Last month US retail giant Macy’s turned in some quarterly numbers that suggest that the beleaguered firm might - just might - have turned a corner in its recovery. After a long period during which it was best known for its real estate fire sale, the retailer showed signs that its omni-channel strategy might be bearing fruit.
Despite this, the firm was beaten up by Wall Street, with a sharp drop in the share price as investors looked for short term progress in what is clearly a long term transformation. For CEO Jeff Gennette that has to be a frustrating thing, but it’s one that can only be countered by getting out and telling his side of the story.
That was the backdrop against which he spoke at last week’s Goldman Sachs 25th Annual Global Retailing Conference where he drilled down on the plus points in the Macy’s story, beginning with a restatement of the basic mission statement:
The Macy’s Inc.’s recipe for success, which is both Bloomingdale’s as well as Macy’s and Bluemercury, is healthy brick-and-mortar, robust e-commerce business and a great mobile experience that ties it all together.
It’s a kind of retail holy trinity, he suggested:
Our customers with the highest lifetime value are engaging with us in all three channels. We also know that that new customers coming into the brand, shop the way they live, anytime and across channels. They expect inspiration, fashion, convenience and clear value. They expect a great experience every time they encounter the Macy’s brand, whether it’s in our stores, on our sites or through our app. We’re working hard to deliver this experience and we are seeing good results.
Our e-commerce business continues to grow double-digits. We’re in the process of a significant expansion of our online assortments, alongside building out enhanced personalization features that will help our customer create for herself, while shopping online. And today, the in-store and online experience are increasingly integrated, our customer often begins a transaction in one-channel, and she completes it in another
While the long game aspect of the turnaround strategy isn’t pleasing investors, Gennette pitched the idea that Macy’s has benefitted from this, citing mobile as a case in point;
We invested early in mobile and it is paying-off. We are seeing increased sales through the mobile app, and this year we expect to reach $1 billion sales in transactions through the app. Mobile is also the delivery point for many of our improvements and the in-store experience. This includes price checks, way finding, we’re also relieving a major paying point for our customers, with Mobile Checkout, which will be in almost every one of our stores by the end of October.
Another positive development is the rollout of At Your Service fulfilment centers, he said:
By the end of the third quarter, these centers will be in almost every one of our doors, allowing our customer to select a product online, or through the app and then pick it up in our local store. At Your Service centers give our omni-channel customers the convenience that they are looking for and these centers also improve the overall experience in the store, as many of our customer service activities, such as returns or exchanges are being handled by the dedicated staff at At Your Service.
As for the stores themselves, the worst of the fire sales are over and it’s now all about upgrading the infrastructure that remains. Gennette pointed to the Growth 50 initiative, stores that are used a test beds for improvements:
In the Growth 50 stores, where we’re putting more focused attention and investment, growth trends have improved to the point where we’re confident in our thesis and ready to expand this approach to more doors in 2019. But we’re just not investing in these 50 stores. Many of our major upgrades to the in-store experience including Mobile Checkout and At Your Service are going to almost every door, because every door continues to have a role to play.
After several years of significant downsizing, our store fleet is now well positioned to serve our customer and take advantage of the growth opportunities that being a successful omni-channel retailer presents.
But there’s a need to re-imagine the role of the store, he added:
Where we’re seeing a store right now is that healthy brick-and-mortar involves really hyper-curation at a store level and using customer data and personalization to be able to let them curate for themselves online.
There’s also a heavy emphasis on the Macy’s customer loyalty scheme to enable a level of understanding to empower such personalisation. Gennette explained:
The loyalty program is all based on where the customer wanted us to go. When we looked at our loyalty program a couple of years ago, she was confused. She was confused by the amount of value that she was getting. One customer didn't know about how she'd be treated versus another customer.
We had two major phases at the loyalty program. The first one was how do you take care of your existing core customer and make sure that we're really dealing with all of her needs. We looked at our competitors, we looked at what was good programs there. And we wanted to massively simplify the Star Rewards program.
So what we launched almost one year ago was the Star Rewards program and was the silver, the gold, the platinum levels. And we have been very pleased with the results of it, particularly when you look at our top customers. She's spending at very different rates than she used to with us as a result of the program.
But that was good for the existing base - how do you keep your existing customer happy, how do you make sure she's not migrating down in her spend? How do you build on the lifetime value? The Rewards program has done that for us.
But there’s also a need to attract new customers, he added:
We also had an opportunity about how we'd be a more attractive brand for new customers to enter. And so when you look at what we created with our bronze level of the program, it's tender neutral. [We are] very pleased with the number of new customers that have joined the brand as a result of the bronze program. It grows every single day, but our objective was to hit a million and we hit that first benchmark exactly where we thought we would. That's going to continue to grow.
The loyalty program is going to be the gift that keeps on giving. The more and more we treat our customers, they're clear about what our products are and our values are. And what they need to do in order to get additional values, that's working for us. And we're going to continue to build on those successes.
As for that long game with Wall Street, Gennette was pragmatic in his assessment:
2018 is an investment year for Macy's as we chart our path to sustainable profitable growth. I've spoken about our approach of test, iterate and scale. In 2018, we're rolling our programs that we tested in 2017 and that we know will work.