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Macy’s Provides A Vital Breath Of Fresh Air

Monday June 24th, 2013 - 12:41PM

It was only a couple of years ago that HomeWorld Business was heralding Macy’s as its annual Retail Champion, a flagship example that the oxygen had not been sucked out of the department store channel.

Two years later, Macy’s has done nothing to dispel such status. And to many of its department store competitors, some struggling (you know who) and some improving (you know them, too), Macy’s has provided a blueprint for just the right amount of fashion and trend leadership, promotional assertiveness, product exclusivity, cross-channel integration and operational dexterity.

Convincing Numbers

Indeed, the department store channel isn’t just off the respirator. The long-term prognosis seems to be improving every day.

Macy’s numbers, which have been beating analyst estimates, are convincing. The company earned $217 million in its recently completed first quarter, compared to $181 million for the year-earlier period on a comp-store sales increase of 3.8%. Macy’s 53-week fiscal 2012 net income of $1.34 billion, compared to a 52-week net income of $1.26 billion in fiscal 2011, came on a same-store sales gain of 3.7%.

Macy’s Omnichannel strategy is proving that a strong e-commerce growth plan can be abetted by a strong brick-and-mortar foundation. Online sales at macys.com and bloomingdales.com combined to grow year-over-year by 47.7% in the fourth quarter and 41% for fiscal 2012.

Some 500 Macy’s stores are earmarked to fulfill online sales by the end of the year, underscoring the retailer’s goal to keep the physical stores integral to its online expansion. By some measures, more than 25% of online orders that can be picked up at stores result in an additional in-store sale.

Modified Merchandising

Macy’s also plans to invest more than $35 million to expand its Goodyear, AZ, distribution facility to support fast-growing online sales.

A recent column in this space discussed the opportunity for retailers to benefit from gentrification of urban neighborhoods that is driving a population shift back to cities.

Macy’s, with a veteran big-city store presence from New York to Chicago to San Francisco, is looking to stay at the forefront of this urban retail renewal. The renovation of the longstanding Macy’s store in resurgent downtown Brooklyn recently unveiled an updated furniture department, part of a storewide re-merchandising plan geared to the wave of upscale consumers moving into the neighborhood’s expanding selection of apartments and condos.

Renewed Vigor

Localized assortments developed as part of the My Macy’s initiative continue to factor significantly in Macy’s plan to engage longtime and new customers with its stores. Speaking of new customers, Macy’s this year is actively launching merchandising and promotional programs to attract and seed long-term loyalty among the expansive Millennial generation for whom digital shopping is an essential outlet.

Macy’s, of course, isn’t the only department store operator re-generating a sustainable growth platform. The success of Macy’s and Bloomingdale’s, however, has a way of validating the renewed vitality of a channel many so-called experts had bound for the retail graveyard just a few years ago.

Macy’s talks about “Magic Selling.” But there is nothing magical in department store retailing about creative vision; a careful balance of trend leadership and value; a knack for product and merchandising differentiation; a strong promotional front; and an intimate understanding of your customers.

For those that get all of that right, there is plenty of oxygen to go around.

—Peter Giannetti