Macy’s will invest in minority groups’ businesses
Robin Wilson has experienced plenty of success since starting her home textile business, Clean Design Home, in 2000. Her hypoallergenic products have been sold at Bed Bath & Beyond, and she has fulfilled large orders for a hotel chain. Her wares are also available at 50 Macy’s locations across the United States, which has resulted in millions of dollars worth of sales.
But Wilson is primarily self-funded, and as she looks to expand her business into other categories, such as mattresses, she estimates that she will need at least $1 million in financing.
“How do you become a brand that people just walk into a store and say, ‘I want that’?” she said. “That takes a lot of pushing open doors, layering the marketing, doing public relations. And there’s a certain point when you just don’t have the money anymore to do that.”
“That’s what’s so important at this point,” she said, “because we are on the cusp of that.”
Now, Wilson and other small-business owners may have a new avenue to secure that kind of financing. Macy’s, the largest department store in the U.S., plans to invest $30 million over the next five years into three financing channels meant to support businesses run by people from underrepresented groups in the retail industry. It is working with Momentus Capital, which will oversee the loan fund. The retailer, which brought in $25 billion in annual revenue in 2021, said total financing for these programs would equal $200 million.
The money will be offered in the form of loans for working capital and commercial real estate, as well as growth equity capital. Executives with Macy’s said they wanted the vendors it works with now and new ones to be involved with the program. They said they expect the initiative to boost profits for the company, in part because they believe their customer base will expand and diversify.
“With a lot of these ventures, they’re starting points in helping,” said Jessica Ramírez, a retail research analyst at Jane Hali & Associates. “We have to just see with time.”
To many businesses run by entrepreneurs who are not white and not male, it has been clear for years that access to more financing is needed to expand their operations and fulfill the demands that come with working with major retailers. Black, Latino and women founders receive only single-digit percentages of venture capital, even though those groups make up a much larger percentage of the U.S. population. Black founders received just 1 percent of venture capital funds, and women and Latino founders received 2 percent.
Macy’s has been trying to figure out how to make its vendor base more representative of the U.S. population, and its shoppers. This spring, it began a program called Mission Every One, where it committed to spending $5 billion through 2025 on initiatives to promote diversity and sustainability. In late 2020, it signed the 15 Percent Pledge, which asks retailers to allocate 15 percent of their shelf space to items from Black-owned businesses. The company says the number of Black-owned brands on its shelves has increased eightfold since then but still has not reached the 15 percent benchmark.
“We have emphasized a holistic approach in regard to supporting Black businesses, meaning that we work closely with retailers to identify opportunities, beyond just expanded shelf space, to break down barriers that have systematically held back Black entrepreneurs,” LaToya WilliamsBelfort, the executive director of the 15 Percent Pledge, said in an email.
Wilson is one of about 200 entrepreneurs who have completed The Workshop at Macy’s, an intensive program started 12 years ago in which underrepresented suppliers learn business skills like how to reach investors and assess pricing strategies and how to receive feedback and gain insights from the department store’s executives.
But Macy’s executives realized that instilling business lessons alone was not enough. Many small businesses have thin margins and employ a dozen people or fewer. To work with a large department store, money is a necessity. To sell with major retailers that have hundreds of stores, smaller businesses often need more labor or equipment to fulfill bulk orders, and there are costs associated with widespread marketing.
“This gives them an opportunity to breathe a little bit, and that’s important in companies that have great ideas but they need to take root,” Macy’s CEO Jeff Gennette said of the new fund.