Case Study
Quinn Nevares
Retail Strategies
Jackson
6/18/13
Macy’s is one of America’s oldest department stores, and has established itself as an
iconic American brand since 1858. (H...
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. st...
new private labels reaching to increase the Millennials share of wallet and lift their spend
level.
Macy’s current merchan...
taking up inventory it will reduce cost and make room for more attractive and desirable
merchandise.
Current Assortment Fu...
In order for Macy’s to reposition their retail strategy towards Millennials, they must
first understand their competition....
Zara has been able to maintain a seamless and continuous brand image throughout
each category of merchandise. Zara offers ...
In comparison to ‘Impulse’ of Macy’s, Zara carries only privately designed and
manufactured merchandise. Focusing on the w...
uses direct and indirect, as well as online and offline communication techniques for the
Millennial customer through their...
H&M has a slightly different assortment, with women’s accounting for
approximately 55%, men’s 35% and children’s the remai...
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 Y...
newest brand Maison Jules and using celebrity spokespersons such as Blake Lively and
Leighten Meister. Macy’s should adjus...
At the end of the casual wear, there is a separate department dedicated entirely for
denim. Well known national brands dom...
utilizing the most successful and desirable brands and merchandise assortment. This
would require investment in trend fore...
drastically increase brand awareness. As previously mentioned, using the stars from the
hit show Gossip Girl Blake Lively ...
Thirdly, Macy’s should create an attractive store environment and keep consistency
throughout all locations. From research...
carry a merchandise assortment with 45% apparel, 20% shoes and handbags, 20% jewelry,
and 15% cosmetics and beauty.
To sum...
Works Sited:
Biesada, Alexandra. Hoovers; a D & B Company. Hoovers Inc., 2013. Web. 17 June 2013.
"Ladies."' Fashion Cloth...
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Merchandise Strategies: Macy's Case Study

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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.

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Merchandise Strategies: Macy's Case Study

  1. 1. Case Study Quinn Nevares Retail Strategies Jackson 6/18/13
  2. 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. 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. 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. 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. 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. 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. 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. 9. uses direct and indirect, as well as online and offline communication techniques for the Millennial customer through their ad campaigns.
  10. 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. 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. 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. 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. 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. 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. 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. 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.
  18. 18. Works Sited: Biesada, Alexandra. Hoovers; a D & B Company. Hoovers Inc., 2013. Web. 17 June 2013. "Ladies."' Fashion Clothing. H&M, 2013. Web. 17 June 2013. "Macy’s, Inc. At-A-Glance - Macy’s, Inc." Macy’s, Inc. At-A-Glance - Macy’s, Inc. Macy's Inc., 2013. Web. 15 June 2013. "Impulse Contemporary Brands."Contemporary Clothing for Women at Macy's.Macy's.com, n.d. Web. 17 June 2013. "MillennialsBy The Numbers." The Doneger Group. N.p., Dec. 2012. Web. "Woman | ZARA United States." N.p., 2013. Web. 17 June 2013.

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