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Pearlstein

Hecht's Past and Future

Steven Pearlstein
Washington Post Columnist
Wednesday, March 2, 2005; 11:00 AM

Washington Post business columnist Steven Pearlstein was online to discuss his latest column, which looks at Hecht's past and the retailer's future.

A transcript follows.

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About Pearlstein

Steven Pearlstein writes about business and the economy for The Washington Post. His columns on the economy appear every Wednesday and Friday.

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Manassas, Va.: If Hecht's becomes Macy's then what's to become of Lord and Taylor? Isn't Lord and Taylor a higher level store to Hecht's?

I like Hecht's merchandise and Lord and Taylor merchandise, how will merchandising of Hecht's, Lord and Taylor, and Macy's be handled?

Steven Pearlstein: The best guess now is that Federated would maintain a separate, higher-end Lord & Taylor, while converting Hecht's gradually to Macy's so they can gain the efficiencies of advertising and other costs that come with having only one nameplate.

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Arlington, Va.: Your column today struck a nerve. I remember taking the bus or streetcar with my grandmother to shop at Famous-Barr, Vandevoorts or Stix Baer & Fuller. (My home town was St. Louis; I guess yours was Boston.) I remember eating at the department store lunch room, my parents taking me to what seemed the full-floor men's department to buy a suit, the Christmas windows and the marvelous Santa Land display.

Now my home town is worried that the merger will mean the loss not only of a Fortune 500 headquarters but of the only remaining downtown department store, an anchor to a struggling but hopeful downtown.

Steven Pearlstein: Nice to hear from a Cardinals fan! You mention the downtown store. You know, one of the things that happened when department stores hitched their wagon to the suburban mall is that they helped suck out what little retailing that was left from downtown, where, it turns out, the convenience of the multi-product, multi-floored department was actually a competitive advantage. I think one of the lessons that department stores should learn from that is that they should return to their downtown roots a bit more, particularly in places that are having a downtown revival like Washington. I'm told the downtown I'm not sure that is true of St.Louis, and there is always that chicken and egg question: the department store won't return until the revival has begun, but the revival can't begin without the return of the department store. Here in Washington, I'm told the downtown Hecht's does very well, and I'm sure a Macy's would as well. Now if we could only convince Nordstrom's and a few others to follow suit.

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Washington, D.C. (formerly Boston): So do you think this is only a stop-gap on the way to the end for the department store? I mean once Macy's has won everything, they won't have any real competition left except online and small specialty stores. I only go to Hecht's for the sale prices and wouldn't got here otherwise. Even then, for size price, selection and convenience the online world is really working best for a lot of basics. Although I just fit Macy's demographic, I probably won't shop there. I've been to Macy's before and didn't like their prices or their attitude. I'll be doing more shopping online.

Department stores are like radio now. They're pitched to a type which is no one. To be dominant and homogeneous, they've done away with the things that really made them distinctive and that people really liked. The muffins, that's what really made Jordan's and why people were so upset when Macy's took over. I don't think anyone will be crying over the end of Hecht's or Filene's which are now the same thing; bad lighting, constant coupons, and can't find anything.

The store that I do predict success for though is a place with easy access, good lighting, and fair prices that sells Jordan's muffins, Gilchrist's macaroons, the mints from Marshall Fields, the caramels from Woodies, and all the other things that really made the stores distinctive and were what we really wanted.

Steven Pearlstein: Next.

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Martinsburg, W.V.: Mr. Pearlstein:

In the grand picture, does it really matter. In my life time I've seen Garfinkles, Landsburgs, Kahns, Woodies, Raleighs, S Kline, Towers, Best (NY), Best (catalog) and countless other's close. I'm still able to shop, get towels, cloths, appliances and jewelry and in some instances at better prices and certainly more conveniently then I did in my child-hood when I had to take Capital Transit from Rockville (my former home) all the way down town.

