Making Macy's Meaningful

Macy's, long a leading department store in the United States, is trying a variety of new tactics to attract shoppers to its stores in the face of a sales decline. This activity is important because managers must understand how to serve customers in the competitive retail environment, especially given increasing competition from online retailers.

The goal of this exercise is to hone your understanding of retail strategy by analyzing these initiatives and applying retail strategy frameworks from the text.

Read the case about Macy's multipronged strategy to maintain its leading department store brand and answer the questions that follow.

Faced with some surprising sales declines and threats to its status as the leading department store brand, Macy's has developed a multipronged strategy, seeking to leverage both its existing advantages and some new retail options. Three key efforts reflect its expansion as an omnichannel retailer, its pursuit of relevant target customers, and its partnerships with other retail sources.

First, Macy's has a great online presence, and it simultaneously has adopted in-store technologies that help customers find the items they want, design fashionable outfits, pay more easily, receive discounts, and even have their purchases delivered if they so choose. For example, with large, Look Book displays, consumers interact with a sort of digital catalog in the store, finding fashionable ideas, ways to extend their existing wardrobes, and images from forward-thinking fashion icons. Touching the screen enables them to check the availability of various colors and sizes, as well as receive more detailed information about items that are of interest. The POP (point-of-purchase) terminals in Macy's stores similarly are touchscreens that provide extensive inventory information, though they are more functional than fashionable. These smaller kiosks indicate which colors and styles are available, as well as identifying which items have prompted the most Facebook likes or customer favorite rankings.

When it comes time to pay, Macy's is working to make the process easier and quicker by installing Apple Pay capabilities throughout its network of stores. As one of the earliest adopters of this new technology, Macy's is seeking to appeal to Apple fans who love to use their iPhones for nearly everything. With Macy's Wallet and the Shopkick app, customers have two methods to receive coupons and special offers. Once downloaded, the app requires people to opt in, and then, as they enter a Macy's store, reminds them to open it so that they can receive personalized notifications. It tracks their movements through the store, so that a shopper in the outwear department receives a discount offer on gloves rather than cosmetics, for example. The Macy's Wallet program is similar, except that it is unique to this retailer and links to consumers' loyalty cards. A shopper who has earned a percentage off offer, on the basis of her or his prior purchases, thus no longer needs to worry about forgetting and leaving the paper coupon at home rather than bringing it on the current shopping trip.

Finally, using a crowdsourced delivery service called Deliv, Macy's offers customers the option of making their purchases in the store, then having them delivered to their homes, such that they no longer have to lug heavy packages through the mall.¹

However, according to one analyst, the inventory in Macy's stores is often messy and seemingly overstocked, without sufficient on-duty personnel to keep the experience moving along nicely. Thus it might need to reorient its focus more on people and less on technology to maintain its high level of customer experience. To compete with Amazon, Macy's needs to leverage its multiple channels and exploit its omnichannel potential to its full extent.²

Second, Macy's had determined that it needs to pursue those elusive young shoppers known as Millennials. Accordingly, it has implemented a $400 million renovation effort for its flagship New York City store, testing out various options that might attract more of the market of shoppers between the ages of 18 and 35 years. The basement level is newly designated One Below, and it offers a notably different shopping experience. In addition to merchandise designed to appeal to Millennials, it provides services such as blow drying stations, jean embroidering, and watch engraving. Shoppers can use a 3D printer to create their own custom jewelry, and a touchscreen wall allows them to take high-quality selfies.³ These tests, if successful, are likely to spread to other locations as well. In the meantime, Macy's is opening more off-price stores, seemingly following the successful lead of Nordstrom with its Nordstrom Rack stores.

These moves reflect the conventional wisdom about what Millennials want. In particular, studies show that these young consumers tend to devote their spending more to personal or digital services than to apparel. They also suffer higher levels of debt, mostly due to student loans, and earn less on average than previous generations. As a result, they generally seek lower priced options for their fashion choices. This preference puts them in direct contrast with the previous big cohort of shoppers, namely, the Baby Boomers. The consumers in this age group, as they start to retire from the work force, exhibit strong spending patterns and have enviable levels of discretionary income and time. From this perspective, some observers suggest Macy's might be going after the wrong age demographicunless Baby Boomers like selfie walls too.

Third, noting the success enjoyed by Best Buy when it opened dedicated stores within the stores, which reflect its strong relationships with vendors and ability to offer the kind of variety its customers demand, Macy's entered into a partnership with Best Buy but flipped their roles. That is, as the host location, Macy's opened several Best Buy operations within about a dozen of its department stores. The miniBest Buys take up about 300 square feet of space and offer tablets, smartphones, smartwatches, audio devices, and accessories. As in traditional Best Buy stores, Samsung has a strong presence. Staffing the in-store stores will be Best Buy personnel, ready to answer shoppers' questions about high-tech devices. Best Buy's recent resurgence and Macy's willingness to innovate have contributed to the new initiative. In addition, Macy's notes that customers are seeking more variety in the items available to them, whether to purchase for themselves or as gifts. By adding the latest and coolest electronics gadgetswhether as tools to help people shop or as an expanded variety for consumers to purchaseMacy's seeks to ensure that it is a shopping destination for virtually anyone.⁴

The case mentions that the Best Buy stores inside Macy's stock many devices from Samsung. When choosing Best Buy as a retail partner, Macy's would have wanted to ensure that a) All of these would have been important. b) Best Buy purchases from Samsung through independent salespeople. c)Best Buy has an exclusive distribution agreement with Samsung. d)the Samsung brand fits with the expectations of Macy's customers. e) the vertical channel structure within Samsung matches that of other suppliers. The case mentions that Macy's, in a move to target Millennials, is opening stores similar to Nordstrom Rack, offering brand name merchandise at discount prices. These stores are examples of a) full-line discount stores. b) specialty retailers. c) category killer stores. d) off-price retailers e) extreme value retailers. Which of the following would be considered a service retailer? a) Drug store b) Off-price retailer c) Supermarket d) Convenience store e) Health spa