This case study examines Macy's current merchandising strategies and initiatives, their top competitors and suggested actionable points to increase their share of wallet of the Millennial target market.

1. Case Study
Quinn Nevares
Retail Strategies
Jackson
6/18/13

2. Macy’s is one of America’s oldest department stores, and has established itself as an
iconic American brand since 1858. (Hoovers.com) Financially, Macy’shas had a bumpy
ride over the past century, specifically over the past decade. Due to the downturn of the
economy resulting in the worst recession since the 1920’s, Macy’s, along with many other
retailers suffered. By repositioning themselves and their initiatives, Macy’s was able to not
only survive but regain some of the market share they had lost. Earning $27.7 Billion in
fiscal sales in 2012, Macy’s has credited much of that success to their M.O.M. retailing
strategy. The acronym stands for My Macy’s, Omni-channel, and M.A.G.I.C. selling.
(MacysInc.com)
My Macy’s is the stance to reposition each location to provide more localized
merchandise reflecting each store’s unique location. By offering more personalized
merchandise catering to different demographics has become Macy’s attempt to further
engage and delight their customer. This has proven to be a successful angle for Macy’s, in
addition to the other two branches of this strategy.
Omni-channel retailing entails creating a seamless and uniform experience for the
customer across all channels: in store, online and mobile device, and catalog. The true
telling of an Omni-channel retailer is the ability to run their business under one inventory.
Macy’s has made large investments to achieve this status and is making headway in
creating a uniform experience for the customer.
The third initiative in the M.O.M. strategy is M.A.G.I.C. selling which stands for: Meet
and make a connection, Ask questions and listen, Give options/give advice, and Celebrate
the purchase. This is the key in creating a sustainable competitive advantage, which has

3. positioned Macy’s to focus on the customer, who at the end of the day is the only thing that
really matters.
The M.O.M. strategy has proven to be successful for Macy’s over the past three years.
However, as of the beginning of the 2013 fiscal year, Macy’s has implemented a slightly
different initiative, focusing their priority towards the Millennial customer. The Millennial
market segment total 73.3 million in the U.S., range in age from 13-31 and are the next
largest generation next to the Baby Boomers. (U.S. Census, 2010) The Millennial’s are
more racially diverse than previous generations, are more technologically savvy, and are
more environmentally conscious. (Pew Research Center, 2010)
Looking at Macy’s current merchandise assortment it is clear that this channel is
aiming to offer exclusive merchandise. As of 2013, about 45% of merchandise sold at
Macy’s was exclusive or in limited distribution. Currently, according to their online channel
and in store merchandise, 26% of their assortment account for Macy’s own private labels.
This reflects the approximate 20% of their sales that is solely private label.
(Macy’sInc.com)
Looking at the future, Macy’s must fully understand their Millennial customer in
order to fully satisfy and gain their share of wallet. Today’s Millennials are constantly
connected. Macy’s has addressed this with creating a multi-channel experience including a
m-commerce channel. The Millennials are also very keen on fast fashion. Vertical Retailers
such as Zara, H&M, and Forever 21 have shown rapid expansion over the past five years.
Looking at these competitors, Macy’s has continued to expand their brand portfolio with

4. new private labels reaching to increase the Millennials share of wallet and lift their spend
level.
Macy’s current merchandise assortment coincides directly with what their sales
figures show, and will continue to focus a significant percent on private label merchandise.
Macy’s has announced the release of two new private label brands for next year with hope
to stir excitement and draw in customers. However, with the abundance of ‘sameness’ that
is overwhelming the market today, careful planning ought to be in order for Macy’s to stand
out. By using vertical retailing as a strategy to control quality and cost while offering an
exclusive product Macy’s is able to compete with retailers such as Zara, Forever 21, H&M,
and Abercrombie & Fitch.
Using this strategy, Macy’s should continue to offer select and exclusive
merchandise. They should increase their exclusive merchandise by an approximately 15%,
using only their most successful labels. By continuing to launch new brands, Macy’s is
diluting what they currently carry with similar merchandise. Macy’s should therefore
choose fewer more successful and desired brands as their primary focus, rather than
continuing to saturate their stores with too much of the same merchandise. This requires
strategic marketing and research of the most current trends to engage and delight their fast
fashion customer. Offering over half of their merchandise as exclusive or private labels,
60%, will help gain a strategic competitive advantage against the competition.
The remaining 40% of Macy’s assortment should also be closely tailored to only the
most desirable and sought after brands. Macy’s store locations have been known to be
overly saturated with excessive merchandise. By eliminating items that are not selling and

