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CHAPTER 12: FEDERATED DIRECT
SUMMARY
Federated Direct, which owns Bloomingdale’s and Macy’s, was losing market share due to
intense competition from discount stores, online retailers, catalogues, and specialty shops. The
retail positioning strategy of both stores was based on offering a broad assortment of
merchandise in one location – a one-stop shop. Customer buying habits are now changing from
wanting everything under one roof to seeking out specialty shops. This change in buying habits
led Dawn Robertson, President and Chief Merchandising Officer, to redefine its brand and
image.
Based on market research, Dawn learned that if she could capture customers, as they are first
making major buying decisions, such as items for a first home, she has a greater chance of
lifetime customer loyalty. Specifically, 96% of brides and grooms will remain lifetime customers
of the store where they have their bridal registry. These customer relationships are worth
cultivating, which Dawn did by revamping the registry experience. Data from 15,000 customer
surveys and several focus groups helped Dawn create a bridal buying experience that will meet
the needs of brides and grooms. Improvements included better in-store service, informative
displays to cut down on confusion of product choices, and letting the customer use the scanner to
pick out gifts. The result is a redefined bridal experience that is simpler, easier, and created for a
younger customer group (with “cooler, hipper” way of marketing).
To stay competitive, department stores need to be more customer-centric by focusing on the
customer needs and wants of the store’s target market and providing the shopping experience that
meets those needs. Dawn and her team realized a large-scale rebranding was needed, in addition
to repositioning the bridal department. Her team first asked, “Who do we want to be? Who is the
customer? Who do we want to attract?” A large part of the marketing strategy for retail outlets
focuses on merchandising, as this is the company’s product. Supporting the merchandising
decisions are the in-store experience – signage, look and feel, customer service. The overall goal
for Dawn is to understand customers’ past purchasing patterns and match them up with future
fashion trends.
DISCUSSION QUESTIONS:
1. The chapter highlights the importance of customer behavior as a factor that affects the
channel system. Discuss the key insights Dawn Robertson drew from her customers’
behaviors that led to the changes she and her team made for Federated Direct.
2. The chapter states that the growth of the Internet and other technologies has affected how
retailers and other intermediaries need to change in order to survive. What do you think
department stores need to do in order to continue to survive and attract customers?
3. How does the chapter concept of “category management” apply to this video?
1. The chapter outlines the various channel functions that channel members provide.
In addition, the “Framework for Choosing among Channels” section on p. 349 provides a
process that can be used to help determine which alternatives are most attractive. Students
should go through this list of channel functions on pp. 347-348 and map out these functions
as they relate to department stores.
2. Conduct a situation analysis on major trends in shopping malls and consumer behavior as
they relate to channels of distribution. What strategic problems and opportunities does this
create for Bloomingdale’s?