I'll miss the name, but really it does not matter what name the store has on its door as long as it offers the goods I want?

Steven Pearlstein: In the grand picture, you're right of course. Most Americans now have more choice of goods from more retailers at lower prices than ever before, both bricks and mortar and through catalogues and web sites. And while I like to wallow in a bit of nostalgia now and again, the comings and goings of particular companies is a good thing not a bad thing: it speaks to the vibrancy of the American economy, where "creative destruction" is the name of the game. At the same time, there are some things the market is not producing that have some value (wonderful Christmas windows, decent service) that the market isn't producing any more. And my point is that this provides an opening for department stores. The assumption is that people like that stuff but they are not willing to pay for it. I don't agree. I think they are willing to pay an appropriate amount for things like that.

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Arlington, Va.: If you were a Hecht's employee in the corporate buying offices, what would you do in the near future? Do you think these jobs will be here in a year?

Steven Pearlstein: These jobs won't be here, I'm sorry to say. Eliminating them is one of the driving factors for the acquisition. Some people may be offered jobs in New York or Cincinnati. But there's no real reason to have two Federated employees calling on the same vendors. That doesn't mean, by the way, that the newly enlarged Macy's can tailor its offerings to regional tastes and incomes -- I'm sure they will. But it doesn't require a completely separate buying staff, I wouldn't think.

As to what you can do, my best advice is go out and start a store by yourselves -- something that happens all too rarely around Washington, which doesn't have as much of an entrepreneurial culture as some other big cities, particularly in retailing. One problem, of course, is that banks and real estate companies don't like to deal with independent retailers. It's an outrage, really.

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Laurel, Md.: How many choices of retailers do we need to buy Dockers? A mile from my house, an old Wards is now Burlington Coat Factory; an old Kmart sits empty; old Penney's and Ames are both discount furniture stores. Meanwhile, trees are being cut to build more shopping centers.

As long as people can get the goods they want at the price they want; maybe we can use less land for shopping and more for parks or other green space.

Steven Pearlstein: Steven Pearlstein: Ah, the environmental view of the retailing scene! You are right, actually, that there is too much retail space and too many retailers now, which explains the sometimes ruthless price cutting. But these things take a remarkably long time for the market to sort out. When you have a shift, say, from downtown retailing to suburban malls, it involves a lot of pain: the two models duke it out for years before one finally wins, and in the meantime, both are there. Likewise in the transition from enclosed malls with anchors to strip malls with big boxes. And now there is the new town center format and the return to downtown retailing in many places. That's also why you have so much consolidation going on: the old formats are consolidating because they are shrinking, while the successful companies in the new formats are consolidating to gain the scale needed to expand. And on top of all that, there is the rise of Internet retailing. So there's a lot going on in terms of structural change, and that can be wasteful and messy and painful, as you would put it.

As to your point about Dockers, it is a good one: the department stores now realize they have to start offering something more unique.

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Bowie, Md.: Does this merger finally mean the possibility of a Macy's in Prince Georges County, Maryland? The population of this county is starving for decent upscale shopping. A man can not even purchase a suit at a Hecht's in this county. I can't imagine Macy's coming to Marlo Heights, Maryland, The Mall at Prince Georges or even Bowie Town Center because that store is so small. It is my fear that this merger, if the Hecht's stores are closed will deplete the county of what little shopping we currently have. I hope someone is out there protecting our interests here in Prince Georges County, Maryland.

Yvonne

Steven Pearlstein: There is no question the retail industry ignored Prince George's county for many years, in part because they didn't feel comfortable in African-American communities. But that is changing now, as evidenced by all the new shopping centers opening up and the success they are having. I'd be very surprised if Federated doesn't use this opportunity to increase Macy's presence in the county somehow. They like to make money, if there is money to be made.

