Introduction
Nowadays ever-changing world sets new challenges and opportunities in the field of retail companies, making them to re-consider their values, strategy, and distribution channels. At the beginning of the twentieth century, the opening of large department stores made a revolution: likewise daily newspapers and electricity, department stores became an integral part of the industrial age.
They become such an inalienable issue that one may question this trading format today, namely, in the Internet age. This paper explores Macy’s, the retail chain company, specializing in clothing, footwear, accessories, cosmetics, jewelry, etc., department store development and utilizes tools of organizational development to assume appropriate strategies that would allow the company enhancing its contemporary position on the global market.
Problem Identification
The very definition of a department store implies that almost all the products that can be needed are collected in one place, beginning with cosmetics and clothes to household goods and appliances. Among other characteristics, such a format meant the convenience of making a purchase, yet today this former advantage of department stores seem to be flawed. For instance, the traditional location in the city center attracts tourists yet frightens residents due to the lack of parking, and the large sales areas as well as the organization of the shopping space that no longer seems perfect compared to the online stores. In other words, customers have other convenient ways to make purchases with the help of new trade formats.
The study by Kearney’s pinpoints that the youth audience – the so-called Millenials – tend to visit shopping malls less frequently than other age groups while active adults present the core of customers (“A.T. Kearney’s 2015 Global Retail E-Commerce Index Contains a Few Surprises”).
Teenagers no longer rest in the malls unless Pokemon GO leads them. Based on the recent market analysis and survey findings, the study states that retailers and brands should involve as many young buyers as possible in order to build long and lasting relationships with them. At this point, Amazon acts in the role of the focal competitor that turns out to be more successful than its offline rivals. This transforms the retail trade, causing serious costs and decrease of efficiency. The detailed information is presented in the following Table 1.
Macy’s, one of the oldest American retailers belonging to middle price segment, declared about the closure of 100 department stores in 2016 after 40 stores have already stopped their sales earlier that year (Macy’s, Inc.). For Macy’s, 100 stores compose approximately 15 percent of the retail network (currently Macy’s possesses approximately 1,400 stores, 675 of which are located in the US), and it seems that the company could decide to take such a decision solely under the threat of losing significant funds (Macy’s, Inc.).
According to Macy’s president Jeff Ghent, most of these department stores were profitable that, nonetheless, was accompanied by the progressive fall within the past six quarters. Loeb considers that “new ways to attract consumers have to be found and sale events rethought” (par. 6). Therefore, it is necessary to identify a new strategy that would address the current challenges.
Omnichannel Approach as Potential Salvation for Retails
The core reason for the mentioned events is the growing competition with online stores. It seems appropriate to overview the contemporary retail trade companies that are on the way to meet their online customers. Plenty of networks decided to change their strategy by closing a part of the offline stores and focusing on online sales, for example, Sears, Kmart and J.C. Penney. Both retailers and market experts agree that the implementation of the omnichannel strategy can help offline stores address the pressure from online competitors (Bock 105).
The core idea of the mentioned omnichannel strategy is that an online order can be received on the same day in the offline store along with the opportunity to exchange or return the goods, if required (Bell et al. 47). For such a strategy, offline showcases are not necessary and, thus, the reduction of the network outlets should not be seen as a sign of a company’s total decline.
The pursuit of the digital savvy customers is not an easy task as it requires an in-depth knowledge of the online market, peculiarities of its functioning, and customers’ expectations. The development in an online environment requires giants of offline retail companies to offer their online buyers a decent level of product presentation and quality service to attract them and keep loyal. The omnichannel approach is rather important for department stores of today due to the fact that it can add value.
For example, Fortnum & Mason were able to use their brand and successfully sell products via the Internet globally by setting a goal to carry out 50 percent of sales through the Internet in the nearest future. In this regard, there is no question, whether to go online or not as it is an actual necessity. Entering the Internet is an opportunity to benefit from existing assets for department stores using this distribution channel.
In 2016, Macy’s ranked the sixth position in the list of the largest online retailers according to the Internet Retailer Magazine (Macy’s, Inc.). The company is going to become a leader in omnichannel retail, as stated by Macy’s CFO Karen Hoguet (Macy’s, Inc.). Terry Lundgren, Macy’s CEO, claims that the company strives to increasingly go online: “we are pleased with the strong performance of our highly developed online business, as well as the progress we have made on selling and visual presentation programs and expense reduction initiatives in 2016” (Macy’s, Inc.).The company expects that online and offline sales will be comparable in 2017.
Organizational Development Strategy
It goes without saying that the experience of shopping should bring pleasure that is also relevant for the online trading format. At the same time, not only the process of making a purchase, but also all methods of communication with the customers differ to some extent. Considering the two different options of online and offline trade, the struggle in the minds of buyers now goes between ordering products on the Internet and reaching an offline store, trying them on (Bell et al. 48). That is why it is of great importance to strive to provide pleasure not only from shopping, but also from new experiences and focus on the unique, friendly, and open atmosphere of online shopping.
Based on the above information, experience of other retail trade companies, and the observation of the recent literature on the topic, one may argue that the company that utilizes all channels of communication with the customers wins and builds long-term relations, thus strengthening loyalty, image, and market position. It should be noted that Macy’s specializes in developing multi-brand store formats, presenting shoes, clothes, cosmetics, and exquisite home textiles – the products that are always demanded. Therefore, the future of department stores of Macy’s is to provide a competent combination of online and offline experiments for its customers (Loeb).
In other words, the latter should be used to present the products in the trading space while the digital platforms should be considered to stay in touch with the consumers, understand them better, and, the last but not least, create an individual approach.