5. taking up inventory it will reduce cost and make room for more attractive and desirable
merchandise.
Current Assortment Future Assortment
Exclusive/Private Labels 45% 60%
National Brands 55% 40%
Today’s Millennials are an extremely challenging market segment to impress.
Constantly connected, they are always looking for the next new and exciting thing. They
live in an era of instant gratification, and in order to compete with fast fashion retailers,
Macy’s must create new and exciting ways to engage and delight their customers. One way
to reach out their customer would be the use of a celebrity spokesperson. Recently H&M
launched their Spring/Summer 13 campaign with Beyonce. This gained massive
recognition as Beyonce carries a very positive and exciting brand image that many of the
Millennials aspire too.
The most effective way to push a private label would be the use of a highly sought
after celebrity as a spokesperson to create a buzz. For example, Macy’s newest brand to be
launched, Maison Jules, takes inspiration from Parisian street style and will be
incorporating the classic style into chic basics to create a tailored, effortless look. Looking
to create a ‘cool factor’ buzz, Macy’s could aim for an ‘American Girl in Paris’ take on
launching the brand. Using stylish celebrities such as Blake Lively and Leighten Meister
from the popular show Gossip Girl would give Macy’s Millennial customer a relatable
spokesperson to build the brands equity.

6. In order for Macy’s to reposition their retail strategy towards Millennials, they must
first understand their competition. Because Macy’s is looking to compete with the big fast
fashion retailers the most relevant competitors to asses would be Zara and H&M.
Zara is a global retail brand using vertical retailing and has established one of the
fastest supply chains in the business today, giving the brand a massive sustainable
competitive advantage. Zara has announced the upcoming plans for their newest flagship
store on 5th Ave in NYC and is continuing to build brand equity by offering the latest styles
with the one of the fastest inventory turnover in the industry. (Hoover.com) Zara provides
their customers with J.I.T. merchandise and offers a variety in their assortment, including
women’s apparel and accessories, men’s apparel, children’s apparel and home goods.

7. Zara has been able to maintain a seamless and continuous brand image throughout
each category of merchandise. Zara offers stylish merchandise at prices that are marginally
higher than other fast fashion retailers, yet lower than designer market. Zara uses their
brand equity to create a more desirable product, therefore justifying the price
differentiation. Price points for apparel range from $30-$120, where price points for
accessories range from $25-$79. In their store-fronts, women’s apparel and accessories
dominate the merchandise assortment with approximately 70% of the total merchandise
mix. Men’s apparel accounts for about 20% and the remaining 10% for children’s. Zara
Home has not been launched in the U.S., and their online channels reflect this merchandise
assortment as well.

8. In comparison to ‘Impulse’ of Macy’s, Zara carries only privately designed and
manufactured merchandise. Focusing on the women’s department, accessories include
jewelry, neckwear, eyewear, shoes and some handbags. The ratio for apparel to
accessories is approximately 3:1. Zara does not carry any beauty or cosmetic products.
Zara’s overall experience for their customer is consistent with their brand image.
The store is well lit, well organized and well presented which reflects their significantly
higher price point than other fast fashion retailers. Their online presence does not offer a
lot of engagement with their customer. The online channel is organized and easily
accessible, however with a very limited selection in assortment. Their customer service is
not entirely consistent throughout the staff, where upon some visits the customer may
experience good customer service, where during other visits may experience poor
customer service.
H&M, a Swedish, vertically integrated global retailer offers a variety in their
merchandise assortment as well. Carrying women’s apparel, men’s apparel, children’s as
well as accessories, H&M has gown to be one of the largest fast-fashion retailers in addition
to Zara. (Hoovers.com) H&M tailors their brand directly to the Millennials, promoting a hip
and edgy lifestyle with affordable merchandise to be worn for every occasion.
As previously mentioned, H&M utilizes celebrity endorsements to create high brand
awareness. Using celebrities such as Beyonce and David Beckham H&M create a ‘cool
factor’ that drives customer loyalty and C.L.V. This POD sets H&M apart from competitive
brands by creating an exciting and desirable image for the brand and their products.H&M

9. uses direct and indirect, as well as online and offline communication techniques for the
Millennial customer through their ad campaigns.

