chain. She’s credited with elevating the quality of the merchandise, backing off somewhat from the value strategy of the early Nineties, and with reinstituting the green shopping bags that had been replaced by brown bags, perhaps a little too similar to Bloomingdale’s. However, Ahlers said, “The renaissance of our State Street store and the reinvention of Field’s is the most exciting thing in my whole retail career.”

Ahlers grew up in Weyauwega, Wis., the daughter of a farm supply store owner, and majored in retailing at the University of Wisconsin. She spent five years with H.C. Prange Department Stores in Wisconsin before joining Dayton Hudson Corp. (now Target Corp.) in 1977 as a senior buyer at its Target division. She rose to the post of divisional merchandise manager for women’s sportswear, then to general merchandise manager of hardlines, before shifting to the department store division as executive vice president of merchandising and graduating to president in March 1996.

Ahlers attributed the recent uneven performances at Field’s to the weak economy, a lack of newness being offered to consumers and “our own inability to make something happen.”

But when she hears people call department stores dinosaurs, “I tell them to come visit Marshall Field’s…We have many, many guests coming into our stores who depend on us for fashion leadership and look for a shopping experience they can’t get anywhere else. There is tremendously more competition than 10 years ago, but there’s a role that Marshall Field’s plays, providing differentiated and quality merchandise. It goes without saying.“I don’t know about other department stores making a comeback or department stores as a category coming back, but I don’t think the need for department stores has gone away.”

Visits to Selfridges during the past couple of years with others on her team reassured her. While much of the State Street program reflects the work Selfridges has done in reinventing itself over the last seven years, it also reflects a strategy of “going back to our heritage,” Ahlers said. That means re-creating Marshall Field’s into what it and other department stores used to be — family-oriented, full-lined stores for nearly all needs and wants. (Of course, it perhaps isn’t surprising that Field’s should look to Selfridges for inspiration. Its founder, Gordon Selfridge, worked at Fields, Leiter and Co., the predecessor of Marshall Field’s, for 25 years, eventually becoming a junior partner in the retailer before moving to London and establishing Selfridges.)

“We’re not about the efficiency of shopping,” Ahlers said. “If you want that, if you want to get the expected, go to Target.

“There is a core cadre of people that like to shop and want to spend their Saturdays and free time going out to stores,” Ahlers said. “It’s a form of social entertainment. Marshall Field’s State Street store is one of the top tourist destinations in the city. The idea of shopping as entertainment is not over.”

According to Ahlers, some reinvented concepts at the flagship will be transported to other Field’s locations, though not necessarily all. “We are using State Street as a lab store,” she explained. “Some of the concepts will provide learning for the rest of the chain.” How quickly State Street concepts roll out to other locations remains to be determined. Nevertheless, “the focus is to provide the expected and unexpected, and to take that to customers who shop outside State Street,” she stated.

“I think what Marshall Field’s is doing is very exciting,” said Phillip Miller, a former chairman of Marshall Field’s who orchestrated a major renovation of State Street about 13 years ago that cost about $110 million. Miller, who eventually ran Saks Fifth Avenue, said, “Field’s is now trying to put a lot of newness and excitement into the store to maximize the productivity, in addition to adding all these noncore kinds of businesses.”While noting Chicago is where Field’s has the most opportunity to attract shoppers, Miller also believes there is a good opportunity to beef up its branches, many of which have been hit hard by the effects of the Midwest’s troubled manufacturing base. In Detroit, a Field’s stronghold, the Big Three auto firms are making layoffs in the thousands. Lack of consumer confidence also has taken its toll. The company hasn’t experienced the kind of sales lift that retailers in other regions have had this season, with the possible exception of the State Street flagship, where media attention has been enormous this year.

Still, Ahlers stated, “we are after market share — regardless of what’s happening with the economy. We are seeing more ups than we have in the past, and seeing a real good trend in the apparel businesses.”

For the holiday season, an “aggressive” plan has been established, Ahlers said, though she wouldn’t specify how aggressive it is.

On Nov. 1, the company has scheduled a relaunch of its online registry, which is for bridal and other special occasions. “It will dramatically expand the number of items we have to over 50,000,” Ahlers said. “It’s a signature business for us. Marshall Field’s was the first department store to start a bridal registry.”

