The omni-channel transformation at Macy's is finally working, just as Trump's China trade war comes along to complicate things

Profile picture for user slauchlan By Stuart Lauchlan May 16, 2019
Summary:
President Trump thinks tariffs are great; Macy's CEO Jeff Gannette isn't so happy.

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You’ve got to feel a pang of sympathy for Jeff Gannette, CEO of US retail institution Macy’s. He’s slashed redundant real estate, reduced headcount and invested heavily in digital to pull off a turnaround at the troubled brand.

Now, just as it looks as though that multi-year effort might be paying off, along comes Donald Trump pitching his trade war with China to threaten the recovery of a great American company.  Or as Gannette puts it:

The three tranches of tariffs that were enacted in 2018 have no meaningful impact on our business and were factored into our 2019 guidance. The increase of the Third Tranche from 10% to 25% on May 10 does have some impact, particularly on our furniture business. If the potential Fourth Tranche is placed on displays on all Chinese imports, that will have an impact on both our private and our national brands.

Sometimes it seems you just can’t get a break - which is unfortunate as elsewhere, while it’s not a case of the fabled Miracle on 34th Street, there are some positive indicators that the omni-channel reinvention of Macy’s is starting to pay off. Gannette says:

As an omni-channel retailer, our competitive mode is a healthy brick-and-mortar business, a robust e-commerce business and a great mobile experience that ties it all together. We are applying a balanced investment strategy to support all three. We are focused on providing our customers with a great experience, no matter where or how they shopped.

Successes

That being so, the CEO is able to point to some upbeat data on all three fronts, starting with the Growth 50 store initiative, which is built around 50 branches nationwide which have been upgraded with new retail tech:

The Growth 50 stores continued to outperform the rest of the fleet, which gives us confidence to expand this treatment to 100 more stores this year…. These 100 stores, we do expect to behave the same as the Growth50 stores do.By the end of 2019, these 150 stores are going to represent about 50% of the brick-and-mortar business that the Macy's brand has. So it's going to make a meaningful difference we believe to our overall brick-and-mortar trend.

The e-commerce business is delivering double-digit growth he adds, while mobile remains the fastest-growing sales channel, having cross the $1 billion mark in app-enabled sales in 2018. For 2019, the intention is to enhance the app experience and functionality. That costs money, but it’s worth the spend, says Gannette:

A lot of our technology spend is going towards really making mobile best-in-class. Our customers really voted on this, and mobile is definitely the method of choice that they're using. It's a constant shopping companion, and so improving the in-store experience, improving the navigability of that anywhere anyhow they want to engage through the mobile app we are spending towards.

There are three “buckets of mobile” spend, he adds - My Wallet, My Stores and My Stylist. The first of those is crucial to the rise of Buy Online, Pick-Up in Store (BOPS) and Buy Online, Ship to Store (BOSS), now accounting for over now over 10% of all digital demand, says Gannette:

BOPS and BOSS is becoming a much more potent piece of an omnichannel of our strategy and customers really like the convenience and the security of picking up in store. So they can do it in the same day, if it's a BOPS purchase or they can do it for something that we're shipping in from one of our warehouses or from vendor direct that takes a couple of days. With My Wallet, they have the opportunity to get in and get out of the store much faster. So My Wallet is also helping us with the My Rewards function that gives app-exclusive point incentives and in-store awards.

My Stores focuses on improving the in-store experience by providing features such as store maps to help guide customers around via their mobile device. Coming up is a pilot for product location finding and in-store product recommendations, as well as extension of scan-and-pay capabilities.

Finally there’s My Stylist a ‘virtual stylist’ via a customer’s mobile device. Gannette explains:

We're piloting that right now in the second quarter and we're adding the ability for the customers to find and follow a stylist that they can collaborate virtually with via chat or with a style board. It also gives [customers] the ability to follow ‘transform influencers’.

STORY telling

The latest new push is STORY at Macy’s, a “narrative driven retail concept” according to the corporate blurb. Macy’s purchased STORY last year to deliver essentially a ‘store as media’ that changes on a rotating basis. In other words, it’s the idea of having pop-up stores inside the main Macy’s branch whose focus alters to keep customer interest engaged over time.

STORY at Macy's opened at 36 stores across 15 states last month, says Gennette, who claims an early positive response from consumers:

This is a retail concept that takes the point of view of a magazine, changes like a gallery, and has a unique merchandising approach. Each STORY at Macy's has a robust events calendar and community outreach plan that will be refreshed with a new theme and merchandise every 10 to 15 weeks. STORY at Macy's gives new customers a reason to visit our stores and gives our current customers a reason to come back and see what's new. The STORY launch is part of our ongoing strategy to improve customer engagement and drive store traffic through exceptional experiences.

My take

Macy’s is of course far from being the only US company that will take the pain for the Whitehouse’s tariff war with China. We're going to be hearing the same story from a lot of places in the coming months if the situation carries on. As Gannette gloomily observes:

It is hard to do the math to find a path that gets you to a place where you don't have a customer impact.

It’s clearly an unwelcome distraction, stealing executive attention as the company looks to find ways to mitigate and minimize any impact, which is why the Macy’s CEO hopes that “these trade actions will de-escalate”.

Well, he can hope, but I wouldn’t be holding my breath if I were him.

But assuming that this too will pass - and Gannette does observe “We’ve been through this before.” - there is an optimism around Macy’s omni-channel transformation which hasn’t been visible for a long time.

But it would be horribly ironic if in a supposed effort to Make America Great Again, President Donald Trump crippled the recovery of a venerable US retail brand