10. H&M has a slightly different assortment, with women’s accounting for
approximately 55%, men’s 35% and children’s the remaining 10%. H&M is still behind the
curve in terms of multi and Omni-retailing due to their lack on online presence in the U.S. If
they continue to miss the opportunity of e-commerce they will undoubtedly fall behind and
continue to loose market share.
Looking at the women’s merchandise mix, H&M carries women’s accessories that
include neckwear, handbags, jewelry, headwear, and shoes. Apparel accounts for the
majority of the merchandise mix, with the ratio of apparel to accessories of 4:1. Similar to
Zara, H&M carries only vertically integrated merchandise. H&M specializes in staple
merchandise, where a large majority of the assortment consist of basic t-shirts and tank
tops. Overall H&M carry a lower to moderate price point on average per apparel SKU,
ranging from $10-$30. For accessories, price points range from $8-$20. H&M does not
carry beauty or cosmetic products.
Assessing H&M’s overall presentation as a brand, their store’s are not completely
consistent with their online presence. H&M’s website offers many interactive
communications with their own blog, Pintrest, Facebook, Twitter and Instagram. However,
there is no online store where the customer is able to purchase in the U.S. H&M’s stores are
moderately organized, but they do not create an engaging environment for the customer
and does not provide stand out customer service.

11. Macy’s ‘Impulse’ Zara H&M
Apparel to
Accessory Ratio
1:1 3:1 4:1
Price Points $20-$150 $30-$120 $10-$30
Beauty/Cosmetics Yes No No
As Macy’s continues to reach out to the Millennial customer, store experience will be
a very important element in creating a sustainable competitive advantage. Zara and H&M
offer an assortment of merchandise for their customer to create an entire outfit with one
stop. Macy’s has separate departments where the customer must seek out each category in
separate areas. Macy’s would benefit by creating a smaller store experience, offering their
customer a desirable assortment of apparel, accessories and cosmetics. This would
encourage the customer to lift their spend level per visit. By offering a beauty/cosmetics
area within the ‘Impulse’ department Macy’s would employ a significant POD in
comparison to Zara and H&M, creating a new and exciting shopping experience for their
customer.
In summary, Macy’s Millennial initiative has positioned Macy’s to reach out to the
Millennial customer. Macy’s has chosen to modify the Millennial departments to create a
more desirable environment by offering a variety of brands, including a significant
percentage of private label brands. Zara and H&M both offer a selection of accessories
along side their apparel assortment. Macy’s should focus on their successful private label
and work towards building brand equity within each brand, for example the launch of their

12. newest brand Maison Jules and using celebrity spokespersons such as Blake Lively and
Leighten Meister. Macy’s should adjust the departments to appeal to the Millennial
customer as well. By offering a select amount of accessories, beauty and cosmetics
products within the ‘Implulse’ department, Macy’s would gain a significant POD against
their competitors.
Macy’s carries about 25% of private label merchandise as well as 45% of exclusive
products available only at Macy’s. Focusing on the Union Square Macy’s in downtown San
Francisco, the ‘Impulse’ department offers a clean layout that is designed in a racetrack
layout. Upon entering the department, the customer is greeted with work wear for the new
professional woman. Private label brands such as Alfani and I.N.C. are intermixed with well
known national brands. The assortment shows a majority of business dresses (25%), dress
skirts (15%), blouses (45%) and dress pants (15%). Further into the department are more
causal and fashion forward styles, with brand stores within the department such as a Free
People section. The assortment shows a majority of tops (55%) and dresses (30%), with a
15% of the merchandise being skirts. A classic and very strong theme for the merchandise
is using the summer holiday with a large portion of American styles and lots of red,
whiteand blue.

