Macy's (M) Digital Strategy Paying Off Amid Dismal Store Sales

Consumers’ inclination toward online shopping has compelled retailers to boost online presence and omni-channel capabilities, while rationalizing physical store fleet. Well-known department store chain — Macy's (NYSE:M), Inc. M — is no exception to such trends. The company is undertaking prudent measures to bolster its online capabilities and adapt to the changes in the retail ecosystem. Additionally, the company is on track with rationalizing its store base, revamping assortments as well as managing costs prudently. Let’s delve deeper.

Digitization is Key to Growth

Macy's is boosting its mobile and website features to deliver enhanced shopping experience. Markedly, the company’s omni-channel offerings such as curbside, store pickup and same-day delivery are receiving sturdy customer response. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. The company also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. These apart, Macy’s has a lot more to offer for its online consumers in the form of Macy’s Star Rewards, Macy’s Gift Cards, experts’ help and other options.

Well, such efforts to boost online capabilities led to an increase of 27% in digital sales during third-quarter fiscal 2020. Markedly, the company witnessed growth across metrics like traffic, search and conversion. Moreover, digital penetration stood at 38%, up approximately 14 percentage points year over year.

Going ahead, the company plans to continue investing in its digital platform, especially in terms of capacity expansion. We note that other retailers such as Walmart (NYSE:WMT) Inc. WMT, Kohls Corporation KSS and Costco Wholesale Corporation (NASDAQ:COST) COST are also gaining from solid growth in e-commerce operations.

Other Growth-Oriented Strategies

Macy’s is revamping assortments to remain aligned with the current market trends. The company observed that customers shifted their spending more toward casual apparel categories to suit their stay-at-home needs amid the coronavirus pandemic. Also, categories such as home furnishing, fragrances and jewelry depicted double-digit sales growth during the third quarter. Macy’s is on track with boosting offerings in these categories.

Additionally, the company is optimizing inventory across all channels. It is also undertaking actions across stores to reduce costs. Such endeavors are part of the company’s three-year Polaris (NYSE:PII) Strategy. The company had earlier highlighted that Polaris strategy will help attain gross savings of nearly $2.1 billion by 2022.

Additionally, the company is on track with its store optimization plans. It is likely to close as many as 45 of its department stores by the middle of this year. The store closures are part of Macy’s previously-announced strategy to shutter nearly 125 stores by the end of 2023. Majority of these stores are located in lower tier malls and have been less productive. The need for closing underperforming stores looks justified for the company when considering the sluggish store sales during third-quarter fiscal 2020. The closures are likely to help the company focus on other productive store locations as well as redirect resources to boost digital capabilities.

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