3 Ways Macy’s Is Tapping Tech to Attract Shoppers
Macy's is hoping it can continue to draw in new shoppers and boost sales with the ones it has.
The department store retailer produced solid numbers to end its fiscal year and detailed how it plans to use technology to continue growth in the year ahead. Total sales expanded by 27.8% on an overall basis and by 28.3% in comparable terms in Q4 2021.
“Our results in the fourth quarter delivered a strong end to a solid year,” said Jeff Gennette, chairman and CEO of Macy’s, Inc. “I am proud that Macy’s, Inc. outperformed expectations on both the top and bottom lines every quarter in 2021, despite COVID-19 related disruptions, supply chain issues, labor shortages and elevated inflation. Our business has momentum and is serving more customers at more touchpoints in their shopping journey.”
The retailer said 7.2 million new customers shopped the Macy's brand, an 11% increase over Q4 2019. Its digital touchpoints are growing as well. Macy’s digital sales jumped 12% versus the fourth quarter of 2020 and 36% on a two-year basis. Digital penetration was 39% of net sales.
“Here, Macy’s outperformed the market modestly over both periods, meaning it gained market share,” says Neil Saunders, managing director of GlobalData. “In our view, it has been easier for Macy’s to gain new shoppers digitally – indeed, 58% of new shoppers came via this channel during the quarter – than it is through stores. Most of this is down the dire state of many stores which means they do a bad job at recruiting new shoppers, especially younger ones.”
Because shoppers are coming in via digital, “a majority of them now are younger and more diverse,” Gennette said on the retailer’s earnings call. Making sure that Macy’s gets a second purchase out of those shoppers, using data and analytics technology, and personalization, is a “big focus” of Macy’s, he noted.
Macy’s long-term capital allocation plans are clearly tapping retail technology to try make this happen. The retailer said it will spend approximately $3 billion over the next three years primarily on technology architecture, data science applications across its retail operations, digital platform enhancements, fulfillment capabilities in stores and to further upstream its personalization efforts. In 2022 it expects to spend around $1 billion.
How Macy’s Is Tapping Tech to Attract Shoppers
1. Macy’s Loyalty Program
Macy’s Star Rewards loyalty membership is growing and Gennette said the retailer is testing advanced and AI-driven targeting to help determine the best communication channel, frequency, message, and offer for customers. Macy’s believes through enhanced personalization capabilities, it can increase engagement that drives positive brand perception, additional visits and purchases. “We view personalization as a growth engine for our company in the early innings of development, he said, later noting that now that Macy’s has 70% of its business tied to loyalty programs it has a lot of flexibility to “move away from a broad-based promotion and really personalize our message all the way through the customer journey.”
2. Digital Marketing
Macy’s has significantly shifted its media mix towards digital marketing; 66% of total spend is on digital versus 35% five years ago. Over this time, Macy's has experienced a 25% improvement in its return on advertising spend, said Gennette.
3. Digital Marketplace and Replatforming its Core Digital Platform
As previously announced, Macy’s plans to launch a third-party marketplace in the second half of 2022 that will allow curated third-party retailers and brands to sell their products on macys.com and bloomingdales.com. In addition to this the retailer is replatforming.
The refreshing of its mobile assets resulted in higher conversion and a better experience for customers since it launched in October, said CFO Adrian Mitchell. Expectations around the broader replatforming of the website are very similar.
[See more: Macy’s to Launch Revamped Mobile App and Live Shopping]
“We want to be able to manage a healthy level of conversion, AOV, help our customers navigate through our sites seamlessly and in a very convenient manner connected to our store experience as part of our omnichannel strategy," he said. "So it's really continuing the things that you heard us talk a lot about in 2021, which is around differentiated experience, new features, easy way to navigate the website. And we believe that those kinds of investments and experiences will be accretive to the brand.”