The customer is just increasingly omni-channel.
So says Macy’s CEO Jeff Gennette, reiterating a thesis that’s underpinned the iconic US retailer’s Polaris turnaround strategy. COVID clearly interrupted progress to some degree, with Macy’s being particularly hit by the collapse of the travel sector, but progress there has been as seen in the latest quarterly numbers from the firm.
Macy’s reported net income of $345 million for the quarter to 31 July, against to a loss of $431 million in the year-ago period Operating income was $597 million versus an operating loss of $631 million in the 2020 quarter. Sales rose to $5.65 billion, up from $3.56 billion in the year-ago period. Digital sales grew 45% in the quarter, with total digital sales penetration now at 32%, even as footfall in-store has risen.
So as the Vaccine Economy takes shape, the challenge for Macy’s is to come to terms with who their post-COVID customers are and what they want. That’s not a simple ask, admits Gennette:
It's really hard to tease out their behavior. It used to be, five years ago, you would have two touchpoints for our customers before they would consummate a transaction; it’s now at six. You've got customers who are going into stores, [but] they are buying later online or on their device. They're doing research, they're getting inspiration in the social channels. We’ve got our colleagues in stores that are basically doing virtual selling…A lot of our core customers that were basically not shopping and they were not comfortable going into a store, they had shifted their behavior during the pandemic to online purchasing. You saw some of that shift back into stores. The younger customer was shopping in both channels with vigor.
But there are still tranches of customers who aren’t coming back in-store yet, he adds:
It's not correlated to vaccination rate. It's really kind of the psychology of those customers. Many of those customers are not buying online or in-store. We believe that we will get a recovery with those customers over time. That will come in 2022 and beyond.
In the meantime, it’s vital to maintain a best-in-class digital experience, Gennette said:
We continue to make investments in foundational improvements to keep our online platform current, and differentiated digital experiences that provide greater service, discovery, and value for our customers. We made advancements in enterprise-wide data and analytics capabilities to improve inventory placement, pickup, and delivery options, boosting speed and convenience for online orders. These omni-channel investments are showing strong results. We saw customer spend increases across both new and retained customers.
Scaling omni-channel thinking across the entire customer shopping journey is crucial, he explained:
That journey increasingly begins with research and initial exploration online. We have a fully integrated business with a portfolio of product categories and brands that allow us to meet our customers based on who they are and how they want to engage with us. To me, it is clear that a comprehensive retail ecosystem with physical stores and the best malls and the most productive off-mall locations integrated with a best-in-class e-commerce offering is a powerful combination and is moving us forward as a strong, digitally-led omni-channel business…The Macy's Inc. portfolio is digitally-led because there is no doubt that consumers expect us to do this exceptionally well. We are robustly omni-channel because stores and sites and mobile apps are stronger together than any one alone.
The ‘digitally-led’ approach is appealing it seems, with 5 million new customers engaging with Macy’s via online and social channels - and they’re ‘the right sort’ of customer. Gennette explained:
They're younger, they're more diverse. You have a little over 40% came in via digital. And they came in through a lot of the categories that we have great strength in. They came in through fragrances, they come in through some of the millennial categories that we're building out. They come in for denim and it gives us the opportunity for that first purchase and to then [say]. ‘OK, what's their behavior in that first purchase? How do we get a second and the third purchase with them?’.
So our personalization techniques and our data analytics capabilities are really coming to the fore and it's really helping us see additional messaging. We're obviously making great incentives for them to come into our loyalty program. But what we find is, those categories that we have the highest market share in are generally where the new customers are coming in.
Our opportunity to give them new content, new categories and new offers is seeding long-term behavior and in many of them moving up our loyalty chain. We have the younger customer very much in mind. And when you look at the 5 million customers that came into the brand, having not seen the bulk of them before, it was very encouraging.
It’s not quite the Miracle on 34th Street, but it’s steady progress at last. Gennette continues to strike sensibly cautious notes. The Delta variant isn’t helping to encourage tourists back on the plane to New York any time soon. But he certainly also has reason to be confident that the omni-channel play is paying off.