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Macy's Blueprint for Omnichannel Dominance

By Joe Skorupa

Which retailer is the clear omnichannel leader, staking an advanced position in the vanguard of the retail industry and posting impressive financial figures while doing it? Of the several contenders that come to mind, including Nordstrom, Urban Outfitters and Cabela’s, Macy’s has the inside track on this very elite pack. Here’s why.
 
According to recently released financial figures Macy’s grew overall sales by 3.7% in 2012 and increased sales at stores open at least a year by 3.9% in the last quarter (November to December 2012 and January 2013). These numbers are impressive, but pale in comparison to Internet sales for the quarter, which were up a formidable 48%.
 
Financial figures this strong for a super tier-one department retailer in the Amazon era, which is characterized by a struggling brick-and-mortar business model, raise an obvious question: How is Macy’s doing it?
 
The answer is by the inspired design and execution of a master plan that leverages omnichannel capabilities. Here’s a detailed look at the Macy’s blueprint for omnichannel success:
 
  • My Macy’s: This corporate initiative is aimed at grouping together small gains made at a local level that when combined add up to a big number. Macy’s go-local initiatives achieved strong performance in such niches as Latino, small-footprint stores and targeting millennial shoppers. Macy’s considers these examples as part of an “extreme growth” strategy, according to Karen Hoguet, Macy’s chief financial officer.
  • Omnichannel fulfillment. This refers to the ability to fulfill online orders both from inventory at warehouses and from stores. Currently, Macy’s has enabled 292 stores to fulfill online orders. By the fall, this number will jump to 500 stores. Competitors should take note of the implications of being an early adopter of a project this complex: “We’ve built algorithms to help us determine from where to pull inventory,” says Hoguet, “and we are learning more each day about how we need to refine these formulas.” The ultimate goal, according to Hoguet, is to offer faster delivery, even same-day delivery of online orders.
  • Other omnichannel initiatives include investments in improving the website and mobile app to make shopping easier and faster, adopting digital marketing technologies that leverage a 360-degree view of customer shopping behavior, and collaborating on merchandising strategies across all channels.
  • Magic selling. This is a Macy’s term that encompasses the training and coaching of associates to improve customer engagements and selling skills, which is probably the most under-utilized technique in retailing. One focus of this strategy is to teach associates to ”think omnichannel,” which means selling customers merchandise that may not be in the store and embracing customers who are making returns, which is another under-utilized opportunity in retailing.
  • Millennial strategy. Before the holiday season Macy’s launched 13 new millennial brands and expanded 11 existing ones. The brands are aimed at two demographics – ages 13 to 22 and 19 to 30 – that are perceived as being trendier and more fashion oriented than other segments. Names of some of the new brands are Marilyn Monroe, Truth or Dare, Ambiguous, Fatal Clothing and Plan B.
  • Item-level RFID. Macy's RFID rollout has been expanded to all women’s shoes across the company. Next up will be luggage and men’s shoes by summer.
Most retailers cannot match Macy’s spectrum of omnichannel initiatives because they have not created the multi-year master plan needed to achieve it. This means they have not done the consistent investment required to create accurate, real-time views of inventory, order management, supply chain management, store and online transactions, and customer histories.

Macy’s began its omnichannel journey in 2009, and four years later it is reaping the rewards of its multi-year efforts. When it began it had a clear idea of what omnichannel meant, something many retailers still struggle with for some reason. Hoguet recently offered this definition: “We are working to provide our customers with seamless experiences no matter how they choose to shop with us and utilize the strengths of each channel to satisfy demand and service customers’ needs better than we could if we didn’t operate multiple channels.”

The upside Hoguet expects from its omnichannel blueprint is still enormous, even several years into the program. “The line between stores and the Internet is blurring so much,” she says, “that beginning in 2013, we are no longer going to break out our Internet growth when we report our results.”

In the future retailing will not be omnichannel or e-commerce or brick-and-mortar or any other channel. It will simply be retailing.

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