“It Pays to be Thrifty” is one of the most famous retail slogans of all time but if you think it was used by some classic discounter like Woolworth or Kmart or another long-lost nameplate, you will be surprised who it belonged to.
“It Pays to be Thrifty” was in fact the long-time slogan of none other than R.H. Macy’s, starting back in 1928 and for many years adorning a prominent corner placement on its flagship Herald Square flagship in New York City.
It’s why the conversation over the past week about Macy’s expanding its Backstage off-price operation — and the resulting flack it incurred from critics who say it’s detrimental to the long-term prospects for the troubled department store — may be missing a little historical context.
Macy’s has in fact just about always been a retailer that has lived — and sometimes came close to dying — by discounting. Yes, it’s a department store and all that the format entails, but for the first half of the 20th century and for some period afterwards before the discount store channel came into its own, it was a retailer that focused on promotions and price-oriented merchandising. It was only in the past few decades — particularly in the wild expansion days of the end of the century and into the early 2000s — that it tried to move more upscale. Even then the Macy’s One Day Sale (lasting at least two days in most cases) and all the accompanying promotional feeding frenzy were very much a part of the company’s merchandising strategy.
Which is why the position it finds itself in now is particularly tricky. It is difficult to move upmarket after its decades of high-low pricing promotions. Besides, Neiman, Nordstrom
Nor can it stake on the low-end part of the spectrum anymore. Certainly Walmart
And the middle of the market, where Macy’s is attempting to play, is retailing quicksand. It’s already consumed most of the department store nameplates in the country and the few hanging on are doing so by the grace of either the family that has their name over the front door or private equity owners who still see a retail cow that has a little more milk to give. A few others are pretty much irrelevant in the marketplace.
All of which helps explain Macy’s Backstage and the increasing prominence it is taking in the corporate picture. Yes, it’s outperforming the company overall and the off-price channel is really the only one in physical retailing besides dollar chains that still has upside potential for expansion. But here too the competition is ferocious. The TJX brands, Ross, Burlington and some smaller up and comers like Ollie’s make for a tough playing field and whatever distinction Macy’s has by co-locating its off-price unit within its full price stores may not be enough of a strategic advantage.
So, Macy’s is the ultimate retail monkey in the middle, boxed in on all sides and getting squeezed at every turn. Which begs the question what does it need to do to succeed? One approach, multi-tier retailing, is possible: look at all the brands like Ralph Lauren, Coach and Michael Kors that sit at both the full-price and off-price tables. It’s a delicate balance and the minute the scales get tipped too far in one direction it can be disastrous. Each of those companies mentioned has made that mistake and suffered the consequences. Macy’s could continue to operate both traditional department stores and off-price (with Bloomingdale’s as the icing on the pricing cake) but it’s not easy.
Or — and here’s a retail slot that really doesn’t exist anymore — it could go back in history and revive the “It Pays to be Thrifty” positioning. Could it offer name brands — both its own and national labels — in an attractive physical space while doing the same online, providing a model that neither off-pricers nor legacy retailers on any level are currently doing? It could offer a different shopping experience than mass merchants but with a price-driven strategy on goods those retailers don’t have access to. The execution would need to be worked out but there isn’t anybody who disagrees with the premise that Macy’s needs to do something different.
Is being Thrifty the answer? It was in 1928. A century later it might just be again.