Macy’s, founded in Manhattan in 1858, is among the oldest retailers in the US. But with brick-and-mortar stores under pressure, the company is looking to e-commerce for growth.
Publicly traded Macy’s, Inc., which also owns Bloomingdale’s and the cosmetics chain Bluemercury, is in the midst of executing a three-year transformation strategy it has dubbed Polaris. The strategy has entailed closing underperforming stores, moving the Macy’s e-commerce team from San Francisco to New York, and launching smaller-format stores for both Macy’s and Bloomingdale’s.
CEO Jeff Gennette was at the National Retail Federation’s annual conference on Sunday to deliver an update to his peers in the retail industry. In a mainstage session, Gennette touched on the consumer mood at the start of 2023; how Macy’s has begun converting some traditional stores to a smaller Market by Macy’s model; and attracting and retaining workers.
Here are three highlights from Gennette’s talk, which was moderated by Caroline Hyde of Bloomberg.
The consumer mindset — and what they’re buying
Gennette said that the luxury consumer still has discretionary spending power, despite fears of a pending recession. But other groups may not be faring as well.
“The luxury consumer is in very good shape,” he said. “[But] when you look at the overall credit card data, what you find is that customers are building balances. … That kind of shows you the… consumer is under pressure.”
Despite that trend, Gennette said that, as the pandemic wanes, consumers have been buying products for travel and special events with friends and family — anything from luggage, to dresses, to men’s clothing and shoes. That trend tracks with the uptick in experiential spending in the US in 2022.
Closing traditional stores in favor of something new
Macy’s closed its store in St. Louis, MO, at Chesterfield Mall, once a booming place for foot traffic and sales, during the summer of 2022. Gennette said the company made that decision because a number of other retailers had already abandoned their stores in the now-dead mall.
“We were the last brand standing in that mall… cash-flow positive, but it was time for us to close,” he said.
Because the company wanted to keep a presence in the area, it opened a Market by Macy’s, a smaller-format store, two miles down the road. Market by Macy’s, launched in 2020, seeks to feature products from local businesses during pop-up events. Stores also host live music, and some have cafes.
“We closed the big door and opened up the Market by Macy’s at the same time. We transferred the colleagues and… the clientele files, all the vendor relationships,” he said.
The company has, to date, opened eight Market by Macy’s stores, some of which share a similar story to Chesterfield, and others of which are first-time Macy’s stores in that area. And, he said, there are more coming in 2023.
“We’ve got a slew that are coming in the pipeline that haven’t been announced yet. … We want to have a scalable model,” Gennette said.
Attracting and retaining talent
Gennette said that, as with many industries, hiring and retaining talent can be a challenge in the retail industry — especially on the front lines. To combat that, Macy’s has instituted a number of programs and strategies, from compensation, to education, to diversity, equity, and inclusion practices.
He said that, to start, the company committed to a $15 an hour minimum wage in its stores for frontline workers — though the average hourly wage at Macy’s is above $20. And employees can, through an online program called Guild Education, work toward certifications; learn a second language; or earn a college degree, with Macy’s footing the bill.
Despite having to make an active effort to retain frontline workers, Gennette said Macy’s has not struggled with executive talent.
“Though executive talent has not been an issue for us, I [have noticed] just how shallow the talent pool is, in retail in general. And if you have an opening, you better have [taken] all the steps you can to [look internally first] — so how you develop your own talent is really critical,” he said.
He said once Macy’s has hired people, it makes every effort to hold onto that talent.
“We spend a lot of time on our culture, to ensure that the culture that [employees] are entering is one where they can uniquely contribute to its success and its execution,” he said.
