Bloomie’s Is How Bloomingdale’s Can Shrink Itself To Growth

Macy’s Inc, the corporate parent of luxury department store Bloomingdale’s, has been trying to shrink itself to prosperity over the past five years without much success.

Back in 2018, the company generated $25 billion in revenues and $1 billion in net income out of 867 stores – 649 Macy’s, 55 Bloomingdale’s and 163 specialty Bluemercury beauty and cosmetic stores.

In its most recent full-year reporting for fiscal 2022, it shrank its way to 783 outposts, with most of the decline in Macy’s, down 83 stores to 566, though Bluemercury cut three stores from its fleet. Only Bloomingdale’s bucked the trend, ending 2022 with 57 stores. However, revenues were down to $24.4 billion, and net income rose a tad to $1.2 billion.

Against a backdrop of store closures, the company sees green shoots for growth: smaller stores. CEO Jeff Gennette announced plans this year to open more mini-versions of its super-sized department stores, specifically four new Market by Macy’s stores to add to the existing ten and one new Bloomie’s store to the two already going. These smaller stores are reported to outperform their full-sized counterparts.

At least in Bloomie’s, parent company Macy’s has found a model to shrink Bloomingdale’s to prosperity.

Narrower Target

Luxury-leaning Bloomie’s is particularly promising in these turbulent economic times because its higher-income target market is better shielded from any potential downturn than the more middle-income customer base of Macy’s.

Based on last year’s results, that is proving true. While Macy’s active customers dropped 4% from previous year, Bloomingdale’s grew 5%. However, Bloomingdale’s active customer base of 4.1 million was only about one-tenth of Macy’s at 42.7 million. The company does not report sales for each nameplate.

And Bloomie’s gives it an edge to reach affluent shoppers in the newly emerging luxury hubs in second-tier cities and farther-flung suburban locations, like its stores in Fairfax, VA, outside Washington, DC which opened in 2021 and Skokie, IL, in the extended Chicago suburbs in 2022. And coming later this year will be a new Seattle location in the Ravenna neighborhood, north of downtown Seattle.

“Regarding our smaller Bloomie’s model, if I had to express it in a word, it’s sharper. It’s so much sharper in terms of the productivity of our resources. And our meaningful edits give us higher full-price sell-through,” Charles Anderson, Bloomingdale’s SVP and director of stores, shared with me.

And he added, “We are still at the startup phase for Bloomie’s, and our learnings from it have been robust.”

Test, Learn And Refine

By opening one Bloomie’s store per year, it is able to digest learnings from each store, which are not cookie-cutter copies but individually designed for its specific location, and apply them more broadly.

For example, its first Fairfax store in the Mosaic shopping district originally offered a more narrow edit in beauty within a smaller footprint. But customers wanted more, and Bloomie’s was able to quickly pivot to expand the range and space to support the kind of enhanced beauty experiences, demonstrations, activations and events to drive more sales.

That learning was carried over to the second Skokie, Il Bloomie’s location in Old Orchard Mall. However, that store had an advantage. Its 50,000 sq. ft. footprint replaced a 200,000 sq. ft. mall anchor flagship, so it had a deeper understanding of what worked there and didn’t, and being about twice as large as the Fairfax, VA store, it had more room to play with.

It fine-tuned its fashion assortment and had its pick of experienced stylists from the flagship store to service customers. Overall, it was able to retain about half of its existing staff. And to meet existing demand, it added a home assortment and high-end jewelry unavailable in Mosaic.

“The advantage in Old Orchard was it was a replacement and we could bring a level of experience, expertise, knowledge of our brands, and customer relations to it,” Anderson said and added, “Originally, we figured to retain 50% of the old Bloomingdale’s business, but we are tracking far better than that.”

He was mum on specifics about the new Seattle store, but it’s product selection and mix will be powered by learnings from the two other stores plus its deep analytic data from local Bloomingdales.com customers.

“Our digital business emboldened us to have a physical presence there,” he said, and he promised the new store will be authentic to the Bloomingdale’s brand but with the high energy and excitement its Bloomie’s stores offer.

Different Strokes For Different Folks

Its new understanding of the different traffic patterns in the streetside Fairfax Mosaic store will prove valuable when it opens in Seattle in a similar outdoor lifestyle center.

“Weekend days were originally bigger than we surmised, so we had to be able to handle that, and sometimes during weekdays, we can experience wild swings,” he said.

For example, Placer.ai found Mosiac traffic peaked during dinner hours from 6 to 7 p.m. while visits fell sharply during those times for flagship Bloomingdale’s stores. However, both enjoy strong mid-day traffic, though the trend is not as marked for Mosaic.

And Placier.ai reports Bloomie’s has an advantage over Bloomingdale’s when it comes to the time customers spend in the store despite its narrower selection of merchandise.

Sharpening The Knife

While it is still early days for Bloomie’s, it offers Bloomingdale’s a path to growth it couldn’t otherwise achieve, and it is tailormade for the next-generation customers who demand more from a shopping experience than just products to buy. They want meaningful shopping experiences and Bloomie’s is delivering it to them.

“Attracting younger customers is important to the lifecycle of our business and combined, Millennials and GenZ index about seven points higher than in Bloomingdale’s,” Anderson revealed.

And at least for Mosaic, it is finding that about half the customers who were first introduced to Bloomingdale’s at Bloomie’s go on to pursue a full Bloomingdale’s experience in either close by Tysons Corner or Chevy Chase stores or online.

Designed To Scale

Bloomie’s has a promising long runway ahead because it is designed to scale by sliding into street-side and outdoor mall locations following a three-pronged strategy:

• In-fill, where a Bloomie’s outpost slips into an established trading area with a flagship store, ultimately expanding its penetration into an existing market. This is the model used for the Fairfax, VA, Mosaic Bloomie’s store.
• Replacement, where a smaller Bloomie’s store replaces a flagship Bloomingdale’s store, such is the case for the Skokie, IL Old Orchard location.
• New Market, with Bloomie’s opening in a brand new trading area. The coming Bloomie’s in Seattle will be the test case for this expansion strategy.

Commenting on the introduction of Bloomie’s, Mortimer Singer, managing partner of Traub, the business development and investment firm founded by the late Marvin Traub, who headed up Bloomingdale’s for 22 years, said:

“How many more department stores can there actually be in this country? We’ve already got too many. But think about the potential of putting a smaller Bloomie’s location in very high traffic areas and in the super 100 zip codes,” Singer noted.

“Bloomie’s would act not just as a retail store, but as a huge billboard. If executed right, they can have multitudes of these stores across the country,” he concluded, to which I wholeheartedly agree.