Can Macy’s hit the private label bull’s-eye?

There was a time when retailers were quite shy about their private brands. Grocery stores would slap bland labels onto “generic” goods, while department stores would sew discreet tags onto their “signature” dresses, suits or cashmere sweaters.

Those days are gone, and leading the way in the development of full-throated, well designed and intensely marketed “owned brands” is Target. After embarking on a private label reboot in 2016, the mass merchant now boasts 48 such brands, across apparel, home, consumer goods and grocery. Together they brought in $30 billion last year (about $6 billion more than Macy’s as a whole did), Chief Growth Officer Christina Hennington said during the company’s Q4 conference call. Ten of them have notched annual sales of at least $1 billion each; several seem like brands that could stand on their own.

It’s no wonder, then, that Macy’s, which two years ago said it would revamp its own brands, has turned to Target veterans. Macy’s nameplate (not counting its Bloomingdale’s banner) runs 24 private labels across categories, representing 15% to 20% of its volume; The retailer doesn’t disclose their revenue, a spokesperson said by email. In 2020, when Macy’s unveiled its Polaris turnaround plan, then-chief merchant Patti Ongman said the goal was for its INC International Concepts, Alfani, Style & Co and Charter Club apparel lines — all four already “well on their way” to each becoming a billion-dollar brand — to account for 25% of sales by 2025.

Since then, with its turnaround resumed after getting interrupted by the pandemic, Macy’s has introduced new labels, including And Now This women’s apparel, and Oake bedding. But there’s more to be done.

“We are prioritizing our private brand portfolio to grow our overall business and capture market share by offering assortments that build style credibility at compelling prices,” Macy’s Chief Merchandising Officer Nata Dvir said by email.

That’s where Target’s former employees come in. The department store recently contracted with Brand Love Lab, run by Nadine Steklenski and Noria Morales, two executive instrumental in Target’s past brand design efforts. Last week a third, Emily Erusha-Hilleque, was hired to join Macy’s own ranks.

“We are prioritizing our private brand portfolio to grow our overall business and capture market share by offering assortments that build style credibility at compelling prices.”

Nata Dvir

Chief merchant, Macy’s

“Emily will be leading our existing team of highly talented designers that create product across apparel, home and accessories,” Dvir said. “This team manages our already strong private brand portfolio and in partnership with Brand Love Labs, we are spending time reviewing our portfolio, ensuring it continues to build loyalty with our customers through outstanding design, quality and value.”

Their Target experience has conferred private-label bona fides onto Steklenski, Morales and Erusha-Hilleque. But there, they participated in a push to recapture an established “cheap chic” reputation. At Macy’s, their challenges will be different, observers say.

Good talent is important, but for target the underlying culture of creativity is their secret sauce,” Retail Speak Founder Sanford Stein said by email. “Which is to say they are a machine built on innovation and deep engagement with their customers, which differentiates them from virtually everyone else, and certainly Macy’s.”

To achieve success, Macy’s merchandising, operating and marketing teams must be in sync, with belief in the brand coming from the chief executive, according to retail consultant Brian Kelly. Macy’s declined to make Erusha-Hilleque available for an interview. In a joint statement sent by email, Steklenski and Morales said that they are aligned, at least with Macy’s merchandising team, “on vision and values.”

“Having worked in retail, knowing how complex and ever-changing it is, we have tremendous respect for what the Macy’s teams do every day,” they said. “We all know Macy’s is on a transformation journey and working through how to operate differently to support today’s customer. This isn’t about one agency coming in to save the day. This is about a likeminded, super-focused group of talented people who ‘ve come together to write a new playbook for success.

What’s in a name?

While Target customers can buy name brands across categories, including Apple, Levi’s and Lego (and all manner of groceries, beauty and household essentials), its apparel and home goods are dominated by its private labels. By contrast, Macy’s is in the business of being an exceptional distributor of third-party brands.

“Target simply evolved faster and further than any anybody else in converting their business from branded to brands owned and operated [by itself], Jeffrey Sward, founding partner and CEO at Merchandising Metrics, said by phone. “Macy’s has to be home for the big national brands. That’s their reason for being in a box that big. That’s the whole point of a department store.”

These days, private label is brand management, he also said. “It’s a lot more complicated than buyers shopping the market and editing assortments from already developed branded product lines.”

“Macy’s has to be home for the big national brands. That’s their reason for being in a box that big. That’s the whole point of a department store.”

Jeffrey Sward

CEO, Merchandising Metrics

With some brands pulling back from department stores, Macy’s may have an opportunity to fill the market niche (and literal store space) left behind, Stein said. But it would be a mistake to mimic what many call “Tar-zhay” too closely, he said.

“Their attempt at tying to emulate everyone else is what got them in trouble in the first place,” he said. “I think they need to tuck under Nordstrom rather than trying to compete with Kohl’s, JCP, Target and Walmart. But therein lies the rub. Slick new brands won’t matter in a sea of ​​clutter, with no sign of intelligent life. still have to up their game in basic retail blocking and tackling to have anything matter.”

The execution

When Macy’s announced its turnaround just before the pandemic hit, the company reiterated a remodeled store strategy centered on 150 locations prioritized for growth, plus flagships in major cities. What the retailer calls “neighborhood stores” are being largely left alone, as it focuses on those growth stores, an expansion of its backstage off-price business (in stores and at stand-alone locations) and experimentation with smaller, off-mall locations .

This leads to a fractured customer experience, with neglect evident at some stores, analysts warn.

“Macy’s, with their shop-in-shops, is kind of where brands go to die,” Kristin Bentz, president of KB Advisory Group, said by phone. “The consumer experience there is terrible. You can never find a sales associate, they’re always back in a corner somewhere hating their life. It’s a miserable experience, unfortunately. So bringing in someone who did Target’s private label will be a huge win for them — if they can execute.”

This already difficult task has been complicated by the pandemic, which taught people to shop even more easily online, including via social media. “You can have the best brands in the world, but if they’re not reaching the proper customer through the proper channels — Instagram, TikTok, all of these new ways to reach customers to get them in the door or to see the product — at Macy’s that’s yet to be seen,” Bentz said. “You’ve got to get people to the store.”

The responsibility doesn’t just lie with the newly fortified merchandising team, either, but, again, also with Macy’s CEO Jeff Gennette, according to Kelly. Otherwise, their work could be overshadowed by the plight of Macy’s stores, he said, pointing to the frequent criticism from the likes of GlobalData Managing Director Neil Saunders.

“Macy’s has to execute and that is a major concern, as Neil’s Saturday shopping trip photos prove,” Kelly said by email. “[CEO Brian] Cornell had to get out of the way, and be a great manager, for Target to return to ‘Tar-Zhay.’ Target’s private label identities might not have the power some think — it’s really the power of the Target brand. Macy’s has to find its soul, its raison d’etre, its purpose. Macy’s has to answer the question, ‘Why should Macy’s exist?’

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