The modern world has not been kind to the old-fashioned department store. Hammered by shopping malls and specialty shops in the late 20th century, it is now confronted by digitized shopping in the new millennium.
And yet Macy’s, founded in 1858, is thriving on a mixture of nostalgia for a storied past and visions of a high-tech future.
Where other retailers are scrambling to downsize their stores, Macy’s is renovating its iconic Herald Square flagship. While others submerge into the minutia of the digital age, Macy’s stays afloat with its larger-than-life Thanksgiving Day Parade.
At the same time, Macy’s was among the first to achieve success with QR codes. It has introduced True Fit, an online tool that enables shoppers to find their fit without actually trying on any clothes. It is testing digital mannequins, so that customers can mix and match to their heart’s content. It has more than six million Facebook fans, too.
Rather than ceding ground to ecommerce, Macy’s has re-imagined
its stores as a nationwide network of “warehouses” that can deliver whatever size, color or style shoppers want regardless of where they are shopping —online, in-store, coast-to-coast. Product assortments are meanwhile tailored on a by-store basis, affording selections according to local culture, events and climate.
As CMO Martine Reardon tells it, it is this intense, technology-enabled customer focus that makes all the difference. “Our motto is that we put the customer at the center of every single one of our decisions,” she says. “It’s almost like she gets a seat at our table as we think about new strategies.” More than any other reason, that’s why Macy’s is still a miracle on 34th Street.
How do you keep up with the Macy’s customer?
We look at the customer inside out and outside in. From the inside out, we have a robust database of households across the country that we have cultivated for the last 15 years. We maintain all of that customer data so we can really understand what she likes and needs.
From the outside looking in, I have a very strong and robust research department that works with market-share data. We are studying which categories are strong across the country, what the customers are looking for and where there are “white space” opportunities for us that don’t cannibalize the businesses that we’re in.
The deep knowledge that we have of the customer and the insights that we have allow us to be more innovative with our communications to the customer.
Do you consider those resources to be “big data”?
Yes, you could call it big data. There are probably 80 different systems in our eco-system at Macy’s that contain data in some way, shape or form. These include our planning and allocation tools, our Macys.com database, the Macy’s department store database and customer service. We receive phone calls every day from our customers, whether they’re checking on deliveries or whatever it might be.
We’re building a “big data” cloud that is the repository of all this data, so that we can be more relevant to each of our consumers. We like to call our consumer a “she” and she definitely is a she; about 68 percent of our consumers are female. However, there is that 32 percent that is male and the male shopper is very, very different from the female shopper.
You also have a divide between older and younger shoppers.
Our biggest opportunity or challenge is probably the Millennial customer because these customers truly know what they want. They have grown up in the technology era and have had more tools at their fingertips, literally, and do a great deal of research.
Millennials are very used to having a huge landscape of resources for their shopping needs. But sometimes they can be a little bit fickle and so it’s really about getting to know how they want to shop versus the older generation. We changed our organization to be Millennial-focused and assembled a team of people who do nothing but focus on the Millennial customer.
Is it mostly technology that wins over the Millennials?
There is definitely more to it than technology alone. It is still all about the product. They want that fast fashion, but they also really want a very good value. They are very savvy.
They know where they want to spend their dollars. They may not have as many discretionary dollars as the older generation does because they are just getting started.
They are used to living in a world where things move fast, and they want to have a really good shopping experience. That means having the technology to reach out to them to tell them about certain things that are happening in-store or online.
How do those technologies improve the retail experience?
What I love about being a CMO in this day and age are the many opportunities to create a better shopping experience. There is the whole digital space where you create great content and then there is the in-store space. The two are complementary.
The greatest opportunity for CMOs today is to figure out the recipe for making all of these experiences work together. While we have a long way to go to understand the digital space better because it’s changing so quickly, we have done a pretty good job of at least staying on top of some of the trends.