The Marshall Field’s brand this fall was expanded to tailored men’s wear. It’s emphasizing a “dressier casual look,” Ahlers said. Beyond men’s wear, “we are looking to extend the Marshall Field’s brand to other categories. Right now, it’s in men’s. We will expand it into women’s for holiday,” including apparel, accessories and jewelry, as well as in home. The famous Frango brand, owned by Field’s, has been broadened from mints into chocolates, hot fudge sauce and stuffed animals.

Previously, Marshall Field’s maintained a private label strategy that included items such as box sets and crystal, Ahlers said. The philosophy has changed. “This is the first time that we have leveraged the Marshall Field’s name in our fashion collections” to create private brands. “We are looking to grow it, but we are not looking to explode our own brands, similar to what Dillard’s and some other retailers are doing,” Ahlers said. Field’s private brand penetration is about 10 percent of its overall volume, whereas Federated is nearly double that and Dillard’s is shooting for double digits.Marshall Field’s customers also want the big brands that are widely distributed. “She wants Columbia [outerwear] and Nike and Dockers,” said Ahlers. “She also wants better brands like Polo and Kenneth Cole, and then we have this layer of the unexpected, like with Thomas Pink,” the British shirt line, introduced to the State Street flagship as part of the reinvention strategy.

Ahlers cited some key labels representing the “core” of the women’s business, including Ellen Tracy, Ralph Lauren, Kenneth Cole, St. John, Karen Kane and Jones. “We do really well in the whole modern advanced area, and we have a well-developed traditional business, as well,” Ahlers said.

Field’s also has a large space for designer collections, called the 28 Shop, including Missoni, Issey Miyake, Jean Paul Gaultier, Armani Collezioni and Marc Jacobs. Designer collections are sold in five Field’s stores, on State Street andWater Tower Place in Chicago; Minneapolis; The Somerset Collection, which is in a suburb of Detroit, and in Old Orchard, a suburb of Chicago.

There has been speculation that Field’s took the leased department route on State Street because some vendors wouldn’t sell the location otherwise. Sometimes vendors prefer to lease space at certain department stores in order to have total control over their presentations. They’re fearful that a retailer might misrepresent their collections or price them wrong.

Also, further north along Michigan Avenue, on the other side of the Chicago River, there is more upscale retailing, including Saks Fifth Avenue and Neiman Marcus. Discounting seems more prevalent in the downtown vicinity of the State Street flagship. Old Navy and Nordstrom Rack are a block away.

Ahlers, however, contended the flagship has been drawing from a wider area and she described business on State Street as undergoing a renaissance. Difficulties on State Street are “ancient history,” she stated. Asked if Field’s was backed into a leasing situation on State Street, Ahlers replied, “Absolutely not. We are going after businesses where we do have an expertise, and businesses where we don’t have expertise. We were first to launch a new Yves Saint Laurent shop concept [for accessories]. If we didn’t have the expertise, we wouldn’t be able to get vendors like that or like Thomas Pink to partner with us.”The “sweet spot” of the business is in the 40- to 60-year-old range, Ahlers said, with the median customer age at 48 and the median family income at $63,000. Still, Ahlers said, “you always have to be reaching to the younger guests” with more fashion-forward goods. “We’ve gone after that business very successfully.” The company does sell such brands as Sixty jeans and Joe’s Jeans, and recently renovated its home furnishings floors to accommodate a greater amount of contemporary furniture.

For a stretch in the late Nineties, Field’s aggressive ways paid off. The store had the highest comp gains among department stores. However, last year, Field’s comparable-store sales dropped 3.7 percent and its performance has settled in the middle of the department store pack — behind Federated, while above May Co.

Field’s can’t compensate for those slumping same-store sales by opening additional doors to raise revenues.Expansion beyond its eight-state reach is not on the agenda. The chain was built when Target Corp. rebadged its Dayton’s and Hudson’s stores as Marshall Field’s units. The chain has 50 stores in Michigan, Illinois and Minnesota. Its remaining 12 stores are in North Dakota, Ohio, Wisconsin, Indiana and South Dakota.

While Federated and May Co. have been testing smaller stores in a handful of locations and May Co. has been acquiring special-occasion retailers, Field’s has yet to come out with a specialized strategy of its own.

