The omni-channel lessons retail needs to take from COVID – Macy's CEO on pandemic learnings for 2021
The omni-channel lessons retail needs to take from COVID – Macy’s CEO on pandemic learnings for 2021
Mon, 12/14/2020 – 03:05
- COVID-19 has been a horrible learning experience for the retail sector as the omni-channel balance has shifted on its axis. Can the likes of Macy’s take on board the necessary lessons for some kind of retail ‘new normal’ in 2021’s ‘Vaccine Economy’?
Last week diginomica noted that ‘America’s Grocer Kroger had made it onto the eMarketer ranking of Top 10 US e-commerce companies. That was a win in a year in which retail has made the systemic online shift that it has.
But not everyone can win of course. The same ranking is notably missing a US retail institution as Macy’s this year drops outside the Top 10. In some ways, that shouldn’t be entirely unexpected. Of all the retailers we’ve tracked through the COVID crisis, Macy’s has been among one of the most negatively impacted, reeling from a quarterly loss of $3.6 billion mid-year.
Still heavily dependent on a real estate network which, although reduced in size over the past few years, still dominates the bottom line to such a degree that when it’s closed down in a pandemic, there’s a lot of red ink to go around. And the digital counterbalance hasn’t been there to compensate, with the firm’s online growth actually going down in recent months.
With the US about to enter a ‘Vaccine Economy’, Macy’s CEO Jeff Gennette will be hoping to get the shop doors open again and have some kind of return to normal levels of footfall soon. But as every retailer under the sun has dutifully trotted out this year, things aren’t going to be exactly the same ever again and the nature and form of omni-channel retail will in practice be changed.
Habits and best practices born out of or accelerated by the COVID crisis will carry on, which puts the onus on retailers in 2021 to adjust their strategic imperatives to greater or lesser degrees, based on what lessons they’ve learned – or scars they’ve earned – during the past 9 months or so, bearing in mind also that there are many months yet to go of operating under the shadow of the virus.
It was against that backdrop that Gennette pitched to the Morgan Stanley Global Consumer and Retail Conference recently and dropped a good soundbite that sums up the situation for most of the retail sector as 2020 winds down:
Plan A becomes Plan B which becomes Plan C – it’s constantly changing as the customer pivots.
This has been a year in which retailers needed to innovate and tackle unanticipated – one might even say unprecedented (sorry!) – challenges, he said, arguing that a key Macy’s behavioral change learning was to become “fast and scrappy”. He cited curbside pick-up as a case in point, a prime example of what was still a retail ‘nice to have’ for all too many at the start of the year, but became an omni-channel ‘must have’ by the end:
In March, we didn’t have curbside in any form; in April, we had curbside up-and-running; and in May it was rolled out in every store. The first version of this was really a hack – it worked, but it was missing some of the conveniences that customers expect. So we ran the initial curbside program while the team developed a more robust solution and we rolled that out right prior to [the] Holidays.
There was also an extreme channel shift underway with physical stores becoming fulfilment centers to support Macy’s dot-com customers, handling execution for more than half of digital business at the peak of store lockdowns. This again is something that’s been forced on Macy’s and other retailers through reactive need, whereas for omni-channel exemplars such as Target, it’s been a long term, hugely successful part of their digital thinking for years. A big learning from 2020 is that those that get to work early on such programs end up reaping the reward.
That channel shift Gennette cites also feeds back into how the resilience – another key COVID learning word and one that cuts across multiple business sectors – of the operating model stood up to pressure. Here Macy’s man is claiming success:
As a true omni-channel retailer, we will give our customers a great experience however and whenever they want to shop – our sites, our apps, or our stores. When demand in one category shrinks, we can offset by expanding into categories that our customer wanted…When value becomes more important, we can and will dial up off-price, and while the best malls will survive and thrive with our participation, we know that we can find new avenues of growth off-mall.
But circumstance has meant re-mapping the customer journey and that’s something that will carry on into 2021. Store doors may re-open and boasts may be made about health and safety rules and social distancing guidance, but ultimately, as diginomica noted about the supposed return to work drive earlier in the year, it all comes back to trust in the end.
The learning here then is how important it is for retailers to put themselves in the customer’s shoes and work out how to make sure he or she is going to feel comfortable cruising the aisles in the ‘new normal’. The images in social media circulation on Black Friday showing a near deserted Macy’s flagship store in New York will be haunting management for a long time to come. But again Gennette reckons that Macy’s has taken this lesson on board, both from a customer perspective and an employee one:
[One] thing was really making sure that we met the customers’ high expectations with health and safety. We were initially designated as one of those ‘non-essential’ retailers and we have fought hard to prove the case that we’re a safe retailer and that no matter where the pandemic goes, that we can stay open by adhering to all CDC standards.The team have worked very hard at that, they’ve become expert at all the city-wide ordinances or state-wide ordinances, and making sure that we’re fully compliant.
