By Aaina O’Malley
After working for Macy’s for 34 years, Jeff Gennette has become the new CEO with plans for a bright future for the 159-year-old retail company. Gennette has stepped into this position in a difficult time. In the past eight quarters, sales have fallen tremendously, in which forecasts predict this drop to continue for the next year with plans to close 100 of its stores.
To devise a plan, Gennette first has to identify where the loss of sales is coming from. One being, the retailer has been recognized as a no longer fashionable and out of date company to shop. They also hurt their reputation with customers and vendors they do business with by supplying customers with endless coupons available to use. In comparison to many other department stores, the retailer does not offer undifferentiated products, making the store less attractive. Another problems lies with competition of off-price stores, like T.J. Maxx and Amazon, where product variety is high and shopping is easy to do.
On the other hand, brand loyalty has been an advantage for the retailer. According to Fortune, the company retains $26 billion in sales a year, with only 10 percent of their customers generate half of these sales. Many of these 43 million shoppers are attracted to the particular brands they carry, like Nike, Levi’s, Coach, and Ralph Lauren.
To bring Macy’s back to light, Jeff Gennette has devised a plan. His strategy details managing coupon distribution, implementing shop-in-shop retailers, increasing in house brands, dedicated clearance racks, enhancing beauty, and staffing fewer workers.
Macy’s customers love the value they are given, but are turned off by their complicated promotional offers. Their overuse of coupons is hurting the stores fashion credibility by cheapening the products offered. Additionally, customers do not like the exclusions of certain brands, and vendors are not happy with the discounts being offered to their brand. By shifting to a coupon like $10 off of $50, the chain can continue this promotions without discounting specific brands (Fortune).
Macy’s has partnered with brands like LensCrafters, who stores are currently located in a few of the department stores. CEO emphases the success they have had with LensCrafters and see a future with other businesses, for example Sunglass Hut and Finish Line. This will help drive traffic into the store with the hopes shoppers will shop beyond the shop-in-shop partner.
CEO, Gennette seeks to increase Macy’s own brands to attract greater profit margins. In comparison to other big department store businesses, like J.C. Penney and Kohl’s, who’s sales are 50% derived from in house brands, Macy’s only collects 20%. Gennette intends this will also help the retailer become a fashion and home destination.
Macy’s has designated a space in 10 of their stores called the Last Act. This area of the store is filled with merchandise that is marked down. Customers are not able to use coupons on products from this section. This has helped profits by moving old goods to the clearance section and making more room for the full price merchandise. In addition, it has helped the retailer charge more on outdated products as the consumer perceives the merchandise as being a clearance item that will not sit on the shelf for long. With the success they have received from the 10 stores, Macy’s plans to expand the Last Act to 30 more stores.
Over the past few years, millennials have been highly interested in the range of beauty products there is on the market. One reason is due to shops, like Sephora and Ulta, which have thrived by offering customers to test the product before buying it. For the future of Macy’s, they will incorporate this same strategy and grow their label Impulse, a collection of the hottest products on the market.
Macy’s realized the number of sales associates out on the floor was not meeting the service customer’s needs. They tested their shoe department by limiting the number of workers and supplying the department with more shoes on floor and keep less in the back, with the goal customers were able to help themselves to a greater selection. By decreasing the number of sales associates on the floor, they were able to cut back payroll and boost their profit margins. Gennette plans to apply this strategy to more stores this year.