Macy's Expands with Four More Smaller Stores, Showing Signs of Success
Macy's announced its plans to open four additional stores that deviate from its typical large mall anchor format as part of its brand revitalization efforts. The retailer believes that this new format is proving to be successful. The new stores are set to open in the fall, with locations in Boston, Las Vegas, San Diego, and a recently debuted store in suburban Indiana. These stores will be smaller in size and situated in strip malls. Macy's aims to create a unique shopping experience by hosting events and frequently rotating merchandise.
During a call with CNBC, CEO Jeff Gennette revealed that Macy's smaller stores outperformed the company in the most recent quarter, with stores that have been open for over a year showing sales growth during the three-month period. However, the company as a whole experienced a 7.3% drop in comparable sales on an owned-plus-licensed basis. Despite this, the smaller stores outperformed the company even during the crucial holiday quarter.
Macy's had previously opened 10 similar stores as part of a test for this new concept. The first one was unveiled in the Dallas-Fort Worth area about three years ago. Some of these stores are called Market by Macy's, serving as mini versions of the Macy's flagship stores, while others are named Bloomie's, representing a smaller version of the upscale department store Bloomingdale's. These stores were opened to replace closed mall locations, add density to high-demand markets, or enter new areas such as Seattle.
With the introduction of these four new locations, Macy's is taking a fresh approach by simply calling them Macy's, shedding off its old-school reputation. The off-mall shops are part of Macy's strategy to rejuvenate its image and merchandise to appeal to younger shoppers who may perceive the 165-year-old department store as a place for their parents or grandparents. Under the leadership of CEO Jeff Gennette, Macy's initiated a three-year turnaround plan called Polaris, focusing on strategies like driving online growth and closing underperforming stores.
Despite beating second-quarter sales and earnings expectations, Macy's maintained its full-year forecast, which predicts a significant year-over-year sales decline. This forecast, along with a challenging consumer backdrop, caused the company's shares to drop by 14%. Alongside the opening of new stores, Macy's is striving to shake off its old-school reputation through other initiatives. It recently launched a new women's apparel brand called On 34th, paying homage to its Herald Square flagship location. The company also revamped other private brands, including the women's brand I.N.C. Macy's plans to refresh or replace all existing private brands and introduce three additional new brands, including On 34th, by 2025.
Hot Take: Implications for New Businesses
Macy's shift towards smaller stores in strip malls and away from traditional large mall anchors provides valuable insights for new businesses. It demonstrates the importance of being adaptable and responsive to changing consumer behaviors and market trends.
Adapting to Market Trends
The success of Macy's smaller stores suggests that consumers are increasingly seeking unique, personalized shopping experiences. New businesses should take note of this trend and consider how they can create similar experiences for their customers.
Macy's efforts to shed its old-school reputation and appeal to younger shoppers highlight the importance of brand revitalization. New businesses must ensure that their brand remains relevant and appealing to their target audience, which may involve rebranding or introducing new product lines.
In conclusion, Macy's strategy of opening smaller stores and revamping its brand offers valuable lessons for new businesses. It shows the importance of adaptability, understanding consumer behavior, and maintaining a relevant and appealing brand. By taking these factors into account, new businesses can position themselves for success in today's dynamic retail landscape.