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Posted Date: 5/12/2012

Macy's Omni-channel Strategy on the Move

Macy's is firing on all cylinders in its mission to transform itself into a true omni-channel enterprise, and its research shows the $26 billion retailer is moving in the right direction as it works to gain market share through a smart combination of its physical, virtual and brand assets.

Among other initiatives, the retailer is bringing digital assets into its stores, equipping sales associates with mobile devices to allow them to service customers better, opening a new warehouse, optimizing inventory with RFID, bringing direct-to-consumer fulfillment into stores and remodeling its flagship Herald Square location.

The omni-channel imperative
Macy's strong sales growth over the past several years has been bolstered by increases in its online sales. Sales on Macys.com and Bloomingdales.com saw an increase of 40 percent last year over 2010, and the channel continues to expand.

But whatever its sales online, the impact of the internet is even greater across the enterprise as a whole.

"Ninety percent of our customers research online at least occasionally before purchasing in-store," said Brian Leinbach, Macy's senior vice president of systems development and field services, speaking earlier this week at a Manhattan Associates' supply chain conference in Orlando, Fla. "Our best customers shop us online and in our stores," he said, adding that they are also twice as likely as other online buyers to have researched a product in its stores before purchasing online.

Whether starting in the store and moving online or vice versa, Macy's customers are engaging in a flurry of activity going back and forth between online and stores — from checking item availability and seeking product information to making the purchase.

We live in a world where people are "constantly checking in and connecting" on smartphones and other devices, said Leinbach. By 2015, social media will affect 80 percent of consumers' discretionary spending, he said, and there will be "50 billion things" available on the internet by the end of the decade. "Information is just part of us, what we need and thrive on. We want to leverage that as change agent with Macy's."

"The shopping experience is at the top of our food chain"
Given the increasing consumer predilection for checking in online — with friends, with products, with other stores — Macy's is working hard to keep the customer happy and engaged in any channel by delivering fresh and unique merchandise as well as a rich digital experience in stores as well as online.

Macy's brick-and-mortar locations are increasingly becoming a "blend of physical and digital," says Leinbach. Photos of Macy's handbag department shown by Leinbach at the conference reveal real purses and digital displays side by side, allowing customers to touch and hold the real thing but also to check out an endless aisle of other handbags, rotating them and looking inside, all onscreen. This format allows Macy's to display merchandise that it might not be able to otherwise because of limited floor space or inventory.

The retailer is also researching digital mannequins that could be re-outfitted quickly and easily throughout the day, changing clothes to appeal to different types of customers who shop at different times of day, for example.

Kiosks and point-of-product info will be an ongoing part of the in-store experience, as will a new visual broadcasting system. While Macy's has long featured video loops in its stores, the new system will bring it to the next level, allowing the retailer to tailor its videos by department, time of day or to highlight doorbusters or other merchandise on promotion.

Other new customer-facing technology is appearing in its cosmetics department, where a "beauty spot" touchscreen provides a blend of physical inventory with a virtual interactive display offering additional product information. At its Clinique counters, customers can seek help via an iPad app or through the more traditional method of on-site technicians. The idea is to give consumers choices, and allow them to get information at their own speed, or to ask for guidance, says Leinbach.

Customers also will have more opportunities to engage on their own terms. By year end, Wi-Fi will be installed all 840 store locations, says Leinbach. Macy's has also partnered with Google to provide in-store maps that customers can download and use to self-navigate its stores, and it is also partnering with Google for tap-and-go mobile payments via Google Wallet.

In an overhaul that involves major architectural as well as technology changes, Macy's is reinventing its Herald Square flagship store in Manhattan as part of a four-year renovation totaling in the "hundreds of millions of dollars," says Leinbach. The newly refurbished Macy's will launch this summer, featuring, among other changes, a full acre of shoe-selling space!

"If we own it, she should be able to buy it"
The promise of so many new digital offerings is exciting but only if there's product to support it. That other half of "buy anywhere" is "fulfill anywhere," and Macy's is implementing initiatives to both optimize inventory and ensure that customers can "shop across channels enjoyably" — in other words, get what they want.

To that end, Macy's is equipping its stores to handle direct-to-consumer order fulfillment; 300 of its 840 locations will offer this capability by year's end. "We are bringing the components of a flagship experience of selection and service to all customers through improved leveraging of central and store inventories," said Leinbach.

Macy's is also looking to better leverage its approximately 30,000 sales associates, not only by fulfilling from stores, but by empowering associates with new tools to better assist customers. New "search and send" capabilities, for example, will enable a sales associate to assist a customer who finds a product she likes but that is not available in her size, by finding the requested size anywhere in the network and having it shipped to the customer's house. In some departments, mobile POS handhelds will allow sales associates to check out customers on the floor so that they do not ever have to traipse back to the cash register. Additionally, reports newly delivered via mobile, instead of paper, will allow the management team to react in real time to developments while walking the floor.

Referencing a Saturday Night Live skit in which a customer was unable to find a sales associate on the floor of Macy's, Leinbach assures that Macy's focus on customer services will guarantee help aplenty. For example, when its new acre of shoes opens this summer, customers will encounter a staff of 150 sales associates on the floor and another 80 to pick shoes in the backroom.

Optimizing inventory across the enterprise
The need to keep inventory optimized for a "buy anywhere, fulfill anywhere" model is a big driver of Macy's ongoing item-level RFID implementation, whose benefits are becoming increasingly apparent as the retailer ramps up the choices it offers customers.

Macy's is applying RFID chips at the source, allowing for wall-to-wall visibility in its stores that enables the retailer to get the right amount of product in the right place. Its RFID readers, powered by Motorola, allow associates to take inventory 20 times faster than via traditional manual methods, with 95 percent accuracy.

"We used to check inventory once a year. Now we are checking 15 to 20 times a year. That's a game changer," says Leinbach.

To support its omnichannel growth, the retailer also has added an eighth distribution center in Martinsburg, W.Va., to service the East Coast. The astoundingly large two million-square-foot DC is so big, says Leinbach, that its engineers had to account for the curvature of the earth in its design.

The new DC, which began receiving goods just last week, is the first to run on the latest version (2010) of Manhattan Associates' warehouse management system (WMS). Other DCs will follow suit.

"This level of growth requires tremendous courage," says Leinbach. "We cannot make a mistake. Every experience must be top notch."

Jordan K. Speer is editor in chief of Apparel. She can be reached at jspeer@apparelmag.com.

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