In 2008, Macy’s looked doomed. Not just Macy’s, but all department stores resembled befuddled prey losing customers to Amazon’s low prices and convenient shipping options. Fast-forward to 2015, and the iconic retailer is thriving. Department stores are investing right in Amazon’s Achilles heel: stores. Stores are not the cost centers they were once perceived to be; when connected to digital, they simultaneously become showrooms and warehouses where consumers try out and pick up products. Macy’s leads the charge in omnichannel, topping 58 brands in L2’s 2015 Department Stores Index. Here is how Macy’s became a leader in omnichannel:
Inventory Visibility: Eighty-two percent of shoppers consider inventory visibility important, and retailers are starting to oblige. Inventory visibility reached a tipping point in 2015, with more than half of brands in the aspirational and prestige categories offering inventory visibility. However, few brands have fully leveraged the capability. Just 29% of brands in L2’s Intelligence Report: Omnichannel allow consumers to set a preferred store via their account, and just 66% automatically integrate consumers’ preferred locations with store-specific inventory data on product pages. A handful of brands have tailored their inventory visibility to those preparing their shopping trip; CVS, The Home Depot, Lowe’s, Macy’s, Neiman Marcus, and Office Depot allow consumers to filter SKUs based on whether they are available at the store of their choice.
Expanding Distribution Centers: For some time, it seemed impossible to compete with Amazon in delivery as it dwarfed all retailers in fulfillment center. The e-tailer has 66 fulfillment centers in the U.S. whereas Target, Walmart, and Macy’s have a mere 26 combined. However, retailers multiplied their distribution points by turning their stores into double-use real estate and using them for shipments. Macy’s ships out of 650 store locations, and Target and Walmart ship from 140 and 83 stores respectively. Often these store locations surpass Amazon’s shipments in delivery-time as they are located in commercial and residential areas.
Pulling the Plug on Loss-Generating Stores: Even with innovative retail technology, some stores will remain unprofitable. Macy’s digital capabilities have enabled it to close 22 stores in 2014 and minimize losses with investments such as same-day delivery and ship-from store from other nearby stoes. An L2 study of retailers suggests those with more omnichannel capabilities are poised to reap profits without excessive reliance on a retail footprint.
Executive Structure Aligned With Goals: Twenty-nine percent of individuals who list “omnichannel” in their title on Linkedin work at Macy’s. The company’s 2014 annual report mentioned “multichannel” 26 times. Furthermore, 38% of Macy’s omnichannel leadership comes from a retail background whereas other organizations bring on average 41% of their omnichannel talent from e-commerce roles (thereby making omnichannel an extension of their e-commerce business). Choosing an executive team that matches the company goals ensures that words like omnichannel and multichannel are more than lip service.
Overall, the key to Macy’s success was transformative and rapid investments early on. While laggards in omnichannel may be able to catch up, those who invested early signaled their forward thinking to the markets. Furthermore, many retailers who put off omnichannel investments are now surprised and overwhelmed by the complexity. If the trend continues, the gap will widen between the leaders in Omnichannel (Macy’s, Nordstrom) and the laggards.