13. At the end of the casual wear, there is a separate department dedicated entirely for
denim. Well known national brands dominate this area including 7 for All Mankind, A.G.,
True Religion, Hudson, Rich and Skinny, and Citizens for Humanity.
Three actionable points Macy’s should use to address the Millennial customer and
create a sustainable competitive advantage are: 1) Make merchandise modifications, with
both their assortment as well as their brands. 2) Use more effective communication tactics
with the Millennial customer. And 3) Create a more engaging store experience, both online
and in bricks and mortar.
First, Macy’s should be to invest in offering a more desirable product than their
competitors. This would entail Macy’s to evaluate which of their private labels are most
successful and position those towards the Millennial market segment. This would provide
their customer with exclusive and desirable products, while still providing desirable
national brands as well. Macy’s should increase their private label merchandise by 15% by

14. utilizing the most successful and desirable brands and merchandise assortment. This
would require investment in trend forecasting and design production to ensure an
assortment of on trend merchandise.
In addition to offering more desirable private label product, Macy’s should evaluate
the national brands carried in their store, and assess which ones are successful and look to
possible update with more current and relevant brands. This would reduce the saturation
of too much sameness throughout the store. The idea would be to excel with fewer brands
and products, rather than stay mediocre with a multitude of brands.
Secondly, Macy’s should utilize the advancements in technology and invest in
communication techniques to engage their customer. As previously stated, Millennials are
constantly connected, whether it is through mobile device or laptop computers, there is
great opportunity to create a connection through social media outlets including Instagram,
Facebook, Twitter and Tumblr blogs. ‘Impulse’ should create a brand image of their own
and offer interactive tactics such as an Instagram contest, where customers engage in
wearing clothing purchased at ‘Impulse’ and posting stylish and creative images. The
‘Impulse’ department could also create their own blog that offers styling tips, pop culture
news, advise columns, and lifestyle topics that engage with the customer. By using more
interactive techniques Macy’s, more specifically ‘Impulse’ would create a community with
their customer’s, which would result in building brand equity.
Macy’s should also use celebrity spokespersons to promote their private labels.
Macy’s has taken the stance to offer a good selection of private label merchandise, and
using a pop culture celebrity that would connect the brand to their customer would

15. drastically increase brand awareness. As previously mentioned, using the stars from the
hit show Gossip Girl Blake Lively and Leighten Meister. This ‘American Girl in Paris’ angle
would increase brand awareness and attract Millennial customers.

16. Thirdly, Macy’s should create an attractive store environment and keep consistency
throughout all locations. From researching the Union Square location and comparing it to
the Stoneridge Mall location in Pleasanton, the San Francisco location has a far superior
store environment and presentation. Macy’s should create a full store experience for the
Millennialcustomer by offering accessories and beauty products within the same
department. Macy’s has attempted this with the ‘MyStyleLab’ department by placing a
M.A.C. counter adjacent to the apparel section. However, this would make far better sense
in the older Millennial department of ‘Impulse’. More specifically, Macy’s ‘Impulse’ should

17. carry a merchandise assortment with 45% apparel, 20% shoes and handbags, 20% jewelry,
and 15% cosmetics and beauty.
To summarize, Macy’s has been a dominant presence in the retail industry for more
than 150 years. Macy’s has been on a roller coaster ride over the past decade in attempt to
stay current and in demand during and after the recession. Looking to gain back market
share they have decided to take initiative to focus their ‘Impulse’ and ‘MyStyleLab’
departments towards the Millennials, the most up and coming generation. In order to gain
and sustain a competitive advantage Macy’s must re-evaluate their retail strategies through
these three actionable points: 1) Adjusting their merchandise assortment. Macy’s should
exclusively offer only high quality, on trend products with a limited number of brands,
private labels accounting for 30% of the merchandise. 2) Invest in technology and
advertising through social media. By utilizing the media outlets that the Millennial
generation are connected to Macy’s will create a stronger presence within the online
Millennial community. Macy’s should also utilize celebrity endorsements and partnerships
to create higher brand equity and awareness for their own private brands. 3) By adjusting
their store layout and the store experience. By offering apparel, accessories and cosmetics
in one hip and cool atmosphere Macy’s will have the competitive advantage to life the
spend level and create a C.L.V. with the Millennial generation.

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