Identification and description of critical issues
Some critical issues that Macy’s is currently facing include traffic problems, loss of premiere status, and the fact that they have spiraled downward with over discounting merchandise.
With the rise of online shopping, it is getting harder to convince people to visit physical stores. Online shopping has become somewhat of a death sentence to traditional retailers that have always depended on foot traffic in store to make sales goals (Schlossberg, 2016). Retailers have been trying to translate shopping into an experience by adding things such as in-store classes hoping this will foster a sense of community (Schlossberg, 2016). Macy’s is also attempting to do something like this in an effort to excite customers and boost traffic. Macy’s has hired personal shoppers and placed a spa in their Ohio store as a test. This is meant to make the shopping experience feel more upscale for shoppers while they are in store. In order to increase traffic, Macy’s has launched an off-price section in their stores to help boost traffic, but this has had a negative impact on the store. According to Business Insider Neil Saunders, CEO of the consulting firm Conlumino wrote a note to clients stating that “The blunt truth is that Macy’s does not give consumers a reason to visit its stores,” CITATION Sch16 l 1033 (Schlossberg, Business Insider: Macy’s new CEO has 3 major problems to solve, 2016). Neil Saunders, also wrote in a note to clients Wednesday stating, “In many stores, they are simply not up to par: they are poorly merchandised, hard to shop, lack any inspiration, and have second-rate customer service. Some of this is because a lack of capital investment, but some are about a lack of basic shop-keeping standards” (Schlossberg, 2016).
In the beginning, Macy’s has always been known for its popularity and premiere status. Although the department store has instituted an off-price section in its stores to help boost traffic it has primarily affected its reputation as a premier retailer and signaled that there are problems in the apparel industry (Schlossberg, 2016). Macy’s in New York has always been an iconic destination. However, Mallory Schlossberg from Business Insider reports that Macy’s flagship store in Herald Square serves as evidence of how the store is in danger of losing its premier status(Schlossberg, 2016). When customers walk into Macy’s and see everything is in disarray, this shows a certain lack of pride for the building or the merchants from employees. So, If the employees don’t care – how can consumers care? And why would they come back to the store? And why would they ever want to pay a premium price? Macy’s sales have steadily declined as they struggle to get people back into the store. It is believed that the two core problems that are affecting the premiere status they are merchandise and store environment (Schlossberg, 2106). When it comes to the merchandise, there is not enough newness in store or online, and the assortment is too cluttered. You can no longer walk into Macy’s and feel as you are walking into a high-end store on Rodeo Drive. Instead, you walk in and find a chaotic mess that leaves customers feeling underwhelmed and fractured.
Consumers have started shopping discount stores during the recession, and many have failed to return to shopping in full-price stores. Macy’s has incorporated Macy’s Backstage where they offer nothing but discounted items. The company’s Backstage Stores offer up to eighty percent off on apparel which gives consumers almost no reason to pay full price (Schlossberg, 2016). According to Business Insider, Neil Saunders, CEO of retail-consulting firm Conlumino, also counseled that Macy’s Backstage could damage the price integrity of Macy’s leading brand. “The logic behind the move is sound — namely that Macy’s wants to tap into the growing off-price market,” Saunders wrote in a note to clients. “However, we would sound a note of caution that Macy’s must not blur the lines between its mainstream stores and the new concept too much if it is to maintain price integrity within its department store” (Peterson, 2015).
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Assessing the Root Cause
As the shopping trend of consumers is pointing to the up and coming e-commerce side of the shopping markets, the brick and mortar stores (even a flagship such as Macy’s) are struggling to keep shoppers visiting physical locations. Traffic is one of many critical issues Macy’s is facing, which goes hand in hand with their other two main issues; loss of premiere status and the fact that they have spiraled downward with over discounting merchandise. So, what led Macy’s down this desperate road they seem to be going down? We will assess the root cause of these issues in more detail.
