Macy's Case Study - Merchandise Strategies FIDM 2013

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Macy's Case Study - Merchandise Strategies FIDM 2013

  1. 1. A Case Study Presented By: Taylor Urbany Course:Merchandise Strategies – Spring 2013 Due:June 18, 2013
  2. 2. 2 Table of Contents Introduction … 3 Macy‟s & The Millennial Customer … 3 – 4 Macy‟s For The Millennial: Mstylelab … 4 – 5 Evaluation & Analysis of Current Strategies & Suggestions … 6 – 11 Competitors … 11 – 13 Conclusion … 13 – 14 Sources … 15
  3. 3. 3 Introduction Macy‟s is one of America‟s most well known, established retailers. The department chain, offering mid-range to upscale goods including apparel, home décor and appliances, cosmetics, and more, has been meeting customers‟ needs and wants since the first flagship store opened in New York in 1858. Today, Macy‟s operates almost 800 stores within the United States, District of Columbia, Guam and Puerto Rico and employees approximately 175,700 employees (Macy's, Inc. Annual Report 2012.). Macy‟s has also been building its omnichannel presence via its website, macys.com. Macy‟s website states the retailer achieved $27.7 billion in sales as of fiscal 2012 (Macy's, Inc. Annual Report 2012.). The retailer continues to succeed due to its wide assortment of quality merchandise at affordable prices. This case study aims to examine what factors contribute to Macy‟s success and what factors the retailer could build upon in order to gain more attention and revenue from the Millennial customer. More specifically, this case study will exam Macy‟s Mstylelab department. This department includes girls and women‟s apparel, targeting customers 13-22 years old. Macy‟s has many strong, successful merchandise strategies that contribute to the retailer‟s success, however there are additional strategies that could further Macy‟s success, and ultimately their sustainable competitive advantage in the retail industry. Macy’s & The Millennial Customer Macy‟s annual report highlights the retailer‟s strategies to position the company to attract more millennial customers. According to Macy‟s annual report, Macy‟s plans to reach out to the Millennials, who spend more than $65 billion at Macy‟s, with an approach that “is part My Macy‟s… part Omnichannel… and part Magic.” (Macy's, Inc. Annual Report 2012.). Not only does Macy‟s plan to implement this strategy, but Macy‟s has also “brought together the Millennial teams from various disciplines…into new open- concept office space in New York City so they could work more collaboratively, create new ideas, and move quickly on key projects,” (Macy's, Inc. Annual Report 2012.). The result of this strategy was the creation and announcement of 13 new Millennial brands, the expansion of 11 existing Millennial brands, and the revamping of fresh merchandise
  4. 4. 4 and new ideas for Macy‟s Millennial departments, Impulse and Mstylelab, both in store and online (Macy's, Inc. Annual Report 2012.). Macy‟s annual report states that Macy‟s marketing teams plan to reach out to the Millennial customer via social media, knowing that social media is an important factor to Millennials' way of life and communication. Overall, Macy‟s strategy to target their existing Millennial consumer and gain new Millennials involves creating, revamping, and positioning merchandise and brands in a way that is not only exciting and affordable, but also easily visible for Millennials to familiarize themselves with. Macy‟s will also have to take into consider its fast fashion competitors, such as Zara, H&M, and Forever 21, in terms of the retailers‟ quick and efficient supply chain management as well as frequent merchandise turnover and accelerated speed of trends to market. The following sections analyze and evaluate one of Macy‟s Millennial departments, Mstylelab. Categories involving product, communication and customer service are analyzed. Suggestions/recommendations to better position Mstylelab to gain more attention, and ultimately a higher percentage of the Millennials' wallet share are also proposed. Macy’s For The Millennials: Mstylelab Macy‟s Mstylelab targets millennial girls and women ages 13-22. Mstylelab consists of several brands, including several of Macy‟s private label brands. Mstylelab‟s website offers 32 different brands for girls and women to shop from, the majority coming from Macy‟s private label brand, American Rag (Macy's). Overall, the brands contribute to Mstylelab‟s wide assortment of merchandise, ranging from dresses and tops, to graphic t-shirts and tank tops, to trending American flag themed apparel, to bottoms and shorts. While there is a wide selection of merchandise, several brands stand out over others in terms of being most appealing to the Millennials.
