Can Macy's MOM deliver an omni-channel future for the 'world's largest store'?

Stuart Lauchlan Profile picture for user slauchlan November 11, 2015
Summary:
Macy's is looking to its MOM to rescue it from its current troubles, but is there really an omni-channel future within reach?

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The retail sector is going through “a tough period” of the kind it does every 7 years or so, reckons Macy’s CEO Terry Lundgren.

He would say that of course. He’s just turned in third quarter numbers that saw profits plummet 46% from $217 million last year to $118 million this year as sales slipped 5.2% to $5.87 billion, missing Wall Street expectations of $6.1 billion.

The company attributes the profit decline to a $111 million impairment charge related to store closures, but the reality is that you can be the “world’s biggest store” and still come under massive competitive pressure in an omni-channel age.

Lundgren’s response to this to point to the firm’s MOM strategy, but insists that he just needs more time to execute on the constituent parts of this:

  • M is for My Macy’s. Lundgren says:

We continue to focus on localization and getting the right mix of merchandise in our stores for our customers at a local level. We are now taking this to an even more granular level with more focus on personalization. This will happen both in-store and online. Our aspiration is to help personalize shopping experience and offers to our customers as they walk into our stores or enter our website. We also need to help attract new customers in ways that we will make them feel like it is My Macy's for each and every one of them.

  • O is for omni-channel. Lundgren says:

Omni-channel now embraces our mobile strategy as well as some new services and models that we've begun testing such as subscription services. We intend to fully push the digital frontier utilizing our innovative culture with more and more testing and faster learning. We also are helping customers get merchandise however they wish, whether it be same-day delivery, Buy Online Pickup in Store, whatever is their preference.

  • M is for Magic Selling. Lundgren says:

This has been expanded to encompass magic experiences beyond just the selling floor. We need to keep making progress with our service, particularly in-store. Although operating over 750 locations with approximately 150,000 associates and providing good service in every transaction does present its challenges, it is an essential part of our mission.

As part of this strategy, we are pushing to improve shopping experiences through our people as well as through technology. We have piloted our approach in jewelry and watches in 40 locations this fall, and based on its early success, we are rolling it out companywide in mid-2016. We have had great success with licensed businesses, which help us acquire new customers and make our stores more productive.

Online, offline

Lundgren’s major challenge is to square the circle between online and offline:

There’s going to be a growing percent of the business is going to be on our digital platform, certainly related to omni-channel. One of the complicated things about our business is that we're going to continue to aggressively support omni-channel shopping, but in many cases the customer is actually looking at her phone first, deciding where to go, coming in to the store, spending time inside the store, talking with our associates, maybe even trying the product on and then buying the product from us later, either that day or putting it in her basket and buying it a day or two days later.

So we don't necessarily believe that that sale would take place if they didn't have the store experience, but when you look at the store impact, that's a negative for the store in terms of time invested, expense invested versus – and a positive for the online business, who is getting the credit for the sale.

This has operational implications, he adds:

That's why we have to continue to look at these as overall omni-channel transaction as opposed to one versus the other. But it does create a complication for us in making sure that we understand just how many stores we need, how far will the customer drive to, try on this product once they've discovered it on their mobile device or their tablet device.

He concludes:

Those are the kind of things that we're thinking through but we think over time that nets to more and more of the business to continue to come from digital. We're growing at a double digit rate and we're already the seventh largest Internet retailer in America today, so more of the mix will come from purely how we calculate, the way I've just described it, in the online category portion of the business.

My take

We intend to fully push the digital frontier utilizing our innovative culture with more and more testing and learning.

So says Lundgren - which is all good and well.

But meanwhile shares in Macy’s dropped 15% to a new 52-week low yesterday.

Ouch.

 

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