First and foremost, the new trend of online shopping has hurt many retailers across the country. Macy’s has not been the only one affected by the technological advances of today’s market, but their decline has certainly been more palpable than most. The Macy’s brand and image have been a long time favorite of people across the country. Their Thanksgiving and Christmas displays, and let’s not forget parades, have become a tradition and give us all the good warm and fuzzies; so, what happened? Online shopping for one. People have lost the need to visit a physical store because they can get what they need from the comforts of home with the click of a mouse. Not only is it more convenient to shop from home, but the pleasantries of shopping in stores is lacking, if not completely gone. This leads to Macy’s next issue, loss of premiere status.
If stores do not offer all the bells and whistles when you shop, then why would you want to visit at all? Macy’s has struggled to keep their elite status and star customer service, which has hurt their appeal to shop in the store. What used to feel like a day being pampered by well trained, well-respected employees who delivered a “white glove” experience, has now turned into employees who lack enthusiasm as well as the desire to pamper the customer. Poor displays and dirty stores have also tainted the Macy’s name.
The last issue is the over discounted merchandise Macy’s is offering. A company who demands respect does not discount their merchandise on a regular basis the way Macy’s has begun to do. The deep discounts lend to the idea that their merchandise is not worthy of upscale value, which also taints the Macy’s brand. Dirty stores stuffed full of discounted racks of clothing and merchandise do not call a buyer to visit the store, they scream “run the other direction!” So, how do all of these issues lead us to the root cause of the problem? They all point to the fact that Macy’s is not doing everything in their power to draw consumers into their stores. Macy’s needs to re-evaluate their strategies and re-align their goals for the company to succeed.
Strategic Alternatives
Let’s take a step back and look at the real problem. Somewhere along the line, Macy’s dropped the ball. Their stores used to be filled with expensive looking displays, minimal merchandise and impeccably dressed employees who waited on their shoppers like royalty. Now if a shopper enters a Macy’s department store, they find overstuffed racks, dirty floors, and the chances of even being able to find an employee to help them is slim. Budget cuts, employee incentives, and company standards have dimmed the light of that red Macy’s star. To alleviate the hurting market share, Macy’s can only turn this around by enticing consumers to come into their stores. Spending more on R&D to find out what consumers are buying and how they store displays could be more appealing could change the outlook for Macy’s profits in the future. Creating flawless presentations and window dressings, as well as boosting incentives for employees to dawn the “white gloves” for their customers would do wonders for the image of Macy’s stores. Only then will consumers feel the desire to shop for the “experience” rather than the convenience of online shopping. Sure, shopping online is easy and fast, but the feeling of walking out of a store with a tailored “just for me” shopping experience is worth so much more. The goal is to appeal to the consumer which in turn helps the business. Image is everything, and as the old saying goes, it takes money to make money, so Macy’s had better put in the work to get back on top. They have the ability to regain their elite status, but they are going to have to spend a little money to do it. Marketing for the in-store shopping experience with commercials and ads can get their name back in the forefront of customer minds. Offering a broader selection of their merchandise online can also target the consumers that are unable to visit one of their physical locations, or to target those convenience-minded shoppers. It’s time for Macy’s to rebrand their image back to the classic top shopping experiences in the market, and with these changes in their strategies, they are sure to rise up once again.
To rebrand Macy’s image, they need to roll out the red carpet and advertise the turnaround the department store is making. Offering new services and tailored-style merchandise would revitalize the dull image they have now. A grand marketing campaign would be well worth the cost, but that is a risk that is difficult for shareholders to take. Diversification of merchandise could help as well. Partnering with other clothing lines or brands would offer a different market share for the consumers, but this strategy could also lead Macy’s into a deeper slump. Sometimes too many choices for products leads to oversaturation and feels more like a discount retailer. By focusing on a concentrated core business plan, Macy’s can grow the company with narrowed strategies. Concentrating the energies of the company on re-imaging storefronts, offering more high-end merchandise and services and tailoring customer service will ensure a more stable image of Macy’s stores. Appealing to consumers by guaranteeing them excellent quality and customer service will re-confirm their opinion that it is better to shop at Macy’s stores over other retailers or online.