  5. 5. 5 For example, Material Girl, American Rag, and Mstylelab‟s collection of graphic t-shirts and tank tops stood out the most in terms of uniqueness, on trend, and affordable. Material Girl targets the more mature girl, likely ages 18-22. American Rag offers apparel for the entire target market of ages 13-22. And Mystylelab‟s t-shirt selection offers options for all ages as well. The placement of these brands‟ collection throughout the store could be reconsidered in order to draw more attention to Mystylelab‟s strongest attributes. For example, Material Girl is placed in the middle of the department. It captures the customer‟s attention immediately, offers hip, trendy outfits, and embodies that “cool factor” all millennial girls are looking for. On the other hand, American Rag and the Mstylelab graphic t-shirt collections are in opposite corners of the department. The collections feel more cramped and are essentially less visible. Macy‟s would benefit by positioning these appealing brands in the center of the department, essentially removing Ked‟s and the Marilyn Monroe brands to the outside of the race track layout, as opposed to the being in the center. The following section further analyzes Mstylelab‟s current strategies in terms of product, communication and customer service that contribute to Macy‟s competitive advantage. Suggestions and recommendations are also proposed. Following the analysis and recommendations, Macy‟s competitors will be evaluated to further determine what strategies Macy‟s should focus on in order to maintain and improve their competitive advantage in the retail industry. Mstylelab’s Material Girl display at Macy’s Union Square
  6. 6. 6 Evaluation & Analysis of Current Strategies & Suggestions Product Product Mix/Ratios o Currently, increased number of tops to bottoms; Approximately 65% tops, 35% bottoms o Should increase % of bottoms slightly o Very limited options for accessories; should increase Private Label/New Brand Ideas o American Rag very appealing for people with a laid back, hip, American sense of style o Should consider placing American Rag in the middle of the department (like Material Girl); this would increase visibility o New Brand Idea: I would suggest introducing a brand that focuses on delivering fast fashion, trending items such as a collection designers specifically for the festival fashion season and place this collection in the center of the store throughout Spring/Summer seasons; Mstylelab would benefit from a festival fashion collection because competitors (Zara, H&M, and Forever 21) all feature festival fashion merchandise; other retailers that target the Millennials focus specifically on festival fashion as well Assortments o Assortments range by brands; American Rag has more „American‟, festival-fashion oriented merchandise. o Material Girl is targeted more towards girls 18-22; assortments include more dresses and tops o Marilyn Monroe is less appealing; The clothes are very revealing for girls ages 13-18, lacking quality, and not sure Millennials identify with Marilyn Monroe as an icon o Ked's assortment is also relatively boring; more casual and conservative; successful to have an option for girls/women seeking a more conservative look, but not a very exciting
  7. 7. 7 Assortments brand o Mstylelab graphic t-shirts, tank tops, and basics are strong addition to Mstylelab‟s overall collection; the assortment is mostly tops, but also a wide selection of bottoms for affordable prices; this assortment collection should be located in the middle of the department as opposed to hidden in the back corner Pricing o Pricing matches target markets predicted income o Prices range, on average, $10-$90 (prices vary by brand within the department) o Macy‟s aims to launch at least 13 new brands; Millennials like “new”; more new brands will excite Millennials, especially if they are appealing, easy to access via MCommerce, social media/internet, and store fronts o These prices are competitive to fast fashion competitors such as Zara, H&M, and Forever 21; by having options that are less expensive and better quality, Macy‟s Mstylelab has a competitive advantage over fast fashion retailers Supply Chain Management o Need to implement, practice, and perfect a speedy and efficient supply chain management program to compete with fast fashion retailers such as Zara, H&M, and Forever 21 Merchandise Flow o Macy‟s Mstylelab needs to strive to have merchandise turnover flow that is consistent and competitive with fast fashion leaders/Millennial‟s favorite retailers such as Zara, H&M, and Forever 21; Zara, specifically, is the leader in bringing trends to market, in as little as 2 weeks o Increased merchandise flow more often promotes a sense of scarcity; this sense of scarcity will encourage Macy‟s customers to purchase the items now
  8. 8. 8 Communication Social Media o High level of involvement in social media; strong strategy due to Millennials constant, active involvement with social media o Connects with customers via Facebook, Twitter, Pinterest, Instagram, YouTube & through Macy‟s blog (MBlog) MCommerce o High level of MCommerce; strong strategy because Millenials are constantly on their phones; provides a sense of convenience o Connects with customers via Macy‟s App, Sign up for texts to hear about sales and events, Macy‟s by appointment includes Macy‟s team of free personal stylists.], shop top-rated items, shipping o Connects with customers via e-mail; notifies customers of upcoming sales, exclusive discounts and events; when signing up, customer receives a 15% off coupon o Macy‟s in on Passbook; allows customers to store all of their discounts in one place; Passbook is only available for iPhone users; many Millennials have iPhones o Mobile App offered specifically for Mstylelab In Store Experience o Overall, enjoyable and exciting o Some brands offer more appealing styles, assortments, and cleanliness/organization than others o Unimpressed by Marilyn Monroe brand/selection; Does the millennial really identify with Marilyn Monroe? I do not think this is a strong, successful strategy to gain a larger portion of Millennials attention and wallet share. Celebrity Collaboration o Current/upcoming collaborations: Macy‟s 4th of July Fireworks with Usher, Mariah Carey & Tim McGraw; Millennials like these musicians; good idea to collaborate with musicians from different genres
