Macy’s, the well-established department store chain with a history spanning 165 years, is grappling with declining sales and a struggling stock amid a thriving market. In an effort to keep up with newer competitors such as direct-to-consumer brands, online giants like Amazon and Shein, and big-box players like Target, Macy’s is placing its bets on a wave of new and refreshed private brands to attract shoppers. The retailer recently unveiled its latest private brand, On 34th, at its Macy’s Herald Square flagship store in Manhattan. This brand, named after the iconic location, offers women’s clothing and accessories designed for modern, versatile, and easy-to-wear looks targeting women between the ages of 30 and 50.
Macy’s Plans to Launch Four New Brands
On 34th is the first of four new private brands that Macy’s intends to introduce by the end of 2025. Additionally, the company plans to revamp some existing labels while phasing out others. Macy’s Chief Merchandising Officer, Nata Dvir, explained that the debut of On 34th is the result of over two years of customer research. The brand aims to cater to customers who prioritize fit, quality, and value, and who have a strong passion for their daily attire. Recognizing the need to meet their expectations, Macy’s is striving to provide better options.
Financial Stress Impacts Macy’s Sales
Macy’s introduction of On 34th comes at a challenging time for the company and the retail industry as a whole. Consumers have been reducing their discretionary spending on in-store purchases due to rising grocery bills and rent costs. Instead, they are allocating their funds towards experiences like concerts and vacations. As a result, Macy’s recently lowered its full-year outlook after witnessing a decline in clothing and other item sales. The company’s CEO, Jeff Gennette, acknowledged the continued strain on consumers’ finances, which is reflected in their purchasing behavior.
Private Brands as a Strategy for Success
Private brands serve as a common method for retailers to offer exclusive and lower-priced merchandise to customers. These labels tend to be more profitable because companies have direct control over their production, limited involvement of intermediaries, and economies of scale. Furthermore, since these items are not available elsewhere, retailers can avoid direct price competition with their rivals. Macy’s currently sells a mix of private and national brands, including renowned names like Ralph Lauren, Calvin Klein, and Levi Strauss. Out of its approximately 25 private brands across categories such as apparel and home goods, On 34th is a notable addition.
While private brands can be advantageous, they also come with risks. Target, for instance, is often cited as a prime example of private label success, having launched billion-dollar brands such as Cat & Jack for children’s apparel and All in Motion for activewear. On the other hand, Bed Bath & Beyond’s aggressive rollout of private brands, which customers did not desire, has been associated with its decline and eventual bankruptcy. Macy’s, however, is approaching its private brand strategy thoughtfully. The company values customer input and has made adjustments based on feedback received during testing at two New Jersey stores. Macy’s also benefits from years of experience selling private brands that have garnered a loyal following, such as the women’s apparel brand I.N.C. and the home goods brand Hotel Collection.
To enhance the quality and fit of its clothing, Macy’s has made significant changes in its supply chain. Over the past three years, the company has reduced the number of factories and mills it works with by half. This consolidation allows Macy’s to negotiate better prices, invest in superior fabrics and knits, and foster stronger relationships with its manufacturing partners. Additionally, the retailer collaborated with a technology company to standardize sizing across all its private brands. By implementing universal sizing, Macy’s aims to provide a more consistent shopping experience for customers and reduce the likelihood of returns.
On 34th will officially launch in mid-August, offering around 750 items ranging from basic tank tops priced at $19.50 to leather jackets priced at $299.50. The shoe collection for this brand is set to debut in spring 2024. Macy’s hopes that these new private brand initiatives, along with the planned launches of three more brands, will help drive sales and increase its share of private brand sales from the current 16% to a target of 20%, which it has achieved in the past.
Macy’s is adapting to the evolving retail landscape by introducing new private brands. Despite facing challenges, the company is confident that its customer-centric approach, experienced talent, improved product quality, and standardized sizing will resonate with shoppers and help it regain its position as a leading retailer.
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