And for employees – or as Macy’s calls them, colleagues:
In the stores and distribution centers, that was again [about] adhering to all safety standards, making sure that our colleagues were safe and that they felt safe and that they can convey that to customers when they hit the buildings. The second [thing] was call centers. This was a tough one because we have a lot of call centers that are international, and so [we were] ensuring that wherever the pandemic was, if it was in the Philippines or if it was in parts of South America, that we had options to be able to serve customers. We went to a work-from-home perspective and basically had the technology where our colleagues could work from home, either in the States or internationally. That dramatically changed our ability to serve customers as those calls went up, as the digital business increased.
Thirdly, as I think every corporation is dealing with right now, is what do you do with your corporate employees as they go from a fully virtual world to one that is more hybrid and really mapping that out. I mean, we want this to be part of our employment brand, that we offer options for our colleagues, but where work needs to be virtual, where it’s mostly execution mode versus where you’re strategizing. you’re brainstorming, you want to bring people back together, thinking through all that for the future as the vaccine takes hold.
The other obvious learning to be taken on board from 2020 is the shift to online and how to cater for it. That again comes back to the customer journey and more remapping work. Despite the slowdown in Macy’s online growth, retail en masse has made a shift into the digital ether and there’s no-one betting on that changing back. Gennette acknowledges:
Clearly the customer has gotten very comfortable [online]. When you look at our core customer, they’re very comfortable now whereas before [if] you started to map all of their behavior when they were a stores-only customer, those people have definitely shifted to omni-channel and many of them actually have not returned to stores. They’re just very comfortable transacting digitally, so [it’s about] recognizing that we needed to make all of the improvements on [the web]site.
Macy’s now has three key initiatives underway to create a more developed digital business, starting, as noted, with the website itself. As every retailer will have realised by now, the learning here is that the cliche of the website being your store front is now an irrefutable reality and not just a nice tick to have on a marketing slide. And if you haven’t put the spade work in over the years, now’s the time to get on with it. For its part, Macy’s is making changes:
We enhanced our product pages. It was all about better browse and filter features. It was the opportunity to re-platform to Google Search, which really improved our search relevancy – that was very important. We had consistent call-outs, particularly from younger customers, about instalment pay and that’s why we launched Klarna, [an online payment firm that caters for over 200 retail customers].
Next up is a push to improve CRM online:
The first thing [todo] was really looking at making sure that we were scaling product recommendations to really be specific to a customer. We are in the early innings of personalization, but we’re really getting very strong bites from that and the conversion rates of that messaging is really improving. We went through and we increased monetization, which can be a profit stream for us. But most importantly with customer relationships was really the site experience. It is much more experiential. There is more storytelling. When you look at our gift guide, the Holidays gift guide, as an example, versus what it was last year, it’s much more easy to navigate. It really shows the range of prices and categories, it’s daily optimized.
Finally there’s more focus on customer convenience, which is where curbside pick-up comes into play, as do delivery options, particularly same day delivery which Macy’s is now executing via DoorDash, explained Gennette, after experience with a previous provider limited the number of customers the firm believed it could reach.
At the end of a nightmare year, Gennette does feel able to take on board its learnings and move into 2021 with some clear objectives:
What I’d say is that we’re laser-focused on where the customer is going – where they’re going in content, where they want to go in value, where they want to go in experience and convenience. Our brand is more flexible than ever to be able to respond to those needs and we’re very clear-eyed about where we’re making progress and very clear-eyed about where we need to make a lot more. We have the advantage of having an omni-channel ecosystem, a great app, a great digital site, great store locations, the opportunity to smooth out all the friction that’s in that journey, because the customer is transacting in so many different ways for so many different categories. We are very committed to improving on that over time.
Much in this will resonate across the retail landscape – or what remains of it at the end of 2020. The trick now for Macy’s – and so many others – is to take the hard learnings and put them into positive, practical use for growth in 2021. At diginomica, we’ve often talked about the need for retailers to strike that elusive omni-channel balance for success, not just pump cash onto digital transformation and hope you turn into Amazon. The biggest learning retail needs to take out of 2020 is that that omni-channel balance has shifted and you all need to check your strategic scales. Lesson learned? We’ll see…
Image credit – Pixabay
Disclosure – Gennette took part in the Morgan Stanley Global Consumer and Retail Conference.