Last week Macy’s missed its revenue and earnings forecast for the first quarter, sending its shares tumbling.
While the talk of a retail apocalypse is just so much hype, the intense waves of digital disruption and shifting consumer preferences assure that the future of retail–and the impact on many large and lumbering players like Macy’s–will not be evenly distributed.
We now live in a digital-first world where the line between brick & mortar sales and e-commerce is mostly a distinction without a difference. Fellow retail analyst Doug Stephens describes this new landscape as “phygital.” But whatever you label it, the consumer’s path to purchase has changed substantially–and with it the role of the store. And, increasingly, same-store sales are a largely irrelevant metric.
Nevertheless, the continuing overall poor performance of Macy’s is concerning and underscores the problems faced by many legacy brands. To get back on track, Macy’s needs to aggressively address several fundamental problems.
- Eschew the sea of sameness. Macy’s, like so many other retailers, picked a really bad time to be so boring. Redundant, repetitive and fundamentally uninteresting product has become the norm. If customers don’t have a compelling reason (other than price) to traffic either their website or store, Macy’s will continue to hemorrhage market share.
- It’s the experience stupid! Having remarkable and relevant products is critically important and a necessary foundation, but it’s hardly sufficient. If Macy’s continues to provide me-too visual presentation, marketing that is indistinguishable from every other department store and lackluster customer service they will continue to make price the deciding factor for most consumers.
- Omni-channel is dead, at least in the way many have been pursuing it. Macy’s spent a lot of time and money trying to be all things to all people. Channel ubiquity with continued mediocrity is pointless. All retailers need to think about how to best harmonize and simplify the shopping across the moments of truth that matter the most for customers. Otherwise we’re just spending a lot of money to move customers between channels, not gaining relevance, share of wallet and profits.
- Strategically re-imagine the store and the store footprint. Analysts are going to keep pushing Macy’s to close stores. And to be sure, shrinking of both store counts and store size is probably required. But the reason this is even a talking point has much more to do with the weakness of Macy’s value proposition, not their sheer number of stores. Online helps stores and stores help online. Period. Mediocre retailers that close a lot of stores are likely starting a downward spiral from which they will never return. The key is to understand the store as the hub of an ecosystem for the brand, not an asset to be merely fine-tuned for productivity. Focus on being remarkable instead of mediocre and focus on how stores strategically drive online (and vice versa) and the store closing discussion recedes into the background.
- Don’t start a price war. With pricing pressures from Amazon, outlet stores and all the off-price players there might be a tendency to get overly focused on pricing. But don’t forget, the problem with a price war is you might win.
- Become a testing machine. It’s easy to blame Amazon for the troubles facing the industry. But by far the biggest reason retailers are in trouble is their abject failure to innovate. Every retailer needs an R&D budget and every retailer needs to test, fail and test again. Retailers were too scared to fail and now their failing because of it. As Seth reminds us “if failure is not an option, than neither is success.”
Of course all of this is more easily said than done, particularly as Wall Street pushes for short-term fixes and Amazon continues to lower its thin margin hammer on most sectors of retail. Yet it’s hard to escape the fact that more of the same at Macy’s will only yield more of the same.
What Macy’s needs is a lot more innovation.
What investors need is just a bit more patience.
A version of this story recently appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.