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Falls Church, Va.: While I also do not consider the homogenization of the American retail scene to be an entirely good thing, I have a hard time getting misty-eyed about the demise of department store chains that resemble their original forms only in name. Brand names come and go, and to expect names like Oldsmobile, Hecht's, and Moxie to be around for generations strikes me as a bit strange. It is as if consumerism has so taken over our culture that we derive a large share of our historical identity from the stores we go to, the food we eat, and the clothes we wear.

Steven Pearlstein: I agree. But its also worth getting misty eyed for a moment and thinking about what it is that we DON"T get from the current retail environment.

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McLean, Va.: If Macy's wants my business, it had better rethink its store design and stocking strategy. The ridiculous practice of sorting women's clothing by "collection" turns me off completely from shopping at Macy's currently. If I want to look at shirts, I want them all nearby -- not in 18 places where I have to move from designer to designer to find what I want. It is immaterial to me who makes the darn thing, as long as it fits and is of good quality!

washingtonpost.com: Knowledge of Its Customer Types Guides Federated (March 2, 2005)

Steven Pearlstein: You know, you've hit upon one of those very difficult decisions retailers have to make. Some shoppers are like you. And some like to go to an area where all the clothes are of a certain style and price point and put together outfits from a particular collection. There is no pleasing everyone. In general, I'd say that Macy's is probably right to organize it the way they do, as long as they don't have too many of these collections, while having in the center of each department a larger collection of "in-store" brands that may be just as good or better but without the designer label that adds to the price.

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Fairfax, Va.: How would you advise upcoming college graduates who have accepted management trainee offers from Hecht's?

Steven Pearlstein: Contact your cousin in New York and see if she has a spare bedroom. No, just kidding. Look, don't despair. There is a lot of turnover in retailing and there is a lot of retailing going on. I'd go ahead with your Hecht's assignment and take a shot that you'll get noticed by the Macy's people.

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Alexandria, Va.: I'm very distressed about Federated's acquisition of May department stores. First off, I'm a 35 y.o. (gay) male who, surprise, doesn't really like to shop, with an average salary for the area. For many years I reluctantly shopped at a Macy's simply because it was closest and most convenient. The store was junky and cramped, the sales were gimmicky, the staff was non-existent or unhelpful, and I learned to always take note of the sale signs on the displays, because that was NEVER the price which came up at the register.

Over the last few years, I increasingly preferred shopping at Hecht's, then Lord and Taylor also. Hecht's merchandise seems to be better, I like the renovation and improved lighting and layout of the downtown DC flagship store, and I LOVE the price check scanners, which are conveniently located. I recently turned onto Lord & Taylors menswear, which is stylish for my job, and fits my build well, but isn't outrageously priced (i.e. Banana Republic).

Unless Macy's makes dramatic changes, I will definitely need to find a new place to shop, and I feel my choices are more & more limited. This really bugs me, because as a consumer I noticed great changes at Hecht's, and I was always treated well there. I honestly had my fingers crossed that Macy's would bite the bullet first.

Steven Pearlstein: I'm so glad you wrote in with that observation, because too much of the coverage so far has suggested that Macy's was a better run store, which isn't necessarily obvious. But in response, let me say that Macy's understands that getting bigger is only part of the process of reinventing the department store. The other half involves improving the value proposition, which includes the quality of the merchandise and service and the shopping experience generally. They're not shelling out all that money to fail. And they know their current formula isn't exactly right, particularly in clothing.

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Herndon, Va.: Mr. P: I've been in the area long enough to once have the "charge card" that covered all the "biggies" - Woodies, Hecht's, Garfinckles, etc. It's been sad to see them all go (I nearly cried when Raleighs went under). Will the Hecht's name remain? I would assume for some places, such as Tyson's, where Hecht's is in close proximity to Macy's and Bloomingdales, the name will die.

Steven Pearlstein: I suspect the name will be phased out over the next several years. And where a Macy's and a Hecht's compete head to head, antitrust regulators may require they sell one store to open the possibility of another competitor coming in. But don't look for that to be a direct competitor. It is more likely to be a big box store like a Best Buy.

