How Macy's went from retail pioneer to dying department store

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Macy's began as one of the first department stores and expanded into a retail giant with locations across the US. But now it's closing stores and cutting staff. Can Macy's survive the retail apocalypse?

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00:00 Macy's has shaped our culture in more ways than we realize.

00:04 From the way we shop to the way we celebrate holidays,

00:06 to even the invention of the retail Santa.

00:09 At its peak, it was a symbol of retail innovation

00:12 and cultural significance.

00:14 But sales have been slipping for decades.

00:16 Macy's has been closing stores

00:18 and letting go hundreds of people,

00:20 making us wonder if the department store

00:22 will fade in prominence,

00:23 like Sears, Kmart, and other Titans.

00:27 So what went wrong, and can Macy's make a comeback?

00:31 Macy's started as a small dry goods store

00:33 in New York City back in 1858.

00:36 It was called RH Macy & Co.,

00:38 and it was the fourth business attempt

00:39 by founder Rowland Hussey Macy.

00:42 On its opening day, the store only made $11.06,

00:46 but sales quickly increased,

00:48 and after a year, they reached $85,000.

00:52 In the following years, Macy's expanded

00:54 into 11 buildings around 14th Street in Manhattan.

00:58 That was the store's first location.

01:00 With his new business, Macy implemented a series

01:03 of business practice that we've never seen before

01:06 in the retail industry.

01:08 For example, at that time,

01:09 bargaining and bidding were the norm.

01:12 Discounts were frequent, and it was common

01:13 for customers to buy now and pay later.

01:16 But Macy added label prices to all goods,

01:19 and he stuck to it with no negotiation.

01:22 He also insisted on immediate payment in cash.

01:25 The American entrepreneur started the custom

01:27 of pricing goods in odd figures instead of round numbers,

01:30 like $4.95 instead of $5.

01:33 He thought this strategy would force his staff

01:35 to be more diligent with how sales were accounted for,

01:38 making it more difficult for them to pocket money

01:40 without being caught.

01:42 Macy was also the first to advertise prices in newspapers

01:46 and offer money back if customers weren't happy.

01:49 His new stores included a made-to-measure clothing service.

01:52 That launched the idea of tailoring

01:54 at big department stores.

01:56 In the 1860s, Macy's became the first retail store

01:59 to get a liquor license to serve alcohol.

02:02 By 1862, it created the concept of the retail Santa.

02:06 And just two years later, the company established

02:09 the tradition of holiday windows,

02:10 giving birth to window shopping

02:12 and spawning an entire industry dedicated

02:15 to designing elaborate store window displays.

02:18 Rowland Hussey Macy died in 1877,

02:22 but his family kept running the store

02:23 until another one took over, the Strauss family.

02:27 Nathan and Isidore Strauss were familiar with the store

02:29 because they were already doing business there.

02:32 They were selling imported china and glassware to RH Macy

02:35 and had started renting retail space

02:37 to establish a china department.

02:40 In 1896, the Strauss family officially bought the company.

02:44 And in 1902, the Strauss family moved Macy's uptown

02:48 to Herald Square.

02:49 The move was a meticulously planned operation.

02:53 It included a procession of 250 delivery wagons,

02:56 all going up Sixth Avenue.

02:59 The New York Times reported that it was the greatest moving

03:01 that ever happened in New York.

03:03 That nine-story store here would become

03:06 an iconic location in pop culture.

03:08 It had 33 elevators and four wooden escalators,

03:11 one of the first to be used in an American store.

03:14 It initially consisted of just one building

03:17 and was about 1 million square feet.

03:19 But the store soon expanded through new construction,

03:22 eventually taking up almost the whole block,

03:24 making it a little over 2 million square feet.

03:27 The department store had everything,

03:29 except for one corner.

03:31 This tiny slice of Manhattan is known

03:33 as the Million Dollar Corner

03:35 because Macy's has never been able to buy it.

03:37 And with all this new construction,

03:39 Macy's eventually became the world's largest store in 1924.

03:45 The same year, they hosted their first Thanksgiving Day parade,

03:47 which included animals from the Central Park Zoo.

03:50 10,000 people gathered to watch this amazing event.

03:55 After a few additions, elaborate floats were introduced

03:57 and became an essential part of this iconic parade.

04:00 In 1947, Macy's was really making a name for itself

04:04 in pop culture, especially with its role

04:07 in the movie "Miracle on 34th Street."

04:09 - What do you want for Christmas, Peter?

04:11 - I want a fire engine, just like the big one.

04:15 Macy's ain't got any.

04:16 Nobody's got any.

04:18 - And in 1976, it started its annual

04:21 Fourth of July fireworks show,

04:23 which continues to this day.

