Macy’s Business Model and SWOT Analysis – How Does Macy’s Make Money

Overview

Macy’s is one of the global premier omnichannel retail companies specializing in men’s, women’s, and children’s apparel, cosmetics, accessories, fragrances, home furnishings, and other consumer goods. The company operates under three retail brands: Macy’s, Bloomingdale’s, and Bluemercury. It also runs seven of Bloomingdale’s outlet stores.

Macy’s provides its services via its subsidiaries, including Macy’s Systems and Technology, Inc. And Macy’s Merchandising Group, Inc. The subsidiaries of the company offer numerous support functions to its retail operations.

Macy’s bank subsidiary, FDS Bank, provides certain collections, customer service, and credit marketing services in credit card accounts. The company also offers certain private label brands, including Alfani, Bar III, Belgique, Aqua, and many others.

Company Profile

Here is a brief overview of Macy’s company profile.

Company NameMacy’s, Inc.
Websitemacysinc.com
FoundedMarch 6, 1929
FounderRowland Hussey Macy
Key PeopleJeff Gennette – Chairman, Chief Executive Officer, Adrian V. Mitchell – Chief Financial Officer, Matt Baer – Chief Digital Officer, Bobby Amirshahi – Senior Vice President, Corporate Communications, Elisa D. Garcia – Chief Legal Officer, Secretary. Nata Dvir – Chief Merchandising Officer
HeadquartersNew York, New York, United States
Company TypePublic
Revenue$17.3 B (FY, 2020)
Key CompetitorsThe Home Depot, Target, Costco, Walmart, Bed Bath and Beyond, Kingfisher, Best Buy

What is Macy’s? A Brief History

Macy’s originally named R. H. Macy and Co. is an American chain founded by Rowland Hussey Macy. It was the year 2007 when the company was renamed Macy’s Inc. It operates through stores, websites, and mobile applications under three brands: Macy’s, Bloomingdale’s, and Bluemercury.

A range of merchandise is sold through the platform, including men’s, women’s, and kids’ apparel and accessories, cosmetics, home furnishing, and other consumer goods.

Let’s look at the company’s history, which dates back to 1858 when a small yet fancy dry goods store was opened on the corner of 14th Street and 6th Avenue in New York City. As we write, Macy’s has grown to be one of the largest retailers in the world.

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It took various failed retail ventures for Rowland Hussey Macy until he could launch R. H. Macy and Co at the age of 36. The first-day sales at Macy’s garnered $11.06, which grossed $85,000 by the end of the first year.

By the year 1877, R. H. Macy and Co had become a full-fledged department store covering the area of 11 adjacent buildings.

Now Macy is known to be the “inventor” in the game, and many firsts are associated with its name. For instance, R. H. Macy and Co was the first retailer to promote a woman, Margaret Getchell, to an executive positive, making business history. Also, R. H. Macy and Co was the first retailer to hold a New York City liquor license. Interesting, right?

By 1902, Macy’s had moved uptown to its now-Herald Square location on Broadway and 34th Street. The store’s 7th Avenue expansion was completed in 1924. This was when R. H. Macy and Co became the world’s largest store covering a retail space of over 1 million square feet.

In 1918 R. H. Macy and Co generated $36 million in annual sales. The company went public in 1922. The following years mark the years of expansion:

  • Macy acquired Toledo-based department store, Lasalle and Koch, in 1923
  • Davison-Paxton was purchased in 1924
  • In 1936, the Network-based Bamberger’s was purchased by R. H. Macy and Co
  • The company expanded west and bought O’Connor Moffatt and Company in San Francisco in the year 1945

On December 19, 1994, Federated Department Stores, Inc. purchased R. H. Macy and Co, which in May 1995 were converted to the Macy’s nameplate.

The company entered 2005 with about 240 locations. As of 2020, Macy’s closed its Cincinnati headquarters, consolidating headquarters operations in New York City.

How Does Macy’s Work and What Does it Offer?

Macy’s, Inc. is one of the nation’s premier omnichannel fashion retailers. According to the official website of Macy’s, it comprises three retail brands, Macy’s, Bloomingdale’s, and Bluemercury. The company is headquartered in New York, New York, United States.

Coming to the next question, what does the company offer?

Well, Macy’s has a robust e-commerce business, rich mobile experience, and a national stores footprint letting the customers shop the way they live with the liberty of time and channel. It runs the department and specialty stores, websites, and mobile applications under the three brands.