For example, Macy’s can run an online application as a part of a loyalty program. Berman claims that “change platforms and channels – comparing prices on a smart phone one minute, trying on shoes in a bricks-and-mortar shop the next, and later making a transaction on their PC or tablet” (22). Speaking more precisely, the mobile application will complement the loyalty program, allowing customers to receive individual barcode discounts to monitor personal offers, events, and changes in terms of the online option. The development of mobile applications may focus on barcodes scanning and the associated options, thereby making it easier and faster to shop at a department store through the combination of offline and online methods.
Another potentially successful decision in the framework of organization development is to offer customers the so-called online shopping support – a team of online experts working in social networks, the department store of the official website, and the mobile application (Loeb).
The specified team would inform the customers about the presence of the necessary products, checking the balances in the warehouse and sending them to the corresponding store, provide information on the cost or delivery, and help on other issues that may occur during the interaction. The retailers that would like to remain competitive in the modern digital world are forced to somehow evolve and make the omnichannel approach a part of their brand’s development strategy (Bell et al. 50). With this in mind, it should be noted that the paramount goal of the above approach is to keep and develop relationships with current customers, and the secondary purpose is to attract new buyers.
Furthermore, it is necessary to continue to advance the omnichannel strategy, focusing on online purchases and giving customers the opportunity to receive them in the offline stores (Berman 22). The identified strategy is likely to allow Macy’s expanding the assortment of the store with the minimum costs for the existing space. The principle is the same: customers can make a purchase of placed products in a vending machine or utilize a special display to enter the online store and obtain a full range of products with the further implementation of the order.
In addition, Macy’s needs to invest in analytics in order to comprehend the strategy of customers’ behavior and also anticipate the growing tendencies that, in their turn, are likely to benefit both the target audience and the company. From the point of view of anticipation, retail is one of the most complex industries as there are millions of products along with their variations on the market (Jiang et al. 205). In this regard, demand is affected by various factors, involving fashion trends, changing customer preferences, advertising activity of producers and retail chains, and so on. In order to address the mentioned challenge, it is possible to personalize the customer experience, making it more thoughtful regardless of whether purchases are made on the Internet or directly in the store.
By analyzing several types of data such as sales revenue from advertising, promotions, sales, the offer may be optimized, for instance, the email promotions may be sent regularly for maximum personalization. By connecting to Macy’s communication channels, the customers would receive an instant access to detailed information about the prices, reviews of other customers, etc. (Bock 106). With the help of geolocation via a smartphone, they would be able to find out the closest department store. The study by Jiang et al. revealed that “consumers regard search inconvenience as a major obstacle to convenient and efficient online shopping” (206).
All the identified options would simplify the purchase process, focusing on every customer’s needs and perceptions. Based on the collected data, monthly and daily reports are to be automatically compiled and then sent to analytics and marketers. In effect, Macy’s analysts would generate reports on how the decision-making processes are being improved, thereby contributing to the development of customer motivation for shopping.
The algorithm should analyze various indicators, including client traffic, sales, assortment and profile of a particular store, etc., correlating them with the geographical location of the certain point of sale. Based on the analysis of various combinations of parameters, the company can optimize the sales network by making a decision to eliminate the point of sale, open a new one, simulate future sales in the particular region or city, develop targeted advertising and marketing actions, and optimize the assortment policy (Jiang et al. 205).
Studying the patterns of consumer behavior and encouraging them to purchase various products would result from analytics data that, perhaps, would not revolutionize the fashion industry, but affect sales to some extent. Nevertheless, the implementation of the world of data and algorithms would significantly impact the development of this area.
As a result, users of mobile applications would be more likely to visit offline stores and make more purchases than other clients of the retail chain. However, regardless of what the application possesses, customers tend to follow their own tactile sensations, which can not completely replace a smartphone. Therefore, the paramount idea is to provide the right product at the right time and in the right place, generating shopping lists, analyzing data on customers’ regular purchases, and offering discounts.
Conclusion
In conclusion, it seems appropriate to emphasize that the conventional department store industry tends to recede in the light of a new format of online sales. Macy’s announced plans to close several dozen stores in 2017. This company that sells primarily through the department stores experiences serious problems associated with an overabundance of retail space and migration of customers to online shopping. This retail chain struggled with the growing competition of online retail, but, apparently, realized the futility of these attempts and now intends to invest in the development of online sales.
With this in mind, the concept of omnichannel strategy is considered as the valuable option to combine department store sales and online platforms to keep customers interested in the products and satisfy the contemporary digital world requirements. In particular, it was suggested that mobile applications, investment in analytics, and demand anticipation based on data analysis are likely to promote Macy’s online and offline sales, thus increasing its overall profitability and also meeting customers’ expectations.
Works Cited
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Bell, David, et al. “How to Win in an Omnichannel World.” MIT Sloan Management Review, vol. 56, no. 1, 2014, pp. 45–53.
Berman, Saul J. “Digital Transformation: Opportunities to Create New Business Models.” Strategy & Leadership, vol. 40, no. 2, 2012, pp. 16–24.
Bock, Gee-Woo, et al. “The Progression of Online Trust in the Multi-Channel Retailer Context and the Role of Product Uncertainty.” Decision Support Systems, vol. 53, no. 1, 2012, pp. 97–107.
Jiang, Ling, et al. “Measuring Consumer Perceptions of Online Shopping Convenience.” Journal of Service Management, vol. 24, no. 2, 2013, pp. 191–214.
Loeb, Walter. “Macy’s Growth Will Be Through Merchandising.” Forbes. 2017. Web.
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