5 Ways to Make Macy’s Great Again

By Aarthi Rayapura January 15, 2016

By Tien Tzuo, CEO, Zuora

Growing up in New York, Macy’s meant the Thanksgiving parade, the Christmas windows, and a trip to 34th Street whenever we had visitors from out of town. But I can’t recall the last time I stepped into one. And you probably can’t either.

Unfortunately, this is sadly reflected in the company’s numbers — Q3 sales ($5.874 billion) were 5.2 percent lower than the same period last year ($6.195 billion).  Year to date, sales are down 2.8 percent from the first three quarters of 2014. Macy’s is about to close 40 stores, and Amazon is expected to beat them to become the biggest clothing retailer in the country by 2017.

Of course, Macy’s isn’t the only big retailer hurting this year  – Nordstrom showed up with a depressing 42% drop in profits and got beat up by Wall Street. Gap, JC Penney, Urban Outfitters, the list goes on – all leading the retail brands are on a downward spiral.

But here’s the thing — Macy’s still has shoppers. You or I may not visit, but your aunt still probably does. Retail doesn’t have a distribution problem, it has a relevancy problem (television is currently struggling with the same dynamic).

Young shoppers are just looking for very different things from what Macy’s is currently offering. To digital natives, the traditional pain points of retail (lines, parking, returns) have become prohibitive. In today’s Subscription Economy, stand alone products are passé. Consumers value outcomes and unique experiences.

E-commerce has grown to over 8% of total retail sales simply by getting rid of these hassles. Look at how Zappos is single-handedly killing shoe stores. With Zappos, every single interaction, even a return, is designed as an investment towards a mutually beneficial relationship.

We are now in a world of near-perfect consumer information. Everyone starts online with research, reviews, social media, product comparisons. Retail stores need to reflect that new reality.  I think that Macy’s still has a lot of opportunity ahead, but it needs to fundamentally re-orient itself around the online experience, versus the other way around.

So how can Macy’s become great again?

  • By surfacing discovery, and highlighting the difference between “shopping” and “buying.” Warby Parker is averaging $3,000 per square foot of retail space (slightly under Tiffany’s number) by knowing that 85% of their foot traffic has already done extensive browsing online. They don’t try to clutter every inch of their retail space with stuff, and taking a cue from the Apple Store, individual purchases are handled with iPads on the showroom floor.
  • By using online data to inform the design and presentation of their physical stores, not the other way around. In their New York flagship store, Birchbox uses rankings and reviews from their web site to inform the way they arrange their physical inventory. They also do simple, intuitive things like organizing by category, not brand.
  • By offering recurring subscription services. Trunk Club hit on a popular online clothing subscription model for younger shoppers, but Nordstrom realized even with personalized curatorial services, it’s still nice to be able to try stuff on and get fitted in a physical showroom. It was a smart acquisition.
  • By figuring out beacon technology. These devices communicate with your smartphone and follow you through the store to offer relevant promotions and product details. They represent a lot of potential (Home Depot is having some early success), but they’re obviously not at an inflection point yet. If 2015 was the year of Apple Pay, 2016 looks promising for beacons.
  • By creating a better conversation between its website and its stores. Seeing online and offline as separate conversations with your customers is missing the point. They are both extensions of the same relationship. Macy’s offers free pick-up for online purchases. That’s a great start. But companies like Bonobos are flipping the script, and sending you items from their warehouses after you visit their showroom, just as if you bought it online.

In many ways, today’s Subscription Economy is about rediscovering the value of ongoing, commercial relationships. We used to know the names of the people who sold us things. Macy’s needs to rediscover those relationships. It needs to reinvent itself as the welcoming physical presence of an equally compelling online experience. It’s time to bring back the magic.

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