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Macy’s Business Model

The company has an overall profitable business model that forms its primary source of success. Macy’s works on the mass market business model, or it can also be called a business-to-consumer business model with no vital differentiation between customer segments. Macy’s basically targets all consumers who desire general merchandise.

With 500 stores in the US and some international locations, the network forms the primary income source for the company as they enable it to earn revenues.

As per its mass-market business model, Macy’s principal focus is on its customers and does not necessarily distinguish between the segments among its customer base. Along with it, Macy’s also avoids segregating its value propositions, distribution channels, and customer relationships. Instead, the company focuses on applying its strategies to one large group of customers having similar needs.

Over time, Macy’s has experimented and changed its business model to meet the latest demands and adapt to the current scenario of the market.

Macy’s Unique Selling Proposition (USP)

The unique selling propositions of Macy’s include accessibility, convenience, and industry status. As we know that Macy’s has expanded over a wide range of merchandise, providing various options in home furnishings, apparel, cosmetics, and accessories. The company succeeds in creating accessibility for its consumers.

Macy’s aims to provide convenience to its customers by avoiding complexities and keeping things simple. Macy’s stores are mainly located in suburban or urban cities, forming densely populated locations where they are accessible to the majority of the customers. Another plus point is the availability of an online market where the consumers can purchase items online and pick them up in-store the same day.

Over the years, Macy’s has managed to establish a powerful brand and a successful one. In terms of retail sales, Macy’s makes the largest department store in the United States.

How Does Macy’s Make Money?

Macy’s operates in various divisions, and this is where it generates its revenues from. The divisions are made as per the type of product sold there. Following are the divisions made by Macy’s, along with the revenue it has generated in the last year (2020)

  • Women’s apparel – $2.909 billion
  • Women’s Accessories, intimate Apparel, Shoes, Cosmetics, and Fragrances – $7.206 billion
  • Men’s and Kids’ – $3.486 billion
  • Home/Other – $3.745 billion
  • Total – $17.346 billion
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We can see from the above data that the company’s primary source of income is the division of Women’s Accessories, Intimate Apparel, Shoes, Cosmetics, and Fragrances, hence forming 41.54% of Macy’s total revenues.

However, it should be noted that this particular division went through a decrease of 23.78% in revenues in 2020 from 2019, which contributed $2.248 billion in revenues.

SWOT Analysis of Macy’s

Here is the SWOT analysis of Macy’s to walk you through the crucial aspects of the company.

Strengths

  • Macy’s is highly accessible to the customers providing a wide variety of options
  • The company includes a wide array of merchandise involving home furnishings, cosmetics, apparel, and accessories belonging to men, women, and children
  • As of 2021, Macy’s employs over 75,000 employees in its network of stores
  • The popular Herald Square belonging to Macy’s receive visits from 20 million people annually
  • Macy’s is famous among the masses for its quality products
  • The company offers incredible customer satisfaction involving customer relationship management (CRM)
  • One of the smartest steps taken by Macy’s is their huge investment in automation to get advantage over the competition

Weaknesses

  • The company has been impacted by the ongoing COVID-19 pandemic and is facing a downturn in revenues ($24.560 billion in 2019 to $17.346 billion in 2020) with a 29.37% decrease
  • Poor management and neglecting effective plans (such as Polaris Plan) is another weakness observed among the analysts
  • Macy’s has a low international presence and overdependence on the US market

Opportunities

  • Macy’s should strengthen its global presence, which will eventually open more opportunities and benefits  for the company
  • Although Macy’s has adopted e-Commerce for the business, there still is room to expand sales and reach the highest potential for growth
  • Apart from offering apparel, shoes, cosmetics, and fragrances, Macy’s can diversify their products by adding second-hand clothes
  • Another good approach can be to focus on the emerging markets in Africa, Asia, and Latin America
  • Acquisition and mergers open the doors to expand quickly and cultivate new ideas

Threats

  • Macy’s primary competitor, Kohl’s, beat quarterly sales estimates and is growing at an impressive pace
  • Since trade is impacted by a broad array of factors like politics, economic factors, and trade wars, trade has been influenced negatively in the past few years. For instance, Macy lost $1.1 Billion due to lockdown alone in 2019
  • There is stiff competition for Macy’s when it comes to profitability and market share
  • Pandemic has already destroyed so many economies across the world, and it is believed that a global recession is already upon us
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