Macy’s Business Model and How it Makes Money

Macys Business Model

Macy’s is an American department store chain that specializes in various products. The company, founded in 1858, is the leading department store chain in the US and has held this position for some years. Macy’s headquarters is in New York City, but it has more than 500 stores in the US and globally as of 2021. The company employs over 75,000 employees in its stores as of 2021.

Macy’s popularity comes from its quality products and focuses on customers. The company has been successful in connecting with its customers, which has built customer loyalty. Its famous Herald Square store receives visits from 20 million people each year. Macy’s primary competitor is Kohl’s, which is the second-largest department store in the US.

Financially, Macy’s has had some ups and downs over the years. The company earned revenues of $17.346 billion in 2020. This revenue dropped by $7.214 billion (or 29.37%) from the $24.560 billion the company generated in 2019. The primary reason behind this downturn in revenues is the impact of the ongoing COVID-19 pandemic.

Macy’s isn’t the only company that has suffered financially. Its main competitor, Kohl’s, has also suffered a drop in revenues due to the same reason. As of 2021, Macy’s had total assets of $17.706 billion and total liabilities of $15.153 billion. The effects of the pandemic are also apparent on the company’s balance sheet in terms of changes.

Despite these performances, Macy’s has an overall profitable business model. Macy’s business model is its primary source of success. Over time, the company has experimented and changed this model. However, it is still competent enough to generate a sizeable profit for the company.

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What is Macy’s Business Model?

A business model consists of the various aspects that define how a company makes money. Every company or business has a business model which describes its key products, customers, revenue sources, expenses, markets, etc. Overall, a business model describes how a company generates revenues by defining all of the above.

Macys Inc

Macy’s has a business-to-consumer business model. Through this model, the company has used its stores to interact with its consumers directly. The company has over 500 stores in the US and some international locations. These are the primary income source for the company as they allow it to earn revenues.

Macy’s also uses a mass-market business model. Although the company focuses on its customers, it does not distinguish between various customer segments. This strategy comes under the mass market business model. The company also doesn’t segregate its value propositions, distribution channels, and customer relationships. Instead, it applies it to one large group of customers that have similar needs.

How Does Macy’s Make Money?

Macy’s generates revenues from various divisions. The company makes these divisions based on the type of product they sell. Given below is a summary of the different divisions that the company has and how they performed over the last three years.

Division202020192018
Women’s Accessories, Intimate Apparel, Shoes, Cosmetics, and Fragrances$7,206$9,454$9,457
Women’s Apparel$2,909$5,411$5,642
Men’s and Kids’$3,486$5,628$5,699
Home/Other$3,745$4,067$4,173
Total$17,346$24,560$24,971

From the above summary, it is clear that the company’s primary income source is the Women’s Accessories, Intimate Apparel, Shoes, Cosmetics, and Fragrances division. This division contributed to 41.54% of the company’s total revenues. However, this segment suffered a decrease of 23.78% in revenues in 2020 from 2019, which amounted to $2.248 billion in revenues.

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The Women’s Apparel and Men’s and Kids divisions have historically been the second largest divisions in terms of revenues. In 2020, however, the Home/Other division contributed to 21.59% of the total revenues. Despite the $0.322 billion decrease (or 7.92%), this division has not suffered as much as the other due to the pandemic.

In 2020, the Men’s and Kids’ division was the third-highest earner for the company. This division contributed to 20.10% of the company’s total revenues. However, it saw a decrease of 38.06% in revenues from 2018, which amounted to $2.142 billion. In 2019 and 2018, this division contributed 23% to the company’s revenues.

Lastly, the Women’s Apparel division was the lowest-earning division in 2020, contributing only 16.77% to total revenues. This division has been the third highest-earning division with 22% contribution each year in the past. However, the pandemic has hit the division the hardest. The Women’s Apparel division made the highest comparative losses with a $2.502 decrease in revenues. Furthermore, it was a decrease of 46.24% from the revenues it earned in 2019.

Overall, the company has suffered due to decreasing revenues in both 2020 and 2019. While the decline in 2020 is mainly attributable to the pandemic, the company also suffered a decrease in 2019. While Kohl’s, Macy’s primary competitor, also suffered a similar faith, Kohl’s drops were slightly less adverse.

Conclusion

Macy’s is the largest department store in the US with over 500 national and international stores. Macy’s business model includes a combination of business-to-consumer and mass-market business models. The company makes money from four divisions. However, its revenues have decreased over the last year due to the ongoing pandemic.

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