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There’s a poster hanging on the wall of Jeff Kantor’s office that reads, “Put the customer at the center of all decisions.” It’s an internal mantra shared by executives throughout Macys.com; for Kantor, its chairman, it permeates every decision he makes. “Satisfying the customer, whether she chooses to shop online or in our stores, is what it’s all about,” he says. “Over the last two years we’ve invested time, energy and capital in transforming from operating separate store and e-commerce businesses to delivering an omni-channel experience. Thinking differently about our business and recognizing that it’s all about what the customer wants — not what we want — has given us a tremendous lift.” The figures would seem to bear this out: Online sales for Macys.com and Bloomingdales.com increased 39.6 percent from 2010 to 2011 and positively affected Macy’s 2011 comparable-store sales by 1.5 percent. Online sales were up 34.8 percent in the first half of 2012, lifting same-store sales 1.6 percent over the same period.

Integration The retailer recently took the training wheels off a pilot program leveraging physical store inventory: Macys.com now fulfills in-store and online demand with inventory from stores and distribution centers. “Most of the customers who come into our stores are there looking for something specific,” Kantor says. “If for some reason we’re out of the size she wants in the item she intended to buy, our sales associates can now look up the item using our POS, locate it in another store or in our inventory and ship it to the customer in two days.” Nearly 300 stores around the country are being tapped for fulfillment, a move Deborah Weinswig, managing director, retailing/broadlines, food and drug, and home improvement for Citi Research, believes will lead to same-store sales growth and improved inventory productivity. “Store fulfillment has the potential to drive sales growth, reduce the need for DC capacity and increase the productivity of Macy’s existing store base.” Nikki Baird, managing partner at Retail Systems Research, says Macy’s is one of just a handful of retailers “getting omni-channel right. The biggest challenge is figuring out how to merge the digital and physical selling worlds into one compelling customer experience. By leveraging stores as inventory sources, they’re doing just that.” “It’s exciting for us to be able to satisfy the shopper however she chooses to shop,” Kantor says. “We only have four online fulfillment centers, including one we just opened in West Virginia, but with 292 stores now integrated we move closer to the goal of zero-disappointment.”

Analytics As was the case with the e-commerce component of many traditional retail companies, Macys.com launched as a stand-alone operation. Once the decision was made to merge the online and bricks-and-mortar operations, company executives invested heavily in finding the talent needed to bring their vision to fruition. Today, Macys.com is run by more than 1,100 employees split almost evenly between New York and San Francisco. The New York portion of the team is tasked with merchandising, marketing and strategy; San Francisco employees are charged with things like technology development, site enhancement, analytics and search. “When you ‘own’ it yourself it requires a bigger commitment,” Kantor says, “but ultimately it gives us full control of the customer experience, which is really the most important thing.” Case in point: analytical software tools that allow Macys.com to better understand and enhance customers’ online shopping experience. “Data is great, but it really becomes more valuable when we can use it to determine what’s important to the customer,” Kantor says. “Using analytics, we know if a customer shops primarily in our stores or online. We know how she likes to be communicated to, and ... if she frequently buys petite clothing or shops most often in our home section. Our job is to support her loyalty by delivering marketing and messaging that’s relevant.” With more accurate real-time decision-making tools about customer preferences at their fingertips, the focus remains entirely on supporting internal strategies and driving the next generation of Macys.com. Kantor acknowledges pressure from pure-play competitors, but refuses to concede that they have an advantage. “There’s no question that [Amazon.com is] the king of pure play — they do an outstanding job when it comes to technology and navigation, personalization and assortment. But they’re a pure play. “We’re always going to win with omni-channel,” he predicts. “It all goes back to the customer, and customers like to shop different ways at different times. If we give them a good experience — whether they choose to shop online or in the store or from their mobile device — we believe they’ll choose to shop with Macy’s.”

Innovation
The retailer’s relentless commitment to innovation is being focused on deploying technology that will give Macy’s a leg up in mobile shopping.

Macy’s was one of Shopkick’s very first retail partners, working with the start-up before it even had an app on the market. In July, Macy’s announced it would begin offering Shopkick rewards at all stores. Using Skopkick’s app for iPhone or Android devices, shoppers can collect points (or “kicks”) by visiting and performing certain tasks in Macy’s stores — then exchange the kicks for rewards like gift cards, song downloads or Facebook credits.

Macy’s was also on the leading edge with Google Wallet-enabled POS terminals — already installed for nearly a year in five markets, where shoppers can tap their NCF-enabled cell phones on a credit card reader to expedite payment — and is nearing completion of a project that will outfit every store with Wi-Fi, stepping up the possibility of communicating with shoppers. Also in trial mode is the use of iPads to provide shoppers in smaller markets with a greater assortment of products like fine jewelry.

“We try to stay in front of what’s next, so we’re constantly testing new technology,” says Kantor. “Some we’ll eliminate and some will be what the customer wants and will be deployed in the near future. We believe that systematic experimentation is what will get us to the next level.”

Kantor says he’s feeling “cautiously optimistic” about the upcoming holiday, but there’s no denying the competitive juices coursing through his veins. “We’re working hard to do better than we did last year and we view the upcoming fourth quarter as a tremendous opportunity,” he says. “The economy might not grow the way we’d like it to, but that shouldn’t stop us from getting additional share of wallet by giving the customer what she wants.”

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