M.O.M – A Star in Retail
Macys is a leader in retail through its strategies of localization, omnichannel, and magic selling
Macy’s is a winner because it has a strong set of core business strategies, successfully aligns business and operating models, and has an appetite for change.
Macy’s core business strategies include My Macy’s, Omnichannel, and Magic Selling or known by the acronym M.O.M.
[M] My Macy’s is a localization strategy designed in 2008 which focuses on offering localized merchandise selections so that it can better target each customer base. Styles, weather, and demographics differ among regions and thus Macy’s strategy is to source merchandise that fits its local customer base, as opposed to having a one-size approach.
[O] Omnichannel (a seamless customer experience across all channels) has been the hot trend in retail and Macy’s has developed a premier strategy. Macy’s offers services such as buy online, pick up in store, mobile POS, in-store kiosks. Macy’s also has developed programs to track the customer seamlessly across channels and continues to invest in its website and mobile app.
[M] Magic Selling focuses on excellent customer service through training, which involves the store associate diagnosing the customer’s needs, offering suggestions that meet the local customer, building loyalty, selling items that may not be in-store due to stock outs or online-only items, and providing speedy check-out via mobile devices.
To achieve the features of M.O.M., Macy’s uses an operating model that focusing on redefining merchandising, investing in technology, and strengthening human capital.
Merchandising: Macys’ has shifted its merchandising to a regional level where assortments are handled at the local level, leading to quicker decisions and streamlined processes. Additionally, Macy’s has closed several stores to eliminate redundancies and to focus on online. Through these efforts, Macy’s expects to save 140M per year.
For distribution, Macy’s had adopted an approach to fulfill items ordered in store from other stores or online fulfillment centers. To enable this approach, Macy’s has expanded its back store rooms where goods are packed and has invested in” inventory-optimizing technology that can reduce markdown costs by enabling mis-located items to be sold, either online or in alternate stores.*”Additionally, Macy’s has trained associates to fulfill orders by selecting merchandise off the floors to ship, since associates know the merchandise best and can quickly identify where items are located. If the customer is already in store and merchandise is out-of-stock, the employee can use the inventory-optimization technology to check store-wide availability, locate items, and arrange for shipment.
Technology: Macy’s had made significant investments in additional technology to support the M.O.M strategies, such as RFID to better track inventory and replenishment, building algorithms from where to pull inventory, and using beacon technology for location-based digital coupons. Macy’s is continuing to experiment with additional innovations such as “smart” dressing rooms (customer can use a tablet on the wall to check other colors, sizes, and reviews while trying on an item).
Human Capital: To support Macy’s emphasis on customer service and MAGIC selling, Macy’s employs a training program that teaches the following: integrating with omnichannel, how to educate customers on the My Macy’s strategy, how to order merchandise from other channels on behalf of customers, etc. Also, managers conduct frequent coaching sessions with each associate to maintain excellent customer service levels. In regards to compensation, associates are provided minimum wage with some associates eligible for commission. Departments such as shoes, beauty, and jewelry are considered high-touch customer departments and call for a deeper level of customer service within the business model. Thus, associates in these departments are provided commission to support these business goals. To maintain an engaged workforce, Macy’s uses contests to encourage selling, tracks sales per associate, encourages customer service surveys to recognize associates and asses development, holds daily team meetings for all associates, and fosters a positive and inclusive family environment.
As a result of these initiatives, Macy’s annual revenue has increased compared to its peers and is expected to remain a leader in the omnichannel space. Macy’s competitive advantage is that it has recognized the need for a multi-year master plan that encourages large investments in technology and embraces a culture of change. Additionally, its commitment to training its workforce sets the retailer apart from the competition since front-line associates are essential in delivering the back-end strategy and sustaining customer loyalty. From personal experience, I have worked for several retailers and seen how Macys has outpaced its competition in embracing change, fostering its culture, and working on continuous improvement.
In conclusion, Macy’s is ahead of the competition because it knows which business strategies to deploy and how best to organize its operating models to support them.
Student comments on M.O.M – A Star in Retail
Timely post, Sabrina. I recently shopped by Macy’s in Boston for Black Friday but found that most items on my list were out of stock, so I definitely appreciated their easy-to-use online channel. Through the online fulfillment process, I was quite surprised how many separate shipments they sent out for an order. My order had 5 items and they sent me four separate shipments in a span of three days! Perhaps this is a consequence of allocating season-specific, market-specific items to certain stores. But I have to wonder how the costs of separate fulfillment and shipping of products add up, and how Macy’s compare in profitability to JCP et al. (i.e. incorporating the cost side to the last chart).
Great post, Sabrina! Building upon the premise that more data will lead to better customer service, the point that seems to be the most valuable to Macy’s strengths is the ability to track customers across channels and measure engagement. If indeed the key to winning in this space is the successful multi-channel engagement, it is critical to be able to measure and perhaps A-B test initiatives and innovations. It would be interesting to follow the customer response to the “smart dressing room,” to name just one example, and whether there are ways to leverage mobile browsing with the in-store experience in a way that customers respond positively to. Fascinating!
Sabrina – thanks for sharing! In your post, you stated that Omnichannel is one of Macy’s core strategies. Do you know how the shift to Omnichannel has affected their bottom line? I know many retailers are struggling with the shift, because the unit economics with shipping are very challenging, especially in a time when companies are still paying the fixed costs of opened stores. Given Art’s post about receiving 3 boxes for one order (which is not that uncommon for retailers), I am very curious about their bottom line profitability.