Macy’s going out of business
Tom Dougherty, CEO – Stealing Share
8 March 2018
Macy’s going out of business? You bet.
Macy’s going out of business? I would bet the ranch and the dog on it. As my old buddy Dave Rooney used to say, “It may not be the end of the world… but you can see it from here.”
In an announcement today, Macy’s CEO Jeff Gennette unveils the expansion of Backstage. You know Backstage? It sits in the corner of some Macy’s stores masquerading as TJ Maxx. Never have I seen such total incompetence in retail management.
The reasoning behind Macy’s going out of business
It’s simple really. Nothing else is working. Same-store sales increase by 1.3% in the stores with Backstage. This uptick comes after a year of disappointing sales.
The idea is to sell Macy’s brands at a deep discount in the area where Backstage resides. I’m assuming Macy’s will be moving lingering merchandise to this part of a Macy’s store and liquidating the inventory. At deep discount, close to 80%.
“So, if Macy’s is not having a Macy’s going out of business sale, look for it to fundamentally change its current model to one that meets prospect needs in a more meaningful way.”
Macy’s can’t compete with TJ Maxx
The answer as to why this won’t work is simple. Macy’s overhead is higher than TJ Maxx’s. That chain locates its stores in low-rent strip malls. Macy’s stores have a much more expensive footprint. And it believes that it needs to defend that real estate.
Discount stores, with lower margins, can’t afford the high ticket real-estate costs. TJ Maxx built the model differently. Macy’s is simply trying to turn a ship around and point it in a different direction. But the problem is not direction. The problem is the ship is taking on water. It’s sinking.
Macy’s gets an A for effort
Many years ago, American humorist Will Rogers had this to say about FDR’s first victory. ‘Well, if he moves into the White House… and it catches fire and burns to the ground… we will say, at least he got something started.”
That works in politics but not retail.
Macy’s must figure out a way to increase its brand’s Strategic Control. Successful brands have a mean score in this 10-point scale greater than 5.0.
- Assets— Physical assets or tangible brand assets (i.e. oil rights or a powerful brand name like APPLE)
- Product— Sale of product and associated service with superior benefits ( i.e. Walmart cost structure)
- Prospects— Meeting prospect needs or priorities in a superior way or with a segmented focus (i.e. Snap-on Tools)
- Reach— Coverage that creates value for the member (i.e. Visa Card).
- Knowledge— Timely application of knowledge or skills in a sustainable way (i.e. H&R Block)
Macy’s lags in most of these values today
No doubt Macy’s wants to become more important to the prospective shopper. And current trends support a desire to shop at discount merchants. But that is simply because no one has rethought the whole concept of retail.
So, if the retail chain is not really having a Macy’s going out of business sale, look for it to fundamentally change its current model to one that meets prospect’s needs in more meaningful ways.
As it stands now, the chain sees its future as being TJ Maxx’s ugly stepsister.
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