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Baltimore: I have to disagree with Martinsburg. My fondest childhood memories are of going downtown with my mother to shop at Hoschilds, Stewarts, Hutzler's and Hecht Company. You will never see the elaborate Christmas displays that I saw at Kohl's or Target!

Steven Pearlstein: No you won't. But maybe some smart retailer will figure out a way to make money offering you and your children and grandchildren an update version of the same experience.

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Bethesda, Md.: Growing up in NYC, Macy's was a wonder. The suburban mall Macy stores, however, are a far cry from the Herald Square store. I hope the consolidation does not result in more homogenization of the stores, which may enable Federated's buyers to cut better deals with suppliers (a la Wal-Mart), but fails to produce interesting merchandise or, frankly merchandise that reflects a city's needs or style.

Steven Pearlstein: Amen to that.

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Washington, D.C.: Steve:

You wrote: "the department stores now realize they have to start offering something more unique."

Please don't say that. It's difficult enough choosing among the 50 different styles of pants they already have. Who needs a 51st?

Steven Pearlstein: Its not they need to offer an additional style. In fact, as you point out, they need fewer choices. They need to edit their collections. But what they do offer also has to be more distinctive from everyone else. You can't make much money selling the same Dockers Wal_mart does.

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Social Question: So how would Macy's deal with the social aspects of losing the Hecht's name in the marketplace. I know my mom and her friends are lifelong Hecht's shoppers (they don't go anywhere else unless forced). It's an event to go to Hecht's and walk around and see what's on sale and get a "deal" on their coupons.

How does Macy's deal with the backlash of taking that away from people who are used to that as a staple fixture of their shopping diet?

Thanks!

Steven Pearlstein: By gradually offering something better--and making cold calculations about the tradeoffs of losing some customers to gain even more of a different kind of customer. That's always hard for any business to do. But businesses that refuse to do that fail.

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Obsessed Shopper In Va.: As an obsessed shopper, I use to start around Columbus Day to find clothes as Christmas presents. After taking notes on all the stores, I know I bought far more at Hecht's each year than any other store. Is that because of price advantages over Macy's and quality advantages over Target/KMart et al ? What's going to help the mid-range buyer like me with Hecht's gone ?

Steven Pearlstein: Hecht's isn't gone just quite yet. And if you are a typical Washington customer, I'm sure Macy's will work pretty hard to give you what you want at the price you're willing to pay.

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Key West, Fla.: My question is regarding those who retired from Woodies and were given a "discount for life" deal with May Company stores; specifically Hecht's and Lord & Taylor. How will this merger deal affect this arrangement once Federated takes over? Will it be honored? Thank you - enjoy all the snow!!

Steven Pearlstein: I'm very much enjoying the snow, thank you. And I have no idea about the discounts. In general, when one company buys another, it buys all its liabilities and promises, as long as they were written down in some contractual way. If its not contractual, however, I would worry about their honoring it in perpetuity.

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Washington, D.C.: Any chance the merger will improve service or will it continue to deteriorate? Last time we went to Macy's (with a gift certificate) the service in the men's shoe department -- where you really need some service -- was virtually non-existent. And I've long felt that Bloomies has become basically self-service. Couldn't someone do well by offering at least some level of decent service?

Steven Pearlstein: My point exactly.

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Washington, D.C.: Since it could be a possibility that Hecht's could be closing. What do you think they will do with the Hecht's in Tyson's Corner? Tyson's Corner already contains Lord & Taylor, Bloomingdale's and Saks.

Steven Pearlstein: I suspect there are already lots of people thinking about that, with more than a few feelers out. I wouldn't think it will remain dark for very long. Its still a very desirable location.

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Washington, D.C.: What type of retailer would you expect to see at stores that would close as a result of the merger? Would you imagine that a Home Depot would replace Hecht's at Tysons, where there is a Macy's just across Rt. 123 at the Galleria? What does the trend in retail leasing suggest will be in the anchors? More movie theaters or theme park restaurants? What's your guess?

