How the big box giant became the leading department store in America
Introduction
The major department store chain Macy and Company, Inc. (furthermore referred to as Macy’s) operates primarily throughout the USA. Among the collection’s largest stores is an 11-story building at Herald Square (34th Street and Broadway) in New York City, which has been physically the largest single store for many years. Among the products that Macy’s offers are apparel and accessories (men’s, women’s, and children’s), cosmetics, home furnishings, and other products of consumer interest. Variations in assortments are due to the size of the store, the merchandise assortments, and the type of customers in the trade area.
Macy’s opened its first store in Massachusetts in 1851 in order to serve the needs of mill workers and their families, but the store failed, as did several others opened by Rowland Hussey Macy (furthermore referred to as Rowland). Despite this, Rowland did not give up, and today his retail chain is one of the leading department stores in the country. As a result of the storms Macy’s has weathered over the past century, it looks very different from its beginnings; when the retail chain first opened, there was no parade or counters, only dry goods. Having a thorough understanding of Macy’s history will bring a better understanding of the journey of how Macy’s became one of the most popular shopping destinations for Americans.
The Beginning
In his early days, Rowland was a crewman on a whaling ship, where he received a red star tattoo on his arm – thus giving rise to the now well-known Macy’s logo. A legendary innovator, Rowland was the first to adopt a set pricing model which was widely accepted by the public at a time when bargaining was the norm.
To understand Macy’s history, it would be necessary to mention the opening of the flagship store in 1902, which stands proudly to this day. In order to meet the shopping needs of mill workers and their families, Rowland proposed the opening of a department store. Unfortunately, that did not work due to the technological advances of Macy’s products, such as towels with various colours, which were unusual in the 19th century. After failing to open a department store in Massachusetts, Rowland decided to open a store in New York on 6th Avenue.
As Macy’s established itself, sales increased exponentially, and the brand became an immediate success. As a result, Macy’s became the first choice for everyone’s diverse shopping needs until 1902, when Rowland decided to move the store to Herald Square. As a result of its new location, the department store was promoted and drew both locals and tourists. As women entered the workforce in 1902, working at a department store opened up a variety of opportunities for ambitious women; Macy’s soon after became one of New York’s largest employers.
The Macy’s Thanksgiving Day Parade
An important day in Macy’s history is the Macy’s Thanksgiving Day Parade. As a result of collaboration between Macy’s employees, the parade was first organized in 1924. A quarter million people attended the parade despite not being as extravagant as other recent parades. Designed as a significant publicity coup for the department store, the parade included live animal attractions and popular circus performers. This event was originally scheduled for Christmas Day, but it was moved to Thanksgiving to coincide with the start of the holiday shopping season.
As early as 1927, the parade’s attractions shifted from wild zoo animals to balloons and elaborate floats. Since Felix the Cat was one of the first, most popular and largest animated characters, it required the assistance of several people to keep it afloat. Upon completion of its mission, the balloon would be cut free, however, due to the scarcity of rubber at the time, the giant figure would be deflated and stored for the following year.
Today, Macy’s Parade balloons let you know which characters are in style. In addition to Sonic the Hedgehog, SpongeBob the Square Pants, and classic characters such as Popeye or Charlie Brown, marching bands from around the country participated in the parade. As a result of its popularity, Macy’s famous Santa Claus appears in the classic 1947 film ‘Miracle on 34th Street’. The history of Macy’s demonstrates the store’s importance in developing American pop culture in the 20th century.
Macy’s Expansion
A store on Queens Boulevard in New York marked the beginning of the company’s nationwide expansion in the 1960s. It was not until 1983, however, that this department store began expanding outside the city of New York. Located in Miami’s Aventura Mall, the first store outside of this location opened in Florida, Dallas, Plantation, New Orleans, and Houston shortly thereafter.
The CEO of Macy’s led a leveraged buyout in 1986, culminating in a loss in a takeover battle with Federated Department Stores. The following decade saw several rebrandings and acquisitions.
The Modern Era
In 2005, Macy’s acquired May Department Stores and rebranded its Chicago store as one of its own. Since the May Department Chicago location had operated for many years before Macy’s was founded, Chicago residents were opposed to this changeover. Following the rebranding efforts, Macy’s opened more stores throughout the United States, and soon the company had over 850 stores nationwide.
In 2005, Macy’s acquired May Department Stores and rebranded its Chicago store as one of its own. Since the May Department Chicago location had operated for many years before Macy’s was founded, Chicago residents were opposed to this changeover. Following the rebranding efforts, Macy’s opened more stores throughout the United States, and soon the company had over 850 stores nationwide.