These strategies will be costly, but frankly, Macy’s is losing money at an enormous rate, so something needs to change. The risk of the high cost of re-branding is worth the reward they could receive by revamping their image. Yes, there is also the chance that the money spent could sink the company if the turnaround does not work, but at the rate the company declining, the only option is to put their efforts towards a change in strategy.
Executing the recommendations
When it comes to the three central issues that Macy’s is facing, which are consumer traffic, losing its premier status, and over-discounting. As previously stated in the strategic alternatives section our group has decided that the best recommendation for Macy’s three central issues are as follows.
The best option to increase consumer traffic to Macy’s stores is to spend more money on R&D and Marketing to find out what consumers are buying and how the store should be displayed/arranged so that it is more appealing to consumers. R&D and Marketing can find out information by doing surveys, focus groups and interviewing consumers. The information gain from these sources can be used to creating flawless presentations and make commercials and ads that show that attraction of visiting the store. Macy’s can do special discounts for the consumers that make an in-store purchase; this will bring consumers to the store looking for a good discount. This plan can be implemented by having the R&D and Marketing working together to set up the surveys, focus groups and interviews with consumers. After this is done any information gathered can then be put into an action plan and submitted to the CEO and from there set up all stores accordingly to the best option that applies to consumers.
The best recommendation for the second issues that Macy’s face losing of premier status is concentrating the energies of the company on re-imaging storefronts, offering more high-end merchandise and services and tailoring customer service will ensure a more stable image of Macy’s stores. Appealing to consumers by promising them outstanding quality and customer service will re-confirm their opinion that it is better to shop at Macy’s stores over other retailers or online. Macy’s can bring back the “just for me” shopping experience and feel of high-end shopping with a middle income price tag. It’s time for Macy’s to regain their elite status again but it will cost them money, but in the end, it will be worth the cost. The action plan would be to implement specialized training for employees so they can offer high-end customer service. Also, Macy’s will have to change the layout of the store, so it shows the high-class nature of the store.
The last recommendation we have for solving the over-discounting that Macy’s has become known for in the past few years is Macy’s needs to get rid of their discount Backstage section. With Macy’s getting rid of the discount Backstage area of the store and keeping discounts to a minimum this will begin to bring up Macy’s store image. If Macy’s wants to give out discounts, then this should only be done on certain days and for a specific time frame. Also, any discounted clothes should be kept tidy and in order. The action plan that will be implemented to solve the over-discounting problem is that will Macy’s start a new loyalty program that will be the only way consumers will be able to get discounts on specific merchandise and these discounts will only be available in store.
References
BIBLIOGRAPHY Dess, G. G., McNamara, G., Eisner, A. B., & Lee, S.-H. (. (2019). Strategic Management. New York, NY: McGraw-Hill Education.
Peterson, H. (2015, November 12). Business Insider: Macy’s shoppers developed a habit during the recession — and it’s haunting the brand to this day. Retrieved from Business Insider: https://www.businessinsider.com/macys-is-going-all-in-on-extreme-discounting-2015-11
Schlossberg , M. (2016, June 27). Business Insider: There’s a ‘dirty open secret’ in retail, and it’s killing Macy’s and Gap. Retrieved from Business Insider: https://www.businessinsider.com/declining-store-traffic-is-killing-top-brands-2016-6
Schlossberg , M. (2016, July 12). Business Insider: We went to Macy’s and saw why the brand might be headed the way of Sears. Retrieved from Business Insider: https://www.businessinsider.com/macys-has-lost-its-premiere-positioning-2016-7
Schlossberg, M. (2016, June 23). Business Insider: Macy’s new CEO has 3 major problems to solve. Retrieved November, from https://amp.businessinsider.com/macys-new-ceo-has-major-problems-to-fix-2016-6
