MACY’S INC: TO SURVIVE OR NOT SURVIVE?

CURRENT AND GENERIC STRATEGY

In 2018, Macy’s set out on a mission to turn the company around in a transformative way. A five-point strategic plan was designed and implemented with the intention of reinventing the company's business model, and bringing new innovative perspectives to the competitive retail market. The main focus of this plan was the Growth50 initiative that would set the new precedent of Macy’s retailing within an initial 50 stores, which took on a new approach to product and merchandising practices. If this initiative went according to their timeline, Macy’s would roll out an additional revamped 50 to 100 brick and mortar locations per year. Alongside the Growth50 initiative, Macy’s broadened their online inventory by implementing a direct vendor fulfillment model, serving as a host to a marketplace of products and merchandise that would be maintained by other various vendors. In an attempt to maintain a competitive advantage, Macy’s continued to modernize their e-commerce site by offering online order pick up, launching a mobile app to increase sales, and better showcasing their strongest product categories including housewares and women’s apparel to draw customers back to their stores. This was in conjunction to improving their loyalty program to drive traffic, encourage higher transaction totals, and encourage repeat business. As a part of this strategic plan, Macy’s also had intentions of expanding the number of off-price Macy’s Backstage store locations, because they were perceived to be more resilient to the competition of online retailers as opposed to their standard store formats. Although Macy’s started off with a broad differentiation strategy, a more focused and strategic cost strategy was implemented.

In an attempt to stay relevant and withstand the rapidly changing retail environment, Macy’s focuses on a differentiation strategy to maintain a competitive advantage, while implementing new strategies as outlined in their plans ahead for the company at all five points. When examining Macy’s strategic plans, the company’s perceived positioning in the marketplace holds a relatively higher value to their customers than the offerings of their competitors; even at the same or higher pricing levels. With a differentiation strategy, Macy’s must invest in the thorough understanding of their customer needs and preferences. A differentiation strategy is driven by innovation in order to continually address these needs and wants, while building the Macy’s brand to maintain their position and visibility.

Despite Macy’s efforts to adjust to a digital environment for the modern consumer, the company seems to hold onto their traditional retailing roots of what has worked for them in the past, and how they have always gone about their business. This limiting attitude and subtle tweaks in omni-channel strategy have proven to be ineffective in addressing the fundamental issues that are the cause of their downfall. Following Macy’s downturn in revenue over the years, especially recently as it was impacted by Covid-19, the company particularly struggled to adapt their business model to the online shopping environment following their record year of sales of $28.1 billion generated in 2014. Despite Macy’s five-point strategic plan launched in 2018, many analysts suggest that their plan was better suited for the retail environment in 2010 as opposed to 2020. Moreover, this plan had produced very few positive results or ripples in the marketplace, which were considered more innovative than their competitors of both in store shopping experiences and online retailers. Due to Macy’s modest attempt at innovation, the long-standing brick and mortar chain went on to close all 775 of their stores by March 18, 2020. Although Macy’s began reopening 270 stores later that year, the combined effect of the company’s ongoing poor performance and impacts of Covid-19, was expected to result in a first quarter 2020 loss of $905 million to $1.1 billion.

STRATEGIC ISSUE

How can Macy’s be organized to present solutions to lifestyle problems?

Department stores found success in their pre-digital age emergence as they were built around the notion that consumers would visit their stores for inspiration and discovery. However, in recent years, retailers have had to pivot their strategies to stay competitive and increase their online presence, as consumers began finding this inspiration online from various social media channels and blogs, and not the retailers themselves at their brick-and-mortar locations. This changed the decision-making process of shoppers entirely, as they turned to online retailers who better suited their needs in a more conveniently packaged way with a shift in technology that was innovative, competitive, and low cost centric. Consumers now tend to choose the specific products they want to buy before they choose where to buy them from. This leaves department stores including Macy’s to compete on price instead of value, as demonstrated with the expansion of their off-price Backstage retail brand locations.

Macy’s main value proposition to consumers is that they offer many great brands all under one roof. However, now that consumers can access nearly every brand at the click of a button, this has progressively become less of a selling point or differentiator for department stores. Macy’s should deepen their brand voice and stand for a lifestyle to provide answers to subsequent lifestyle problems which their consumers may have, by offering their expertise to add value to their consumers that they cannot find on other mass e-commerce retailer platforms. This will help to address the new way that consumers shop and make purchasing decisions. Optimizing store layout would make their stores more organized to present solutions to lifestyle problems such as occasion wear for weddings, suits for interviews, or just a new handbag to add to their collection. With the current layout of department stores, customers would have to visit several brand vignettes in order to explore their options for each product category. This is inorganic and outdated to how people have become accustomed to shopping online; where they can filter by brand if they so choose, but the primary sorting preference puts the function first and the brand later.

Offering expertise in-store could be a strong differentiator and valued asset of the Macy’s in-store shopping experience. This can be achieved by having knowledgeable and affluent sales staff who double as style advisors. Customers would be able to book appointments by going to their website or app for more in-depth styling sessions, or come on a walk-in basis if they just need assistance in finding a specific item or product. This would create value and convenience for shoppers by having an expert on hand to personally curate a selection to choose from that fits their preferences and criteria. It will also allow consumers to be introduced to new brands and try on items they normally wouldn’t pick out for themselves, which are flattering and suit their styles. This would then support and sustain the already existing resources and capabilities of the company, while revitalizing the in-store shopping experience at Macy’s.