If they ever remake “Big,” the Tom Hanks character could be dancing on the piano keys in Macy”™s.
Starting this fall, Macy”™s will carry FAO Schwarz toys in its department stores.
FAO Schwarz, which filed for bankruptcy in 2003, will exclusively allow Macy”™s to carry the toys.
“I think what Macy”™s is doing is extremely intelligent,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc. a national retail consulting and investment banking firm headquartered in Manhattan.
“It”™s a move in the right direction to diversify their product mix, and it fits with their idea of exclusivity,” he said.
Jim Sluzewski, a Macy’s Inc. spokesman, said there are 685 stores with children”™s departments and a total 812 Macy”™s stores.
FAO shops inside the stores will range from 200 to 3,500 square feet.
The first 275 shops will open this fall, with more stores adding the toy departments until 2010. Sluzewski said at this time the company is not sure which stores will have them and when.
“This is an outstanding partnership that will bring toys back to Macy’s in an exciting and unique way,” said Terry J. Lundgren, chairman, president and CEO of Macy’s Inc. “FAO Schwarz is the world’s most famous toy retailer, with interesting and distinctive products that appeal to our customers and will drive store traffic, particularly to our children’s departments. Following agreements with great names such as Martha Stewart, Donald Trump, Tommy Hilfiger, e-Spot electronics and Lush Cosmetics, this is the latest example of an exclusive partnership with a leading brand that differentiates the merchandise assortments at Macy’s.”
During the first three months (first quarter) of 2008, Macy”™s profit dropped $59 million and sales at stores open at least a year fell 2.6 percent.
Macy”™s will compete with online retailers and their rivals, such as Toys R Us, by offering more high-end toys consumers won”™t find anywhere else.
Davidowitz said Macy”™s is taking less risk because it”™s going to be an FAO Schwarz department and the department store won”™t have an increased inventory risk as part of the deal.
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“I think this is a way for Macy”™s to broaden its scope without a lot of increased risk and satisfy their customer,” he said. “This puts Macy”™s in the position of exactly where they want to be.”
This could be the strategy of Terry J. Lundgren, who according to Davidowitz, is “not for the masses, he”™s for the classes.”
Department stores don”™t have the toy business that they did years ago, including other types of products like electronics, Davidowitz said.
“The department stores have given up a lot of businesses over the years,” he said. “If you walk into a department store today its men”™s, women”™s, children”™s and home.”
Davidowitz said department stores have cut out what was least profitable and expanded what was most profitable. The result is department stores ended up as a store for the mature customer selling apparel and home goods.
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