3 Reasons Why Macy’s Struggles Are Sad But Not Surprising

3 Reasons Why Macy’s Struggles Are Sad But Not Surprising

By Brent Franson | Industry Insights | 09 January, 2017

Macy’s announced this week that it’s moving forward with closing 68 stores and laying off nearly 4,000 workers after a holiday season that was, frankly, pretty terrible.

Furthermore, the retailer is selling off some properties and restructuring, which carries a human cost of another 6,200 jobs, according to reports.

Of course, this should come as absolutely no surprise to anyone who’s been paying attention – and here’s why.

1. Macy’s has made some missteps.

Macy’s is not the only brick-and-mortar retailer to face the pressure to transition to an omnichannel approach by far. It is, however, not handling that changeover effectively.

Just look at Best Buy for comparison. Best Buy used to be the big box store with lots of blaring big TVs and expensive, high tech, high touch merchandise. Today, it still offers all that product you might want but it’s smartly layered in components that highlight the value of patronizing the store itself, versus merely buying online. You have the Geek Squad, which can give you in-depth information about products, tailored to your questions and interests real time, and even install that equipment in your home for you. They’ve jumped on the Internet of Things, capturing customer imagination with how they might transform their homes into the smart spaces of the future. In short, they’ve made the Best Buy experience enjoyable, immersive and modern.

In contrast, walk into any Macy’s and it probably doesn’t look that different from a Macy’s of 20 years ago (minus some updated fixtures, paint color and – of course – the style of the product itself).

2. In an era of personalization, the retailer hasn’t leveraged regional customization.

You only have to look at Macy’s acquisition strategy to see this in action. The retailer aggressively bought – and then subsumed – regional retailers with very good brands, eliminating what made them special and beloved to local customers. Think Marshall Field’s, Filene’s and Kaufmann’s, to name just a few. (This was famously problematic in Chicago and Pittsburgh, the latter which held the Kaufmann’s Celebrate the Season parade for over 20 years before Macy’s acquisition in 2006). Guess what? Those people liked these stores for a reason – and they were succeeding because their buyers knew those markets really well, tailoring inventory for them. Although at the the time this may not have been an obvious wrong move, forcing that bland Macy’s brand on unreceptive local markets was a big mistake in hindsight – particularly as more consumers now expect and value personalization.

3. Macy’s ran right smack into the Amazon train.

It’s easy to blame Amazon for physical retail’s downturn. In this case, Macy’s has made some fairly significant missteps while Amazon has simultaneously made spot-on decisions. Amazon, as we know, has made it very, very easy to avoid going to a store, for example. It gives us excellent shipping and easy returns. Fast – even same day – delivery. A very functional interface coupled with excellent product inventory. In contrast, despite clearly trying hard, Macy’s just can’t seem to nail its one heavyweight advantage: an actual physical retail footprint.

Our research shows that two out of three people prefer in-store shopping because they can actually spend hands-on time with the product. What’s more: other research says consumers are orienting more toward a services and experience mindset versus a focus on “stuff.” If that’s the case – and we know it is because why else would Amazon be opening actual physical retail stores? – then Macy’s has really whiffed its major opportunity to outmaneuver the ecommerce giant with in-store promotions, events and more. And we’re seeing it in the numbers. If you look back at September, Amazon was in a very comfortable lead with online apparel sales at over $16B (versus Macy’s, which came in second, topping off at slightly over $6B). Most analysts have confidently predicted that Amazon will supplant Macy’s this year as the largest seller of clothing in the U.S. It’s a real shame.

At this point, though we should certainly root for the resurgence of this 158-year-old company, it seems increasingly likely that a successful second act will be a very steep uphill climb for the retailer.

Check out the original LinkedIn post by Brent Franson here.

Brent Franson

Brent Franson

Brent is the CEO of Euclid Analytics.

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