The Macy’s Way
Macy’s takes pride in having a customer-centric business model. Thus, in the wake of the trend towards technology-based consumerism, the company quickly developed and launched a three-pronged customer engagement strategy , rooted in an evolving landscape of technological innovation.
Within five years of the 2010 launch of the strategy, Macy’s funneled $2 billion  worth of investment in technology and e-commerce to maximize its impact. Since initiating this digital transformation, Macy’s profit margin has grown 257.2%, far outpacing many of its top competitors 
The success of the Macy’s digital transformation can be attributed to two key shifts in its business and operating models:
I. Adopting a bricks-and-clicks omnichannel strategy
Since the launch of the macys.com website in 1997 , Macy’s online sales have grown to represent roughly 18% of total sales , In order to maximize the online shopping experience and offset the cannibalization of instore sales, Macy’s has embraced a technologically innovate, bricks-and-clicks hybrid strategy that enables customers to shop whenever, wherever, and however they choose.
In 2011, the company stayed ahead of the competition by adopting Radio Frequency Identification Technology (RFID) . Through RFID, Macy’s grants tablet-equipped sales associates and online shoppers a comprehensive view of all available inventory business-wide, helping fulfill the “buy anywhere, fulfill anywhere” omnichannel vision . The inventory visibility offered through RFID also allows Macy’s to employ a “Pick to the Last Unit” strategy, whereby every item available for purchase instore can be easily located and delivered to the customer . This optimized inventory management has resulted in an estimated $1 billion reduction of instore inventory . Macy’s has also incorporated a “click and collect” functionality to its website, allowing omnichannel customers to order merchandise online and pick it up in a nearby store .
Coupled with the RFID technology, this functionality enables customers to browse and order based on inventory availability at specific stores. Once in the stores for pickup, omnichannel consumers are incentivized to shop instore through promotions  and, on average, end up spending approximately 125% of their intended online order . Omnichannel customers have five times the customer lifetime value of single-channel customers .
To facilitate the omnichannel vision, Macy’s consolidated its merchandising and marketing businesses into one cohesive unit and invested in a number of strategically-located direct-to-consumer distribution centers, including a 1.3 million center completed in 2015 in Tulsa, OK .
II. Digitizing the instore shopping experience
In addition to digitally luring technology-based shoppers into physical stores, Macy’s has created a robust suite of digital tools to keep these shoppers in stores longer.
⎯ Macy’s On Call – Macy’s has teamed with the IBM Watson team to develop an artificial intelligence-powered shopping assistant. Still in its pilot stage, Macy’s On Call will allow customers to input questions about specific brands, departments, and services and facilities within a particular store .
⎯ Smart Pay – To allow for a more efficient checkout process, Macy’s has implemented one-touch-pay technologies such as PayPal, ApplePay, and the Macy’s Wallet mobile app so that customers can easily scan and checkout items .
⎯ Smart Fitting Rooms – Through smartphones and company-provided tablets, customers can try on items without having to leave the dressing room. Customers can browse, locate and request items by size on their Macy’s mobile app and sales associates can deliver those items directly to the fitting room through a wall chute .
⎯ “Virtually Dress Up” with the Magic Mirror – A newer feature of the smart fitting room is the magic mirror. The 72-inch mirror allows customers to superimpose different clothing options on their reflections . The multi-touch mirror surface allows customers to swap various articles and sizes of clothing with a few simple swipes .
⎯ Visual Search – Through the visual search application, shoppers can upload images of items from their smartphones and search for similar items in the Macy’s catalog.
⎯ Promotions and Advertising – In 2014, the company installed 4,000 iBeacon devices in its 786 stores . The devices send personalized ads to the smartphones of consumers in and around physical stores. The Macy’s Wallet mobile app also provides users with easy access to loyalty programs and instore/online promotions.
The Road Ahead
While these investments have spurred double-digit digital sales growth, this growth showed signs of slowing in Q1 2016 . In an effort to reverse this trend, Macy’s should consider ramping up its personalized omnichannel strategy through the use of social media. Using facebook profiles and pinterest boards, Macy’s can potentially replace the iBeacon technology and create more targeted advertising campaigns for individual shoppers. Similarly, Macy’s could incorporate a social component on its mobile app to allow users to create profiles that showcase specific Macy’s products. The exchange of outfit ideas, for example, can increase word-of-mouth advertising, thus reducing overall marketing costs.
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