  9. 9. 9 Celebrity Collaboration o Mstylelab should consider celebrity collaboration with popular actresses/musicians that Millennials identify with; suggestions: Lucy Hale from ABCFamily‟s Pretty Little Liars o Mstylelab offers merchandise from Jessica Simpson‟s clothing line Advertising o Advertising via internet, TV ads, radio, and print; high level of advertisements increases retailer‟s visibility and awareness o Should consider advertising/promoting Mstylelab via social media sites such as Pinterest more; Example: Create a Pin board with a select number of styles from Mstylelab website and other photos to embody the customer‟s style, then „Like” Macy‟s on Facebook and submit the Pinterest board via Facebook to potentially win a gift card to Mstylelab; this contest would increase awareness of Mstylelab online and in the store and would excite Millennials who are very social media-savvy; encourages interaction o Macy‟s annual report claims that the company allocated $1,181 million for marketing and advertising in 2012 (Macy's, Inc. Annual Report 2012.) Customer Service In Store & Online o Very successful; detailed website, easy to navigate, many sources of information/assistance o Ability to send „E-Gift Cards‟; customer need‟s recipients e-mail to send e-card; strong strategy, easy and convenient Returns o Easy returns; return in order or from home via shipping o Certain merchandise categories have specific return
  10. 10. 10 Returns policies; the website details the policies very clearly o Easy returns attracts Millennials; Free Shipping o Macy‟s & Mstylelab‟s website offers free shipping on purchases $99 or more (certain merchandise items are excluded; offer is only valid in the U.S.) o Macy‟s offers international shipping; not free Stylists o Access to free stylist via MCommerce, in store, or over the phone to help customers find and create outfits for events or find a new look; less likely this feature will attract Millennials; Millennials are more likely to bring their friends with them to help them find an outfit Sales Training o Macy‟s emphasizes MAGIC selling: “Meet and make a connection … Ask questions and listen … Give options, give advice … Inspire to buy … and Celebrate the purchase,” (Macy's, Inc. Annual Report 2012.) o Magic is about “treating people right, taking the extra step with each customer, and bringing a new measure of joy to shopping,” (Macy's, Inc. Annual Report 2012.) o Macy‟s annual report claims that the company as a whole will be “redoubling our efforts to encourage our associates to sell form the heart and to take the extra step to make every customer feel special,” (Macy's, Inc. Annual Report 2012.) o Magic selling is a successful guideline for training sales associates Store Layout/Design o Race track layout with brands located within the center of the race track, emphasizing importance on these brands (Ex: Material Girls, Marilyn Monroe, Ked's); should consider replacing Marilyn Monroe or Ked's with American Rag and/or Mstylelab T-shirt & Tank selection – these brands & assortment options are more appealing
  11. 11. 11 Store Layout/Design o High level of light, upbeat music, wide aisles o Register/Check Out located in back corner of department; easily visible o Its Sugar = impulse items; this display should be closer to the register or in the center of the department to increase visibility Web Navigation o Strong strategy; the millennial is very internet-savvy, having an appealing, accessible website is beneficial Competitors According to Hoover‟s Database, two of Macy‟s main competitors, in terms of targeting the Millennials, include Target and Nordstrom (Macy's, Inc.). Below is a comparing Target‟s and Nordstrom‟s merchandise strategies in terms of targeting the Millennials. Target Product o Similar and competitive price points to Macys Mstylelab o Styles are trendy for summer, also include casual for the young professional, school appropriate clothing, and basic apparel merchandise as well o Offers more options in terms of accessories Communication o Similar to Macy‟s, Target has a very high level of communication with its customers via its website and social media connections o Strong advertisements via commercials Customer Service o The website is much more cluttered (Target); more difficult to navigate than Macy‟s Mstylelab o In store experience: Clean, organized, well-light, music is not as exciting, but overall good Overall o Similar experience to Macy‟s Mstylelab in terms of atmosphere; more casual, laid back, yet exciting