04:25 Over the years, Macy's continued to scale up,

04:29 opening regional stores all around the U.S.,

04:32 from San Francisco to Atlanta.

04:35 Macy's was capitalizing on growth

04:37 and taking risks by stocking up on lots of inventory.

04:40 While other stores were being cautious

04:43 in controlling how much products sat on their shelves,

04:45 Macy's stores always had product to sell.

04:48 At the same time, competitors were reducing

04:51 the number of buyers who chose what to sell

04:53 and started relying more on suppliers.

04:56 Well, Macy's did the opposite.

04:59 They hired more specialized buyers

05:00 so that each could focus on specific sections of the store.

05:04 That helped them identify products

05:05 that customers would love

05:07 and even uncover new business opportunities.

05:09 And while other retailers were investing

05:11 in research and strategic planning,

05:13 setting firm targets for return on investment

05:15 and other benchmarks, Macy's didn't.

05:18 They didn't really believe in having strict returns

05:20 on financial goals.

05:21 So in the mid-1980s, the iconic department store

05:27 started seeing the first signs of trouble.

05:30 The whole retail industry was experiencing

05:33 an economic slowdown, but for Macy's,

05:36 the downturn was worse

05:38 because they had already had high internal costs.

05:41 The company was spending a lot of money

05:44 rolling out more private label products

05:46 and on ads to attract upscale customers.

05:49 Their $500 million expansion across the American South

05:53 also didn't help.

05:55 Reports suggest they overestimated demand,

05:57 which led to stockpiling way beyond anticipated sales.

06:01 They also had to slash prices to clear out their excess stock.

06:05 All of that made it very hard for Macy's to pay its bills.

06:08 Crushed by a $6 billion debt,

06:12 Macy's fell for bankruptcy in 1992.

06:15 By 1994, Macy's was acquired

06:19 by Federated Department Stores,

06:21 a company that already owned its rivals

06:23 like Bloomingdale's and Abraham & Strauss.

06:25 With this purchase, it became the largest

06:27 department store retailer in America.

06:29 In the 2000s, the company tried a few different strategies

06:34 to revitalize its business.

06:36 It launched new brands and smaller stores.

06:38 It also started some major collaborations

06:41 with celebrities like Kate Moss and Sarah Jessica Parker.

06:45 It beefed up its rewards card to attract shoppers

06:47 and opened its off-price store, Macy's Backstage.

06:51 But Macy's has been slow to adapt to online shopping

06:54 and new consumer trends,

06:56 at a time when many customers were already walking away

06:58 from department stores.

07:00 On top of that, Macy's has been facing stronger competition

07:03 from discount retailers like TJ Maxx and Burlington,

07:07 and more recently, from fast fashion giants

07:09 like Zara, H&M, and newcomers like Shein and T-Moon.

07:13 So Macy's has not been able to slow down

07:15 this retail apocalypse.

07:17 Sales dropped and Macy's began closing stores

07:19 around the U.S.

07:20 In February 2020, Macy's announced a massive restructuring

07:24 that would close 125 stores and cut 2,000 jobs.

07:28 The goal of the plan was to generate savings

07:30 of about $1.5 billion a year by 2022.

07:35 The plan involved experimenting with concept stores

07:37 that operate outside of traditional malls.

07:40 In 2021, Macy's also joined the crypto craze,

07:43 auctioning off NFTs depicting its most iconic

07:46 Thanksgiving Day parade floats.

07:48 But in 2023, Macy's closed another wave of stores.

07:53 Behind the scenes, the company also underwent

07:55 a series of executive shakeups.

07:58 By February 2023, Macy's CEO, Jeff Gannett,

08:01 retired after working at the company for 40 years.

08:05 He was replaced by Tony Spring, the CEO of Bloomingdale's.

08:09 Today, Macy's runs 502 stores under its own banner.

08:13 An investor group offered $5.8 billion to buy Macy's.

08:18 The company declined, though,

08:20 citing a lack of compelling value.

08:22 Shortly after, Macy's announced it would close

08:25 another 150 stores in the next three years.

08:29 The closures will leave the company

08:31 with about 350 full-size Macy's department stores.

08:35 That's less than half of what they had a decade ago.

08:38 But in March, the same investors returned to Macy's

08:41 and upped their takeover offer to $6.6 billion.

08:44 That offer is still under consideration.

08:47 The fate of the retail giant remains unknown,

08:51 but no matter what happens next,

08:53 Macy's will always hold a significant part

08:55 of our culture, life, and history.

08:58 (gentle music)

09:01 (upbeat music)

09:04 (gentle music)

09:06 (gentle music)

09:09 (gentle music)

09:11 (upbeat music)

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