Not to brag — but I will a little bit — the L2 think tank for digital innovation ranked our Facebook IQ at the “genius” level. We ranked number one out of 100 brands. Last year, L2 compared the digital competence of 64 online retail brands and we were ranked number one, at “genius” level.
What makes Macy’s a digital genius?
It’s because of our fan engagement. Our fans truly are fans. They are not people who just happen to be visiting our Facebook page, “liking” us and then never coming back. They are part of the conversation almost on a daily basis.
I believe we were also the first retail brand to use QR codes as a means of educating as well as entertaining our customers. That is something that has been in our wheelhouse for the last year-and-a-half.
We created videos where our designers talk about why they design products the way they do, fashion trends for this season and how to complete a look. There are some fun facts about the designer — for example that Tommy Hilfiger came from Elmira, New York and opened his first store there when he was 18 years old.
Much of the rest of the world seems to be souring on QR codes.
We’re having great success with them. We first tried QR codes, which were then called jag tags, in the fall of 2010. We knew that we were probably a little bit ahead of our time because the consumer didn’t know anything about this technology and smartphone penetration was relatively low. But we just put it out there and I think we received 10,000 scans.
I didn’t know if that was good or bad because we were just starting. In the spring of 2011, we released about five or six QR videos. We featured all of the major designers who really stand for what Macy’s is all about. We obtained much greater adoption than we did with the jag tag, but it was still low.
So, we polled about 1,000 people across the country to find out what they liked and what would engage them. We adjusted some of the content, put the QR videos back out there in the fall of 2011 and basically tripled the number of downloads. This spring, we issued another 12 videos, and downloads are up 300 percent.
What have you learned from technologies like True Fit?
We’ve learned some important things about our customers. We have a group of shoppers who just love to shop, buy and then take their purchases home and try them on. Or, we have customers who are shopping online and don’t have the ability to try something on.
What customers are looking for are more tools to help them understand what would be the right fit, because we know that every designer sizes clothes a little bit differently. The technology also helps you figure out your body type — if you are more of a curvy or a narrow fit, for example.
What will digital mannequins do for the shopping experience?
We are just starting to experiment with those. One theme that we continue to hear in our research is that our customer wants help putting her look together. She loves mannequin presentations in-store because they give her some ideas, but the problem is that each mannequin can have only one look.
With digital mannequins, we can offer many, many different looks. So, you’re going to a black-tie event and here’s the great dress that you can wear … but maybe you don’t like those shoes so here’s another option for shoes … and here’s a handbag and some earrings. It enables us to give the consumer different choices while she’s shopping.
Is Macy’s still a department store in the traditional sense?
Yes. The wonderful thing about Macy’s is that it’s a one-stop shop. There are many different stores within this store, and if you define that as a department store, then that is what we are. We have home products. We have children’s products. We have accessory and beauty products and shoes and intimate apparel, dresses, sportswear and men’s wear. We have it all in one place and that is one of the advantages of being a department store. There are a lot of special things about the department store that the customer loves. I see what we’re doing as using technology to enhance the shopping experience.
Can the online experience ever be as rich and fulfilling as the in-store?
Oh, absolutely! I would never see it as a conflict. We approach our online and offline businesses as one brand. We are Macy’s. It is an omni-channel experience.
A certain number of today’s customers are both shopping online and coming to the store. They are using the online space to research items or put their “hit list” together. So, when they come to the store, they have already scoped out what they might be looking for. That’s where both channels really complement each other.
We also have the ability to bring the entire inventory from across all of Macy’s to a customer even though an item may not physically be in her store (see sidebar). If she happens to be in one of our smaller stores that may not carry the KitchenAid stand mixer in all 22 beautiful colors, we have the ability, in-store, to show her those 22 colors. She can then order her choice and have it within three days.
How concerned are you about “showrooming”?
I’m not as concerned because we are so confident in our merchandise offerings. It’s very rare that a customer will go elsewhere to find something, specifically as it relates to what we call our “limited distribution products.” Almost 50 percent of our merchandise in-store is only sold at Macy’s, or very few other channels.
