Question

Based on your Macy's case analysis, identify and justify five strategies that Macy's can follow. Use the tools in Chapter 6 to develop your answer and response (strategic management: case 1)

Answer 1

Macy’s is a retailer operating under three brands (Macy’s, Bloomingdale’s, and Bluemercury) that sells merchandise including apparel, accessories, cosmetics, furnishings, and other consumer goods. Founded in 1858, Macy’s pioneered many marketing practices such as a one-price system for all customers (instead of bargaining), money-back guarantees, Santa Claus during the Christmas season, and illuminated window displays to attract the attention of those passing by.

However, in recent years, Macy’s has been challenged by headwinds driven by the digitalization of competitors’ supply chains and subsequent increase in market share. According to Rigby, retailers like Macy’s have lost traffic and have faced pressure on prices from eCommerce retailers such as Amazon, as their “selection is vast yet remarkably easy to search. The prices are good and easily compared. It’s convenient: You can do it at home or at work, without using gasoline or fighting to park…product reviews and recommendations are extensive.”Intelligence estimated that “U.S. consumers will spend $385 billion online in 2016” and “that number will grow to $632 billion in 2020.”While the U.S. retail average growth rate in the first half of 2016 was just 2% for total retail, it was 16% for e-commerce.”

To respond to the business headwinds in the short-term, Macy’s management has announced the closures of 68 stores in 2016 and early 2017, and its intention to close approximately 30 additional stores. Macy’s has hired Jeff Gennette as the new CEO, who joined the company in early 2017. Macy’s has equipped hundreds of stores to ship online orders, speeding up the process and making better use of unsold store inventory.In the long-term, Macy’s is attempting to increase the health of its physical store portfolio, while trying to drive the growth of its e-commerce channel.

The five strategies that Macy's can follow are mentioned below:

1. LOYALTY PROGRAM

Macy’s can redesigned its Star Rewards loyalty program and opened it up to all customers, regardless of how they pay for their purchases; previously they needed to use their branded Macy’s card to receive any loyalty benefits.

The benefits of the tiered program include:

• Bronze –  All customers can enjoy star money days, perks and offers, and a birthday surprise.
• Silver – Customers who spend up to $499 annually at Macy’s with their Macy’s credit card will receive 25% off any day they choose with Star Pass coupons.
• Gold – With $500 to $1,199 annual spend, customers receive 25% off any day they choose with Star Pass coupons and free shipping on all Macy’s purchases when they use a Macy’s card.
• Platinum – With $1,200 or more annual spend on a Macy’s credit card, customers receive 25% off any day they choose with Star Pass coupons, free shipping on all Macy’s purchases, and 5% back in rewards on every Macy’s merchandise purchase in-store and online.

“There can be a meaningful positive change in behavior at the platinum tier, which are their best customers. And at the bronze tier level,they can have more than one million new members. These are new customers to Macy's. Within the loyalty program,their best customers are spending more. And new customers are coming into the program.They should continue to expand and refine the Star Rewards program.”

2. BACKSTAGE EXPANSION

Macy’s can expand its off-price brand Backstage. It opened 47 new Backstage stores in the second quarter for a total of 65 openings in the first half of the year. The retailer is on pace to open 120 discount locations this calendar year.

“Opening a Backstage store within a Macy's is a significant operation, since they need to relocate departments to carve out space and then construct and merchandise Backstage. “This process creates a ripple effect in the store and to date the teams have been handling it very well with minimal disruptions. Adding backstage makes existing stores more productive, gives their customers an exciting new experience, and will bring new customers into the brand.”

3 EXPANDED ASSORTMENT

Macy’s is expanding its online assortment by partnering with vendors who will handle fulfillment. The new system is similar to the marketplace model used by many retailers across the industry. The ongoing merchandising expansion strategy is set to go live before the holiday shopping season. The assortment increase will include Macy’s well-known brands as well as some new brands and categories designed to connect with a greater customer segment.

They’re almost doubling the amount of SKUs that they have in their inventory.That’s a lot of sales that they’re banking on that’s going to be digital, that’s going to be fulfilled by a vendor. We should own the inventory until they consummate the sale.”

In addition to its third party merchandising strategy, Macy’s should relying on analytics to pinpoint shopper needs and tailor its offerings to meet demand. Last year the department store chain consolidated analytics into one center of excellence that serves the entire business. The analytics center of excellence is focused on pricing, POS discounts, markdowns, and discovering and acting on customer demand.

They’re in the early innings of this, but they have appetites to continue to use science really married with the art of a retail fashion business. “[A mixture of] art and science can what their success formula is going to be at both Bloomingdale's and Macy's.”

4. STORE FULFILLMENT

Macy’s can expand its in-store pickup program, both its buy online ship to store initiative and its buy online pickup in-store program. Buy online pickup in-store has been expanded to 50 stores and will be rolled out to most of the chain by the end of the third quarter.

In addition to scaling the program, Macy’s can refine the service with a focus on an improved customer experience. The retailer should introduce at their Service stations in every store to make pickup quick and seamless for shoppers.

5 GROWTH50

The retailer’s Growth50 initiative can be implemented of in-store enhancements at 50 stores throughout the chain based on success from its Woodbridge Township, NJ test location.

Their Growth50 stores are performing as they had expected and leave the improved trend in brick-and-mortar in the first half of the year,said Gennete.They can also see an outside improvement in customer satisfaction scores in the Growth50, which tells them that their customers are noticing and appreciating the changes that they're making.”

Macy’s Growth50 strategy can focus on the five Ps: product, presentation, process, promotion and people. Year-to-date net promoter scores of the Growth50 stores are up almost 10 points,that is customer experience,omni channels,mobile apps,mobile commerce,mobile strategy,POS,loyality programs,assortment planning,supply chain and merchandising and fulfillment.