  12. 12. 12 Overall merchandise selection o Similar and competitive price points o Appealing styles and trends, potentially stronger than some of Mstylelab‟s brands (i.e. Ked‟s, Marilyn Monroe) Nordstrom Product o More expensive than Macy‟s Mstylelab, however the quality of certain merchandise is likely to be better o Top Shop attracts Millennials; essentially similar to Material Girl, but more expensive o Relatively proportionate ratio of tops to bottoms o Products more appealing to older demographic; however, there are options for Millennials, but not as affordable or as wide as a selection as Macy‟s Communication o High level of communication via connections on social network sites such as Facebook, Pinterest, Instagram, Twitter, etc. o Also very well-known for omnichannel presence and success; high level than Macy‟s o Offer exclusive deals and discounts; similar to Macy‟s Customer Service o Very high level of customer service, both in store and online (Nordstrom). o Free returns; similar to Macy‟s o Special events; similar to Macy‟s Overall o Macy‟s Mstylelab‟s atmosphere is likely to attract more Millennials vs. Nordstrom o Prices are also more affordable o However, there are more stylish brands/better quality at Nordstrom, but it is more expensive o Communication and customer service levels are both
  13. 13. 13 Overall very high for Nordstrom and Macy‟s o Macy‟s needs to improve their omnichannel presence and efficiency to better compete with Nordstrom Conclusion Macy‟s has taken considerable efforts to gain more attention from their Millennial target customers. The Millennials includes a younger demographic, specifically ages 13- 22 for Macy‟s Mstylelab department. As stated earlier, the retailer has exciting plans for new brands, ideas to revamp existingbrands, and other strategies to grab the Millennials attention and essentially a larger portion of their (or their parents‟) wallet share. While Macy‟s marketing and merchandising teams have implemented many successful merchandising strategies, such as an easy-to-use website, interaction via social media and MCommerce, deals and discounts, and appealing merchandise assortments, there are several strategies Macy‟s Mstylelab could benefit from. For example, Macy‟s Mstylelab needs to take into consideration the appeal that fast fashion leaders such as Zara, H&M, and Forever 21 have, and why those retailers are so successful at gaining the Millennials attention. First, the fast fashion retailers successfully create the idea of scarcity by having a quick, efficient supply chain in place and frequent and consistent merchandise turnover rates. Zara, specifically, also has great success due to their ability to quickly bring trends to market. While other retailers take months to bring trends from the runways to customers, fast fashion leader, Zara, does this in as little as two weeks. Macy‟s would greatly benefit by increasing the speed of bringing trends to market via a more efficient supply chain management system. This increased speed of trends to market will also create that sense of scarcity that attracts Millennials. The merchandising team at Macy‟s Mstylelab should also reconsider the layout/placement of brand‟s assortment collections throughout the Mstylelab‟s department layout. For example, the stronger, more appealing brands such as Material Girl, American Rag, and the Mstylelab t-shirt and basic collection should be the main features of the department. Rather than having less exciting brands such as Ked‟s and
  14. 14. 14 Marilyn Monroe as the center focus of the department, Macy‟s should feature the brands that will attract the Millennials. I would also suggest to the merchandising and buying teams to really consider whether or not the Millennials, especially the younger demographic of Millennials identify with the Marilyn Monroe brand. Not only are some of the styles inappropriate, I would also question whether or not girls of Mstylelab are likely to identify with Marilyn Monroe as an icon, and essentially as a brand. I would also suggest that Mstylelab introduce a new brand that focuses solely on the very popular, extremely popular Spring/Summer trend that is festival fashion. Festival fashion essentially dominates more than half of the year, with the festival season beginning in late February/early March and extending into October. Other retailers that target Millennials, such as American Eagle, Free People, and Urban Outfitters offer assortments that are greatly inspired by the macro trend that is festival fashion. Therefore, in order to compete with other retailers targeting Millennials, Macy‟s should consider implementing an exclusive, private label brand that features an assortment of festival fashion merchandise. The Millennials, especially the Millennials ages 16-22 are likely to attend music festivals and could likely turn to Mstylelab‟s festival fashion brand if it existed. Overall, Macy‟s initiatives and goals to target the Millennials could potentially create great success for the established retailer. The retailer just has to make sure the new brands, existing brands, marketing strategies, and communication strategies emphasize that “cool factor” many fast fashion retailers are very successful at. The Millennials are the future in many ways, but are definitely a force in determining trends in fashion that influence every aspect of the retail industry, from supply chain management, to assortment selections and trends, to marketing techniques. With a generation that is very Internet and social media savvy, Macy‟s should take extra steps to allocate marketing funds to ensure that all avenues of Internet and social media marketing are reached. By reaching the Millenial customer via social media, offering hip, quality, and most of all affordable clothes that help the Millennial girl feel cool, it is likely that Macy‟s will continue to succeed and compete in the retail industry.
  15. 15. 15 Sources "Macy's." Macys.com. Macys.com, Inc., 2013. Web. 17 June 2013. "Macy's, Inc." Hoover's Online. ProQuest, 2013. Web. 17 June 2013. "Macy's, Inc. Annual Report 2012." Macys.com. Macys.com, Inc., 2013. Web. 17 June 2013. "Mstyle Lab." Macys.com. Macys.com, Inc., 2013. Web. 17 June 2013. "Nordstrom." Shop.nordstrom.com. Nordstrom, Inc., 2013. Web. 17 June 2013. "Target." Target.com. Target Brands, Inc., 2013. Web. 17 June 2013.

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