What keeps the Macy’s shopper loyal?
It’s really about making her experience be what she wants it to be. Everybody has a different idea of what loyalty is, but it’s all about knowing our customer so we can create a deeper relationship with her. That is really what builds long-term retention, or loyalty.
Whether that’s on an individual, local or national level, it’s about creating an experience that is important to her. That is why we’re always putting that customer at the center of every single one of our decisions. If we do that right, and we’re giving her the experience that she wants, that creates loyalty.
What will the Herald Square renovation do for the Macy’s brand?
The great thing about Herald Square is that it is the halo for the entire brand. It’s interesting: We are not a global brand; we are only here in the United States, and yet we have a global presence because of this building. Macy’s is the number-two tourist destination in all of New York City, after the Empire State Building (the Statue of Liberty actually stands in New Jersey, so I don’t count that).
Roughly 30 percent of our Herald Square shoppers are tourists — not only from other states within the US, but from other countries, like the UK, Australia, China, Italy, France and anywhere that you can think of. They have such a great experience that they go back home and tell everybody about it.
So, people know of Macy’s, even though we don’t have a footprint anywhere but in the States. We now offer international shipping on Macys.com, so now that we’ve expanded that footprint globally, it’s giving us an even bigger presence.
How much of that Herald Square experience translates to your other stores?
A lot of it translates because Herald Square is all about the terrific products that we sell. Much of the appeal of Herald Square is because it’s the world’s largest store, so people want to see it. But a lot of what’s in Herald Square also then trickles down to all of our other stores on a much smaller scale.
I have just returned from visiting six of our stores — from Los Angeles to Portland, Oregon. I met with our teams to understand more about the customer in those markets to make sure that the assortments in those stores are directed towards those customers.
We don’t want to just push Herald Square into smaller stores across the country. What we want to do is have that as the foundation, but then layer in what’s important in those markets.
You can’t think about LA and Portland in the exact same way. Portland is all about everybody being outside, so the people there need a different assortment from LA, which is very different from what Arizona, Florida or Chicago needs. We have been concentrating on tailoring those assortments so that each customer feels like we know her and we get her and that we are there for her.
The great thing about being the CMO of a company like Macy’s is that it affords me the time to visit with all these stores and markets to see the differences. There are definitely similarities across every single market, but there are nuances, too.
What do you want your shoppers to understand about Macy’s?
The biggest thing is that we understand them, that we know what they are looking for, that we are so appreciative of them that we make sure we are giving them the best possible experience they can get.
I look at Macy’s as being a part of our customers’ lives, and that they look to us for every major occasion, that we are always there to help them celebrate their holidays and all of the important milestones in their lives. We are creating that emotional connection to them.
We do that through the shopping experience, as well as in the entertainment that we create for them. I hope that’s what they understand. All of our research confirms that they do.
What do you love most about Macy’s?
Oh, my gosh. There’s so much to love about Macy’s. The people who operate this company are what make Macy’s the incredible retailing establishment that it is today. The talent here, between the merchandising organization, the stores team, the marketing team and all of the support teams and logistics teams — all headed by Terry Lundgren — how we all work together is really what makes Macy’s great.
Terry leads this company by encouraging us to be out there looking for new things, and to do things a little bit differently. He gives us the freedom to come up with new ideas and test new things. He is always appealing to us to take some risks and not to worry if it doesn’t work. We’ll learn from it, move on and continue to make things better in the future.
We have all these fantastic designers and brands that want to partner with us and do fun programs. There are so many wonderful things that have always been a part of our brand, and each year we continue to put little twists on them to make them even more interesting. I love the DNA of this brand, which is so embedded in pop culture with the Macy’s Thanksgiving Day Parade and Fourth of July Fireworks. We have other big events, like our Macy’s Glamarama and Passport events that benefit HIV/AIDS, and our Brazil campaign.
Those are really great things that everyone in this company is so incredibly proud of. We take such pride in being associated with the company for that. It’s like the perfect storm.