Macy's makes private brands central to new strategy

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Macy's makes private brands central to new strategy

By David Salazar - 02/06/2020

Department store chain Macy’s has a new strategy, and private brands play a key role. The New York-based retailer’s new plan, dubbed Polaris, includes closing roughly 125 stores in the next three years, developing new formats, revamping its loyalty program and save costs through various efforts. 

As if that isn’t ambitious enough, Macy’s also plans to launch four billion-dollar private brands. The company said that in an effort to entice customers through exclusive, on-trend products, its revamped merchandising strategy would focus on bringing four new private brand lines to stores in an effort to focus more on the higher margins that owned brands can drive. 

“We have a clear vision of where Macy’s, Inc. and our brands, Macy’s, Bloomingdale’s and Bluemercury, fit into retail today,” said Jeff Gennette, chairman and chief executive officer of Macy’s. “We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams. Over the past three years, we have shown we can grow the top-line; however, we have significant work to do to improve the bottom-line. We are confident the strategy we are announcing today will allow us to stabilize margin in 2020 and set the foundation for sustainable, profitable growth.”

A report from Nasdaq about the new Macy’s strategy highlighted research from NPD Group, which estimates that private label items make up one-third of the total U.S. consumer apparel market. Among its current private label offerings, which the retailer is said to see as billion-dollar contenders, are Concept, Alfani, Style & Co. and Chart Club. 

Nasdaq noted that Macy’s trails its department-store competitors in the private brand business. Comparatively, Kohl’s private brand sales make up 45% of its revenue based on estimates from Jungle Scout, and not too long ago, roughly half of J.C. Penney’s revenue came from its owned brands. 

One of the features of the new strategy that could complement private brand growth is the new Market by Macy’s format — an off-mall, smaller-format store that will include curated Macy’s merchandise, local goods and local food and beverage options. The first one opened in Dallas on Thursday. 

Also in line with the new private brand focus is a revamped supply chain, meant to better serve omnichannel shoppers, which includes a new private brand sourcing strategy expected to lower costs and increase speed.