Customers want their retail lives back as Macy's shows signs of omni-channel improvement in the Vaccine Economy

By Stuart Lauchlan

May 19, 2021

Audio version

6 min reading

Clearly, our customer is ready to get on with life. 

A relieved reaction from Macy’s CEO Jeff Gennette as the Vaccine Economy starts to kick in the US retail sector, partly addressing the questions of whether and how quickly shoppers will return to the in-store experience. In case of Macy’s, the answer at this early, pre-Indian variant, stage seems to be positive.

The retail institution even managed to turn in a profit for Q1, with net income of $103 million against a loss of $3.6 billion for the same period last year, just as the pandemic kicked in and store fronts shuttered. Actually, Macy’s isn’t keen on making comparisons with last year - understandable perhaps, given that most of us would be glad to wipe 2020 from memory - and is basing its current performance comparisons with 2019, before most people had even heard of the wretched Coronavirus.

Revenue of $4.71 billion also exceeded analyst projections and was up on $3 billion in sales this time last year, leaving Gennette to claim:

After a year of reduced activity, consumers are ready to get out, reconnect with family and friends and celebrate life. Our customers are ready to spend and demand is rising in categories we are positioned to win in…The US stimulus package and vaccine rollout certainly contributed to the momentum.

The stimulus encouraged more customers to use cash and debit cards instead of credit, and the increased level of vaccinations boosted store traffic, all encouraging signs as consumers move towards a post pandemic lifestyle and start to spend more for in-person activities, travel and events. Looking at our customer base, we're seeing our core customers coming back to shop and they're spending more.

In its first quarter, Macy’s added 4.6 million new customers across all channels, up 23% against  2019, 3 million of whom were brand new to Macy's while the remaining 1.6 million were dormant customers who have re-engaged. And while the return to the physical store is a relief to any retailer with as much real estate as Macy’s - despite years of shedding excess weight - digital continues to grow with 47% of new customers making their initial transaction through digital, while 82% of digital orders in the first quarter came from repeat customers. In total, digital sales account for 37% of overall sales.

Gennette classes this as an increase of 74% compared to Q1 of 2019 and evidence that the stated goal of generating $10 billion in sales from digital by 2023 is attainable:

We began to re-orient our business as digitally-led a year ago when we started consulting in our digital team into New York. Today, it's fully integrated with our merchandizing, marketing and supply chain teams. Collectively, they're working to enhance the customer experience on our Web sites and apps by constantly improving our digital platform and launching new offerings. This work is delivering results.

Under our Polaris strategy, our digital focus is bifurcated into fundamental improvements and new differentiated experiences. As part of our fundamental improvements, we've re-platformed our search function and redesigned our product detail pages for a clearer, more curated experience. These actions helped us increase conversion by nearly 9% in the first quarter compared to 2019.

After the successful launch of curbside pickup last year, we are now focusing on providing more specific delivery dates and launching an improved returns experience within our app. We believe our initiatives will continue to drive conversion and incremental sales across our platforms with increasing customer satisfaction.

Next steps - and a new CIO

The next step in all this is to focus on differentiated experiences across three main areas - immersive categories, expanding hopping channels, and redesigning the overall digital experiences, he adds:

With immersive categories, beauty is one category where we are doubling down. We're building out experiences that will enhance our makeup, skincare and fragrance businesses, including Virtual Try-On. We're also allowing customers to access the experience through social media channels, including the test on Instagram.

Live video shopping is an emerging channel that we are currently developing to enable our vendors and store colleagues to host live events. Our goal is to create the best of our store experiences virtually to make online shopping just as social and fun as in-person. We are also beginning a multi-year redesign of the Macy's website to modernize our brand presence and elevate our image as a source of style, guidance and inspiration. We plan to launch some of the refreshed shopping experiences on the site and app before this Holiday.

Personalization will be a major focus here, he says:

Through personalization, we can develop a true understanding of a customer style. We can help our customer assemble outfits and design rooms with products that inspire them. We can suggest the right sizes and colors and even customize the entire browse experience around what we know about our customers.

Underpinning all this will be an ongoing upgrade of the underlying technology platform and revamped data and analytics capabilities, Gennette explains:

While data informs everything we do, we're putting particular emphasis on advancing our data led initiatives in such areas as merchandizing, pricing, allocation and personalization as we see these as areas of competitive differentiation. We are seeing early wins, including markdown and promotion optimization.

Spearheading the tech overhaul will be  Laura Miller, Macy's new Chief Information Officer, former CIO at InterContinental Hotels, who takes over from Chief Technology Officer Naveen Krishna, reporting directly to Gennette:

Laura brings strong experience driving technology transformation in consumer focused businesses, and is bringing a customer focused lens to all of our technology investment decisions. She is continuing our pre-pandemic efforts to modernize our technology foundations, and boost our ability to react to customer and market shifts, regardless of channel.

My take

Macy’s is a healthier business coming out of the pandemic than we were going into it. And moving towards the post pandemic future, we envision a fully integrated experience for our customers as they shop online and in-store.

Well, it’s early days, but after the hell of 2020, in general and in the retail sector in particular, let’s grab onto any straw that looks hopeful. Tracking Macy’s omni-channel transformation efforts across the years has been a bumpy ride. If 2021 does leave this most American of retail institutions in a better place at last, that will be the proverbial Miracle on 34th Street many, many months earlier than usual!