Macy’s Eyes New Strategy For Heightened Customer Engagement, Improved Shopping Experience

In late June, Jim Sluzewski, Senior VP of Corporate Communications & External Affairs at Macy’s, told Loyalty360 that the venerable retailer planned to be a “significantly different retailer” because customer shopping preferences and patterns are evolving rapidly.

Terry J. Lundgren, Macy’s CEO since 2003 and Chairman since 2004, has been working with his heir apparent Jeff Gennette during the latter’s transition to the company’s top post. The pair has collaborated on making Macy’s the premier omnichannel retailer focused on the customer experience and increased customer engagement.

Coming off a disappointing second quarter−sales dropped nearly 4%, to $5.866 billion, while year-to-date sales are at $11.637 billion, down 5.7% compared to the first half of 2015−Macy’s officials have announced a series of initiatives to drive profitable growth, enhance shareholder value, and strengthen Macy’s as America’s preferred omnichannel shopping destination.

According to a release, the company will heighten the Macy’s brand with exclusive products and an improved shopping experience. Plans also include re-creating Macy’s physical store presence as customer shopping preferences and patterns evolve, reallocating investments to highest-growth-potential store and digital businesses, and capitalizing on opportunities within the company’s real estate assets.

“The announcements we are making today represent an advancement in our thinking on the role of stores, the quality of the shopping experience we will deliver, and how and where we reinvest in our business for growth,” said Gennette. “In the short term, our company’s topline sales will be somewhat smaller, but the changes being made will position us to grow comparable sales more quickly and generate a level of profitability that stands out among retailers. We will continue to carefully analyze consumer shopping patterns and trends, and use data and customer insights as the basis for innovations to drive the business. You can look forward to a company that expedites decision-making, moves faster, and is bolder in its approach to the customer.”

Gennette will officially become CEO in the first quarter of 2017 and, after that, Lundgren will continue as Executive Chairman of the company and work side-by-side with Gennette.

Macy’s is re-creating its physical store footprint to capitalize on Macy’s unique competitive advantage of operating in the most attractive retailing locations in America. While still maintaining a significant bricks-and-mortar presence in 49 of the top 50 U.S. markets, Macy’s will operate fewer stores and concentrate its financial resources and talent on our better-performing locations to elevate their status as preferred shopping destinations. Stores will remain critical customer touchpoints for Macy’s, along with online shopping and mobile apps, as omnichannel retailing continues to evolve.

As part of this strategy, the company intends to close approximately 100 Macy’s full-line stores (out of a current portfolio of 728 Macy’s stores, including 675 full-line locations). Most of these stores will close early in 2017, with the balance closing as leases and certain operating covenants expire or are amended or waived. In a number of cases, stores will be closed as the value of the real estate exceeds their value to Macy’s as a retail store. The locations of the 100 stores to be closed will be announced at a later date, once the company makes final decisions. The company will act to remain connected to customers of the stores it will be closing by supplementing merchandise assortments in surrounding locations, as well as through the company’s online site and mobile app.

“Nearly all of the stores to be closed are cash flow positive today, but their volume and profitability in most cases have been declining steadily in recent years,” Gennette explained. “We recognize that these locations do not yield an adequate return on investment and often do not represent a customer shopping experience that reflects our aspirations for the Macy’s brand. We decided to close a larger number of stores proactively so we can invest in a winning customer experience in our most productive and highest-potential locations, as well as invest in growth sooner and more aggressively in digital and mobile.”

Macy’s will invest in improvements in ongoing stores and digital vehicles. These investments will take a range of forms: Macy’s will add new vendor shops, bring new businesses onto the sales floors through additional license agreements, increase the size and quality of staffing through programs such as My Stylist personal shopping services, infuse new technology, accentuate high-potential businesses such as fine jewelry, and create new in-store events and experiences.

Macy’s, Bloomingdale’s, and Bluemercury will reinvest to maintain exceptional growth in digital sales – transactions generated from websites and apps. The company’s online business has grown at a compounded double-digit rate in each of the past 15 years, placing Macy’s, Inc. sixth on an independently published list of America’s largest-volume online retailers.

To foster continuation of this growth, the company is investing in capacity-building on its sites and apps, improvement in natural language search, faster page loading and simpler procedures for placing and fulfilling orders. Macy’s and Bloomingdale’s successful Buy Online Pickup in Store offering, introduced in 2013, is being refined to improve speed and convenience of the customer experience.

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