Though Macy’s has achieved considerable success over the years, it was not immune to the high impact of the e-commerce boom. Announcing in January 2015 that it would close 14 stores across the country due to the digital shift in the landscape of the world, Macy’s closed 35 to 40 underperforming stores by September. Over 4,800 employees were laid off by Macy’s by January 2016 to save $400 million following a disappointing holiday shopping season. The number of Macy’s stores had been reduced to 770 by January 2016. In early 2017, the department store announced the closure of 100 more stores and the layoff of 10,000 employees. As a result of this cut-throat slashing, the company was able to save $550 million, which was used to build and grow the brand’s e-commerce infrastructure.
Growth Strategies
The Macy’s Department Store has made some progress in recent years after suffering from financial difficulties. As we will explore below, Macy’s has implemented different strategies throughout its history, and as a result of the initiatives described below, the struggling retailer has been able to rebound.
Redesigning the Loyalty Program
One of the ways Macy’s was able to turn their situation around was through their loyalty program. In order to make the loyalty program available to all customers regardless of payment method, the company completely redesigned the already prominent, but disorganized loyalty program. The loyalty program offers a different perspective than the original, in which shoppers were required to use their branded Macy’s card to receive benefits. As explained below, loyalty programs are divided into tiers.
- Bronze: This is the lowest tier in the loyalty program and allows all customers to enjoy star money days, a birthday surprise, and different perks and offers.
- Silver: This tier is opened to customers who spend up to $499 at Macy’s Department store. Such customers will receive 25% off any day they want using the Star Pass coupons.
- Gold: This is the third tier of the loyalty program and is open to customers that spend up to $500 to $1,199 annually at Macy’s. Such customers will receive 25% off any day they prefer using the Star Pass coupons and free shipping on their Macy purchases.
- Platinum: This is the final tier in the loyalty program and is open to customers that spend $1,200 or more annually at Macy’s. Such customers will enjoy free shipping on all their purchases, 25% off using the Star Pass coupon, and a 5% back in rewards on every Macy’s purchase they make in-store and online.
The loyalty program at the store has been a great success, especially with the platinum tier. Overall, Macy’s experienced a positive change in behavior among its customers. As a result of this shift in behavior, new consumers are signing up every day, and they are willing to spend more to enjoy the benefits.
Expansion of Its Backstage Stores
Another strategic initiative implemented by the company was the expansion of Macy’s Backstage store. Backstage, the off-price brand owned by the company has expanded to more than 300 Macy’s stores nationwide, including nine freestanding locations since 2015. In addition to increasing productivity at the existing stores, investing in this new retail chain has created a ripple effect for the company. Customers will also have the opportunity to experience exciting new features under a diversified label, thus attracting new consumers to join the Macy’s tribe.
Expansion of Assortment
Among the ways in which the brand has continuously grown is by expanding its assortment. The company partners with vendors who can handle fulfillment very quickly and efficiently. In many respects, the new system is similar to the marketplace model that is currently being used by many retailers. With this expansion, Macy’s was able to offer a more diverse selection of brands, categories, and well-known brands. Using this new option, Macy’s aims to reach a larger customer base.
Additionally, Macy’s plans to formulate its success formula in-store by combining both art and technology. The brand intends to increase its digital sales while simultaneously transferring the fulfillment process to a third party. Furthermore, by understanding their shoppers’ needs through the use of data and analytics, they can create a strategic business plan accordingly, and in turn, increase sales.
Store Fulfillment
The expansion of Macy’s pickup program has also contributed to Macy’s growth over the years. By providing the option to purchase online and pick up iin-store the brand can refine their services by focusing on improving the entire multi-channel consumer journey. With the successful testing of the strategy in 50 stores, Macy rolled out the ‘At Your Service’ station throughout their entire chain. Macy’s goal is to improve the overall consumer experience by creating a seamless way to shop, providing convenience and accessibility.
The Growth50 Initiative
The Growth50 initiative is to enhance 50 Macy’s stores throughout the chain in five major categories:
- product
- presentation
- process
- promotion
- people
The Macy’s Corporation took 50 stores and implemented new ideas around the selected categories, and then monitored the performance of these newly implemented strategies. Upon achieving success, the strategy was implemented in the remaining locations of the store. This brand has seen a significant increase in customer satisfaction after adopting improved strategies such as these in its stores. It has resulted in the company showing their shoppers that they value their feedback, and their loyal clients seem to appreciate the fact that their concerns are taken into consideration.
Final Thoughts
Throughout Macy’s history, there have been both struggles and successes. The Macy’s logo is one of the most recognizable logos in the country, even by those who are not avid department store shoppers. Thanks to focussing on the specific strategic initiatives implemented by the company, and examining its growth, Macy’s was ranked as the leading department store in the United States in 2021, with sales amounting to 17.23 billion U.S. dollars.