Steven Pearlstein: Movie theaters and restaurants are becoming very desirable tenants for malls now. Home Depot doesn't strike me as quite right.

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Rockville, Md.: I'm nowhere near as knowledgeable as some of the other people on this topic, but here's my question: If the department stores keep consolidating, what are the malls going to do with all the empty anchor stores? I always thought that having strong anchors made a mall successful, and when they start closing anchors, the mall's quality suffers. What do you think?

Steven Pearlstein: As I wrote today, the importance of the department store anchor is much less than it used to be. There are other uses for those spaces than department stores that also can be even bigger draws. The dynamics of mall leasing is changing very quickly. You might even seen that they take that big box and punch many more holes on the outside to have a variety of mid-sized stores that face out with their own entrances. The upper floors might be movie theaters and restaurants.

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Alexandria, Va.: I too have found that Hecht's far exceeds Macy's in terms of store organization, neatness, and helpfulness of staff. At Macy's, I feel like clothes are shoved on racks willy-nilly, seemingly weeks worth of clothes piled in the dressing rooms, staff are surly... Go into Macy's at Springfield after a big sale or at Christmas and it looks like a hurricane blew through. Contrast that to the relative serenity of Lord & Taylor or Hecht's (esp. the new downtown store).

Sure Hecht's weekly "Biggest Sale EVER" promos got old, but you can't hide poor service.

I will be sorry to see Hecht's go.

PS - loved your op/ed on the wimpy snow day policy!

washingtonpost.com: Washington, The Nation's Weather Wimp (Feb. 25, 2005)

Steven Pearlstein: Well, from the comments so far, it sounds like the folks at Macy's and Federated have their work cut out for them retaining the loyal Hecht's shopper.

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Washington, D.C.: Macy's at Pentagon City has to be the most poorly run/managed department store I have EVER been in. Try finding someone to help you buy a pair of earrings in there, and when you do, the staff is rude, slow, and they act like they're doing you a favor by doing their job. The worst, ever. Seriously.

Steven Pearlstein: And another.

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Arlington, Va.: I think the loss of Hecht's is a shame. I actually prefer Hecht's mens line to Charter Club from Macy's. The Charter Club stuff falls apart much sooner and the line (don't recall the name) from Hecht's is much sturdier wearing. The biggest loss might be Hecht's furniture. We recently furnished our living and dining room from Hecht's, where the value quality and style was impossible to beat. Especially compared to places like Marlo and Room Store, who sell a lot of poorly constructed stuff, and the high-end retailers. They really fill a great niche there where no one else does.

Steven Pearlstein: And yet another.I sure hope someone from the Federated marketing department is listening/reading in.

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Shaw, D.C.: Any idea what will happen to Hecht's Furniture department? Do any Macy's stores sell furniture?

Steven Pearlstein: Very good question. Macy's here doesn't sell furniture, although Bloomingdales does a big business in it. You may see that some of the Hecht stores are changed to Bloomingdales.

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Clifton, Va.: I am a guy and shop at Nordstrom's and Kohl's for Dockers and Levis. Hecht's and Macy's share one common problem -- you can never find anyone to take your money and their stores are a mess.

Steven Pearlstein: I have to say that this is closer to my own, very limited experience at both stores.

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Falls Church, Va.: What are the chances that Dillard's may move into some of the local mall slots vacated by Hecht's and/or L&T?

Steven Pearlstein: Small.

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20001: Comment and a question:

I fail to see what significant economies can be gained by re-branding regional chains into Macy's or Bloomingdale's stores. The marginal cost of additional paper bag designs can't be that much. Sure, merge all of the back office work - but there is value in the regional store names.