However, Field’s has a major advantage: It has room to work within existing doors. The chain has about two-dozen branches in the 300,000-square-foot range, considered large, or “A”, locations in the trade. Competitors would have a lower portion of their store fleet occupying that much space.

The smallest Field’s department stores have 150,000 square feet, which is a typical size for a branch unit at most major department store retailers. J.C. Penney and Sears have many stores that are smaller, under 100,000 square feet, and both companies have been rethinking the viability of these smaller boxes.

“Our stores are in very good condition,” Ahlers said. Over the last eight years, a significant amount of capital has been poured into improving the look and physical character of branches, she added, though she declined to specify how much. “A lot of other department stores are just now starting to do this,” she said. “We have been doing this for quite a while [at branches], so now we can visually, and from a merchandising perspective, take them to another level.“It’s about leveraging the assets we have, including our physical plants,” Ahlers said. “We have some of the largest-volume stores in the country and we can leverage them. We can’t just live on past glory. We have to be relevant for today.”

Field’s already is quite relevant in the Chicago, Detroit and Minneapolis markets, where it’s the dominant department store play. But retail sources have pointed out that one reason Field’s dominates those areas is because the competition is less intense than on the East and West Coasts. Field’s is most directly up against Kohl’s, Carson Pirie Scott, Sears and Penney’s, as well as discounters such as T.J. Maxx and Old Navy. Hennes & Mauritz opened in Chicago earlier this year and is slowly expanding west from Chicago, and also south from Washington, D.C. Bloomingdale’s, too, has a few locations, though its parent corporation, Federated, and May Co., have little presence in Field’s Midwestern markets.

Field’s has another advantage. Unlike other regionals, Field’s benefits from its big corporate parent, tapping into such areas as corporate store planning, engineering, design and purchasing. Much of the manpower and purchasing power for installing new shops and fixtures at the State Street flagship, and the speed with which it all happened, is owed to Target Corp. The latest Field’s renovation started in January and phase one was virtually complete as of September. Engineers, construction workers, visual coordinators — “an incredible amount of resources” — came from Target Corp., Ahlers said.

On the flip side, Field’s serves as an in-house fashion forecasting, trend-setting kind of business for Target that some key competitors like Wal-Mart and Kmart don’t have. “That’s an indirect benefit for Target,” Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates, said.

According to Ahlers, “There is a lot of information trading and best methods and trend information that is shared, but there is not so much shared with the buying. Target watches us closely,” but any merchandise programs spread from Marshall Field’s to Target is not so much of a formal process as it is an organic effort, Ahlers said.This fall, Anna Sui created five design motifs that Marshall Field’s used to develop women’s accessories, like hats, mittens, scarves and a purse, bearing the Anna Sui for Marshall Field’s label. The mini line was sold through September. “Those kind of things are very typical of fashion partnerships that might develop over time” intobigger collections at Field’s or at Target, Ahlers said. However, Field’s officials said the company has no plans to reintroduce the special Sui collection, at least for now. The store does sell other nonexclusive Sui products.

But like most department stores, Field’s is not viewed as a retailer with major growth potential. Being a regional operator compounds the view. Because of that, there has long been an expectation that Target Corp. would sell off Field’s to fuel further growth at the Target division. Federated and May Co., which both have sufficient cash for acquisitions, are seen as potential buyers. Years ago, J.C. Penney made an overture.

Yet Target Corp. has denied Field’s is up for sale each time the rumor has surfaced. Some sources believe Target has set the price too high.

“If Target believes in Marshall Field’s and its stake in its ownership, if they are staying the course in the department store channel, then Target certainly has to face the challenge of reengineering Field’s. Shareholders are demanding improvement in Field’s and each of Target Corp.’s businesses,” Aronson said.

“All of the major department stores are in the inevitable stage of now-serious reinvention. They have been losing market share for long enough,” said Aronson, though he believes Field’s has a fighting chance to reverse the trend. “Its nucleus of major downtown flagship stores and large branch stores can help them do major things to reinvent themselves,” he said. “The scale of their stores is really full line,” providing opportunities for cash-flow improvement, Aronson said.

“Marshall Field’s on State Street, like a Saks on Fifth Avenue, Macy’s on 34th Street or Bloomingdale’s on 59th Street, can get a lot of attention, and it’s where you can set the beginnings of reengineering techniques for branch stores,” Aronson added.

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