In August, Macy’s announced that it would close 100 of its stores after recording six quarters of declining sales.1 There are many reasons why Macy’s is struggling, some that are unique to its business and others that plague brick-and-mortar more broadly. On the latter point, retail analysts agree that millennials prefer the convenience of shopping online. Mallory Schlossberg, contributor at Business Insider, explains, “If people can shop online, why bother going into the store? If it’s an unpleasant experience – and shopping at Macy’s can be – why even try to sort through the mess?”2 However, Macy’s is not giving up on its stores that easily. Instead, it is digitizing them to create a more seamless, exciting shopping experience for its customers.
Macy’s business and operating models
Macy’s offers customers a range of high-value and high-quality fashion and household products, served via a convenient in-store and online shopping experience.3 To deliver on this promise, the Macy’s operating model must ensure that customers can easily locate and purchase whatever merchandise they want, whenever they want it.
Bringing digital to stores
One way that Macy’s is digitizing stores is by adding RFID (Radio-Frequency Identification) tags to its products. The tags contain a chip and antenna, which transmit a unique signal. Reader machines interpret these signals and generate reports detailing store inventory.4
Macy’s plans to roll out RFID technology to all stores by the end of 2017.5 One of the key benefits to RFID is that it enables Macy’s to build an accurate, consolidated view of inventory across its stores and warehouses. This enable Macy’s to buy product more efficiently and leverage stores as nodes within its broader distribution network. For example, suppose a customer in Massachusetts orders a toaster oven from Macys.com. Instead of shipping that product from a distribution center in California, Macy’s may be able to achieve a faster, cheaper delivery by shipping it from a local store. Alternatively, Macy’s may ship it from a store that is holding excess inventory, lessening that store’s need to eventually discount the product.6
The implementation of RFID tags also improves the customer’s shopping experience. A study led by GS1 US concluded that inventory accuracy improves from 63% to 95% among retailers that implement RFID.7 The more refined its inventory tracking capabilities, the better prepared Macy’s sales associates are to serve customers. For example, if a customer is unable to find her size, her sales associate can easily survey inventory across nearby locations and request that the item be shipped to her. Additionally, RFID technology enables customers to buy online and pick up in-store, a time-saver for those who need an item ASAP.6
Overall, Macy’s estimates that RFID has helped reduce its inventory position by $1B across stores, while simultaneously improving customers’ ease of shopping.8
Macy’s is also innovating its in-store experience by using beacons to serve custom messaging to shoppers’ smartphones. Beacons are devices that transmit Bluetooth signals to nearby smartphones.9 Customers with the Macy’s app can opt into receiving push notifications and other marketing communications as they pass by beacons throughout the store. The goal of these communications is to generate excitement and drive purchases. For example, during Black Friday last year, Macy’s launched the “Walk in and Win” campaign, which allowed users who visited a store to play a beacon-activated mobile game offering $1M in prizes. Other applications of beacon technology include surfacing discounts, as well as product recommendations, information, and tutorials.10
As it looks to the future, Macy’s should identify new opportunities to integrate technology into its stores, taking cues from other fashion retailers that have innovated successfully along these lines:
- Marketing personalization: Leverage data on a user’s interactions with the Macy’s website and app to tailor her in-store experience. For example, if she demonstrates affinity for a certain brand online, utilize beacons to guide her to that brand and similar ones when she visits the store.
- Interactive merchandising: Like Burberry’s smart stores, install interactive displays that offer product recommendations. For example, if a customer brings an RFID-tagged dress to the display, it should be able to present recommendations for accessorizing the look.
- Service delivery: Utilize technology to efficiently enhance customer service. For example, install smart dressing rooms, like those at Rebecca Minkoff, that enable the customer to request new sizes from the sales associate with the touch of a button.
Although ecommerce is rapidly changing the retail landscape, there is still room for brick-and-mortar. Per Macy’s CEO Terry Lundgren, “I very strongly believe that consumers are not only going to shop online, they’re going to start their journey on their phones, they’re going to enter our stores … They may not buy in store that day. But without that store interaction, it’s likely the sale would not occur.”11
1) Egan, Matt. “Macy’s is closing another 100 stores.” CNN Money, http://money.cnn.com/2016/08/11/investing/macys-closes-100-stores.
2) Schlossberg, Mallory. “Millennials only want to spend money on one thing – and it’s killing Macy’s. Business Insider Nordic, http://nordic.businessinsider.com/macys-trying-to-survive-in-the-experience-econmy-2016-7.
3) “Evolving Our Strategies with M.O.M. 2.0.” Macy’s Inc., https://macysinc.com/macys/m.o.m.-strategies/default.aspx.
4) “Chapter 03. The different types of RFID systems.” IMPINJ, http://www.impinj.com/resources/about-rfid/the-different-types-of-rfid-systems.
5) “Macy’s to RFID-Tag 100 Percent of Items.” RFID Journal, http://www.rfidjournal.com/articles/view?15081.
6) Tenser, James. “Omni-Channel at Macy’s: It’s About Inventory Too.” Retail Wire, http://www.retailwire.com/discussion/omni-channel-at-macys-its-about-inventory-too.
7) “RFID is Gaining Traction!” GS1 US, http://www.gs1us.org/DesktopModules/Bring2mind/DMX/Download.aspx?command=core_download&entryid=1620&language=en-US&PortalId=0&TabId=785.
8) “Macy’s Leverages the Power of RFID to Fuel Successful Omni-Channel Fulfillment Strategy.” Yahoo Finance, http://finance.yahoo.com/news/macys-leverages-power-rfid-fuel-111100028.html.
9) “What is iBeacon? A guide to iBeacons.” iBeacon Insider, http://www.sdcexec.com/article/12130780/radio-frequency-identification-spells-holiday-season-sales-opportunities-for-retailers.
10) Chamberlain, Lauryn. “Macy’s To Test Beacon Messages Outside App, Explore Retargeting.” Geo Marketing, http://www.geomarketing.com/macys-to-test-beacon-messages-outside-app-explore-retargeting.
11) Wahba, Phil. “Macy’s CEO Defends Role of Stores in E-commerce Era.” Fortune, http://fortune.com/2015/11/11/macys-ecommerce.