I stopped shopping in ANY department store owned by Federated when I was walking down the street and the buttons literally fell off my 2 day old Federated house-brand sportscoat. I lived in Cincinnati at the time and made sure the corporate office knew about the problem, but they didn't seem terribly interested in fixing it.

Over the past year I had to build a "professional" wardrobe - at considerable expense. Lord and Taylor was my first stop - excellent quality at reasonable prices, and excellent, professional staff. It's been my experience that I can't find any of those three qualities at any Federated department store. It simply isn't worth my time even to see if Federated makes any improvements in its sales force or products.

It now seems that I will need to get a raise so that I can purchase my wardrobe at "specialty" stores - which, in my opinion, is a bad thing.

Question: any word on which Federated store will close in Downtown Crossing (Filenes or Jordan Marsh I mean Macy's?).

Thanks!

Steven Pearlstein: I can't answer you question. But you may find that Federated actually changes some of the Hecht's into Lord and Taylors in places where it makes sense if there is already a Macy's nearby. But its good to hear your experience. I know of a few other people here at the Post who also have found Lord & Taylor to provide good service. And I can't say it enough, as I did in the column this morning: if department stores don't start delivering good service by attracting and retaining knowledgeable sales people (not just clerks), the department store won't be around for very long. Its crunch time.

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Silver Spring, Md.: Dear Mr. Pearlstein,

I placed an order for furniture from Hecht's with the fabric 5-year guarantee.

Now, I'm really concerned.

What will happen if Hecht's gets completely swallowed up, and I end up having problems with the furniture?

Should I cancel the order?

Many thanks

Steven Pearlstein: Hard to say. If they still do furniture, they'll probably honor it. If not, there won't be anyone for you to speak with.

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Washington, D.C.: More of a comment than a question, really. I lived and worked in retail management in Richmond when the May Co. bought two other regional dept store chains (Thalhimer's and Miller & Rhodes). They first purchased Miller & Rhodes and converted all locations to Hecht's. Later when they bought Thalhimer's (where I was a manager), they were faced with a Tyson's or Fair Oaks like situation of having both anchor stores in several malls. In both Regency Square in Richmond and Lynnhaven Mall in Virginia Beach (and perhaps in others), they did not give up the real estate right away. Both malls had two Hecht's -- one men's and housewares and one women's and children's. The stores were later consolidated and other retailers moved in -- Lord and Taylor in the case of the Va. Beach mall.

Do you see something like that happening here or do you think a new anchor would come in right away where they end up with essentially two Macy's?

Steven Pearlstein: I don't think anyone likes a two Macy's solutions. Federated now has a portfolio of brands with national reputations that they can deploy (Bloomingdales, Macy's, Lord & Taylor). They will segment the market where they think that makes sense. But operating the same store from two locations is not very satisfactory.

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St. Louis: It's interesting to me that many people here are saying that they find the selection at Hecht's better than Macy's. I think it's the merchandising that brought the whole May Company down-random selection of high and low end clothes, other stuff (stuffed animals, odd holiday items, etc) but nothing for the average person to wear to work. I just don't think they know who their customer is anymore. I am sad to see Hecht's go, and quite sad to see what this deal will do to St. Louis in general (a city that is on the verge of rebirth).

Steven Pearlstein: Thanks for that.

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Washington, D.C.: You're right that people want memorable experiences. But isn't the mall owners' problem that we've all got too much stuff; too many places to buy it; and because so many people live in anonymous suburbs -there's no place for interactions. Visiting Santa Claus, the awe at the windows are (free) activities that allowed us to share time with our families. What can retailers do?

Steven Pearlstein: Stop listening to the same three consultants and instead use their own guts and instincts to design a better shopping experience. They might start by strolling down a European retail street and seeing how people shop and interact and think about a cost-effective way to capture some of that experience. And there are all the things I mentioned in the column. But doing the same thing as everyone else only at a lower cost -- that's not a winning department store strategy.

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Steven Pearlstein: That's it for today, folks. See you next week,

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