Can Macy’s Revive Its Brand Through Discounting?
Macy’s incoming CEO Jeff Gennette revealed at the Bank of America Merrill Lynch Consumer & Retail Technology Conference last week that the department store plans on making significant changes to its struggling brick-and-mortar presence.
The changes include dedicated clearance racks, fewer coupons, more third-party stores-within-stores, the expansion of its Bluemercury cosmetics brand and a decreased emphasis on store associates, indicating that the brand is turning itself more into a discount-focused department store.
Despite the iconic brand’s recent struggles, Gennette said that 10% of the 43 million people that shop at Macy’s every year generate half of its $26 billion in annual sales. With that in mind, Macy’s still has a large contingent of loyal shoppers that will be affected by the changes.
The RTP team discusses whether becoming more of a discount retailer is a good move for Macy’s, and whether the department store accomplish this without sacrificing the elements that its loyal customers value in the shopping experience there.
Debbie Hauss, Editor-in-Chief: Well, JCPenney’s move in the opposite direction did not work. If Macy’s abandons its core customers then this type of initiative is likely to fail. It sound a bit like a desperation move. I personally have visited a store transformed from Macy’s to Macy’s Backstage and I was severely disappointed and unimpressed. It did not feel like Macy’s in any way. It was a mess. I don’t think Macy’s should go so far as to associate its name with that kind of retail environment. If discount for Macy’s is the way to go - and we’ve seen much success with other discount chains recently - then I would suggest Macy’s completely rebrand those stores.
Adam Blair, Executive Editor: We may not like the idea of the venerable Macy’s becoming a discount retailer, but I’m wondering if the company has any realistic alternatives. When a retailer with as distinctive a “personality” as Neiman Marcus is struggling with poor financial results, what are the prospects for a middle-of-the-road brand like Macy’s? And don’t forget that Macy’s must factor in enormous fixed costs in terms of real estate, inventory and personnel as it deals with declining mall traffic and fierce competition from online competitors. Closing underperforming stores is a short-term solution that will only diminish the retailer’s brand presence further. I agree with Debbie that if Macy’s does go the discount route, it will need to rebrand in a way that fosters a positive perception of its new identity.
Alicia Esposito, Content Strategist: Growing up, the Macy’s at my local mall was my favorite store. It always had the best products and the best Christmas decorations. I also loved roaming from the clothes and shoes to the perfume and makeup, to the home goods and cookware. I could get lost in it. Recently, this same store was slashed in half. One half remained the Macy’s I knew and loved; the other became Macy’s Backstage. You may be thinking, “That’s great, you get the best of both world!” But honestly, it led to some bigger issues that spotlighted the flaws in the Macy’s business and strategy behind this project. For one, there was no signage promoting Backstage, it’s value and how it would impact the existing Macy’s store. Second, the construction completely changed the store layout and none of the employees were educated on where the new departments were located. Finally, because the footprint was slashed, so was the inventory and, in turn, the quality of the products. Not to mention, I was less than impressed with the quality and diversity of the Backstage inventory. We have Home Goods, Marshall’s and TJ Maxx…we don’t need another discount store. Personally, I think Macy’s is shooting itself in the foot with this strategy. It’s steering away from its brand history, as well as the service and experiences it was once lauded for. The magic of Macy’s is gone for me. Why? Because the retailer forced us to go Backstage.
Tim Parry, Managing Editor: Macy’s as a discounter sounds like a last-ditch effort, but it seems to be the route Macy’s has been going down for some time. If you’re a loyal Macy’s shopper, you’re probably driven in by a 3-day-long one day sale and a Super Saturday (plus a “preview day”) every month. Macy’s is also no longer in the people business, and they have slowly eliminated customer service positions in its stores. Macy’s Inc. is selling off and leasing back its real estate assets. As we’ve learned from Sears Holdings, that’s just a temporary solution to cash flow problems. Sears Holdings has also taught us that mass store closures do not lead to a gain in net sales, which does not make Wall Street happy. Macy’s should learn from JCPenney’s mistake as well: Becoming a discounter does equal a turnaround. Macy’s is also trying to compete with TJX and Ross Dress For Less with its Backstage stores… which may be the most decrepit, depressing concept in ages. If Macy’s is going to compete with off-price retailers, it needs to differentiate itself in a positive way. Sectioning off part of your store to look like a pop-up flea market isn’t the way to go about it.
Klaudia Tirico, Features Editor: Oh, Macy’s. I’m shaking my head as I write this. I’ve had issues with standard Macy’s stores long before this news. The truth is, going the discount route and changing Macy’s stores into Backstage stores will have its own struggles, no doubt. That means it will have to compete against retailers such as Nordstrom Rack, Saks Off 5th and even Marshalls and TJ Maxx. How will Macy’s differentiate itself from these stores? It’s unfortunate because the Macy’s flagship store in New York City has great examples of experiential retail and unique offerings. But I understand how it’s not very realistic for every single Macy’s department store in America to follow suit. Whichever way the cookie crumbles, Macy’s will have to think long and hard about how to maintain its reputation, keep loyal customers happy and compete against other discount/department stores. It won’t be an easy feat.
Glenn Taylor, Senior Editor: Macy’s appears to be headed in the off-price direction a few years too late on this one. Despite the lucrative sales performances at TJX, Ross Stores and Burlington Coat Factory, these brands have already been well-established throughout the U.S. as off-price brands. If anything, Macy’s appears desperate here because it just now decided this was a trend to hop onto, even after building out its Backstage off-price format both within stores and as standalone stores. If discounting is going to a be a full-time strategy for Macy’s, where will the Backstage stores even fit in? Since the Backstage stores have a separate buying team that uses different vendors from Macy’s, I’m interested to see just how well these stores have stacked up compared to the traditional stores. I thought the decision to continue closing stores was smart for the struggling department store, especially in selling off some of the larger real estate properties that haven’t reeled in appropriate revenue. But overhauling the pricing strategy at this rate may take a while to get used to, especially for loyal customers.
