Macy's adding Apple store-in-store, expanding Starbucks concessions

Dive Brief:

Macy’s plans to expand its Starbucks partnership beyond the 49 coffee concessions in stores now and opened the possibility of adding restaurants offering beer and wine in some locations, CEO-in-waiting Jeff Gennette told analysts at Goldman Sachs' annual retail conference Thursday, according to TheStreet.
Gennette also said that Macy’s will open an Apple store at its Herald Square flagship in New York City, becoming the the first department store to house an Apple shop-within-store, Fortune reports. Macy’s also will sell the Apple Watch at more than 180 stores in time for the holidays.
Target recently replaced its hot dog-and-popcorn concessions with Starbucks shops in many locations nationwide. Electronics retailer Best Buy, which also runs shops in some Macy’s locations, also has its own Apple shops within its stores.

Dive Insight:

Department stores are struggling, and Macy’s in particular appears to be over-stored; the retailer recently said it will close some 100 locations nationwide by 2017, with an expected emphasis on reducing its Midwest footprint.

For the stores that remain, Macy's is looking for ways to boost traffic, including these overtures in food and with electronics juggernaut Apple. But coming weeks after Apple reported quarterly profit declines of 27% due in part to the first extended slump in iPhone sales, retail expert Doug Stephens wryly asked Thursday via Twitter whether the deal represents “A slick move by Macy's or did @Apple just jump the shark?”

The move to expand food concessions could fare better, although it’s complicated. The National Restaurant Association calls retail-host restaurants one of the fastest-growing segments for restaurant food, expanding at an annual rate of close to 6%. Defined as restaurants located within health and personal care stores, general merchandise stores, variety stores, food stores and grocery stores, gasoline service stations and other miscellaneous retailers, retail-host restaurants topped $40.5 billion in sales in 2015, up from $29.5 billion in 2009.

While the in-store food and beverage opportunity is undeniably appetizing, opening a successful and complementary retail-host restaurant is a complex proposition that entails a lot of decision making about who a retailer’s customers are, experts say. The concept doesn't work for all merchants: In early April, Kohl's scrapped pilot “Kohl’s Café” locations introduced less than seven months earlier, citing a negligible impact on traffic and sales. But when the pieces fall into place, in-store dining (especially retail-host restaurants in urban environments) offers consumers something unique and compelling that digital commerce simply can't deliver.

“The most important thing today in retail has become offering an experience,” Jim Bieri, principal of Detroit-based commercial real estate brokerage Stokas Bieri, told Retail Dive earlier this year. “People do not have to come to [a] store because they can buy from their living room — actually, they can buy from their car, they can buy from the train. There’s no question that if you [do a restaurant right], customers will spend more time and will spend more money.”

All of the moves discussed Thursday by Gennette follow in line with previous comments indicating that Macy’s will aggressively lease space across its 800-plus department stores to other specialty retailers and expand its array of in-store experiences. Days after announcing that Gennette will take over as CEO in spring 2017, Macy’s unveiled a new prototype store concept in Columbus, OH’s Easton Town Center, integrating features like store-within-store concessions, a Bluemercury spa, revamped wedding and stylist services (including a Men's Wearhouse tuxedo shop), and an athletic wear section with fitness “ambassadors.”