Case study on Macy's

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CASE 8.1 OPENING CASE Macy’s Races Ahead with Mobile Retail Strategies

Online retailers also face significant challenges. Maintaining an e-commerce website requires ongoing investment in new technologies designed to enhance the online shopping experience, increase operational and logis- tical efficiency, as well as maintain high levels of customer satisfaction. Thanks to social media, dissatisfied customers now have numerous forums for informing others about frustrating experiences they might have with a company. It can be difficult meeting customer expectations that seem to grow more and more demanding everyday. Companies that are branching out into mobile com- merce face challenges as well. For years, industry pundits

have said that mobile commerce, or m-commerce, is going to be huge. But those predictions have failed to material- ize for a number of reasons, leaving some to question their investments in mobile technology. However, there are signs that mobile devices have finally begun to make an impact on retailing in noticeable ways. Nevertheless, the question still remains whether or not this emerging chan- nel will become as big a force as some have predicted for years. In this chapter, you will read about the forces that are shaping consumer shopping behavior, and the ways that traditional, online, and mobile retailers are using technology to address the many challenges they face.

Mobile devices, particularly smartphones, have become a key tool in the arsenal of modern-day shoppers. Using barcode scanner apps, customers in brick-and-mortar retail stores can quickly compare prices with other stores and online retailers. They can access product information, check expert and consumer product reviews, and even purchase products from online retailers. This practice, called showrooming, represents a significant threat to many traditional retailers who continue to ignore the impact of mobile consumer behavior.

Showrooming is frustrating to retailers who bear the costs of providing sales support, product inventory and maintaining a store front, only to see customers

TABLE 8.1 Opening Case Overview

Company Macy’s, Inc.

The business Macy’s is a premier department store retailer with a signifi - cant online e-commerce website and mobile shopping app.

Product lines Macy’s department stores offers a range of products, includ- ing fashionable clothing, jewelry, footwear, furniture, bedding, small kitchen appliances, cookware, and other household goods.

Business Implementation of an omni-channel retail concept that challenges allows consumers to freely and seamlessly engage with

Macy’s through a traditional storefront, e-commerce website, or mobile technology.

Digital Macy’s embraces technology to enhance the shopping technology experience through the use of QR codes and SMS text

messaging, mobile videos to provide information about merchandise, and an SMS database for distribution of mobile coupons and marketing communications.

Taglines “The Magic of Macy’s,” “Macy’s, way to shop!”

Barcode: A machine- readable code consisting of numbers and a pattern of thick and thin lines that can be scanned to identify the object on which the code appears.

Showrooming: The practice of examining products in a traditional retail store, sometimes with the help of a salesperson, and then purchasing the product online.

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266 Chapter 8 Retail, E-commerce, and Mobile Commerce Technology

purchase products at a lower price from an online retailer with lower overhead costs. Target recently wrote to several of its vendors asking them to create special products, only sold in Target stores, in an attempt to stifle consumer comparison shopping via mobile devices (Zimmerman, 2012). But other retailers, recogniz- ing the pervasive nature of mobile shopping trends, are developing strategies to embrace and engage the mobile shopper.

Department store giant Macy’s (Figure 8.1) is recognized as a pioneer when it comes to using mobile technologies to enhance the shopping experience of its customers (Figure 8.2). Macy’s uses in-store displays to encourage customers to use mobile devices while shopping. The Backstage Pass Program is designed to enhance the in-store shopping experience at Macy’s. Using quick response (QR) codes and short message service (SMS) technology, customers can easily access fun and informative 30-second videos that highlight the retailer’s celebrity designers and fashion experts (see related videos at youtube.com/Macys). Mobile shoppers can access the videos by scanning the QR codes posted on displays in each department. Shoppers who do not have a QR code scanner can access the videos by texting a special keyword to Macy’s using codes supplied on the displays. Backstage Pass is an example of what marketers call a mobile display strategy. It is supported by

Macy’s is one of the nation’s premier retail organizations specializing in the operation of mid-range department stores.

Brand Operates 840 department stores in the U.S., Guam, and Puerto Rico under the Macy’s and Bloomingdales brand names.

Global Reach

QR codes, mobile video display, augmented reality, coupons via SMS, mobile payment.

Digital Technology

Macy’s, Inc.

Macy’s considers itself to be a leader in omni-channel retailing practices and innovation.

Corporate Culture

Figure 8.1 Macy’s, Inc. overview.

Quick response (QR) codes: A machine readable code typically used to store a link to a URL or web address that can be read by a mobile device.

Short message service (SMS): A technology used to send and receive text messages on mobile devices via a telecommunications network.

Figure 8.2 Macy’s encourages shoppers to use mobile technology in its stores through a variety of strategies, including mobile videos that describe merchandise, benefi ts from mobile check-in, and fun augmented-reality apps. ©

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an integrated communications campaign involving traditional television and print media advertising. Macy’s can measure customer interest in the program by track- ing the number of times customers watch the videos. Based on the initial success of the program, Macy’s has increased spending on mobile display strategies by 70 percent (Kats, 2012).

Another key mobile strategy used by Macy’s is the SMS database strategy, growing its list of customers who have opted-in to receive discounts and special offers via text message. According to Martine Reardon, executive vice president of national marketing at Macy’s, New York, the retailer is including SMS short codes in most of its printed coupons to encourage customers to opt-in to receive coupons and other offers via text message. Macy’s customers have responded well to these kinds of promotions, so growing the list of people who opt-in to this program should be easy.

With its mobile check-in strategy, Macys has partnered with Foursquare and Shopkick to create check-in programs that reinforce shopping behavior at retail outlets. Mobile customers using the Shopkick app on their phones receive points on their account just for visiting a Macy’s store. They may also receive special offers from Macy’s via the Shopkick app when they visit particular departments or scan featured merchandise. The points can be redeemed for restaurant vouchers, iTunes gift cards, and gift cards from a variety of participating retailers. Macy’s partnered with Foursquare and a charitable foundation created by insurance company Aflac. For every consumer who checks-in at Macy’s via the Foursquare app, Aflac donates $1 to its charity, The Aflac Cancer Center and Blood Disorders Service of Children’s Healthcare of Atlanta. Aflac made the same offer to customers who checked-in while watching Macy’s famous Thanksgiving Day Parade, using an entertainment check-in service called GetGlue.com (now called tvtag.com). These kinds of part- nerships and programs not only reinforce store shopping behavior, but also enhance Macy’s positive brand reputation among target consumers.

Via the mobile payment strategy, customers can pay for products at Macy’s using Google Wallet, a mobile payment app (Figure 8.3). At the register, customers simply tap their phones on a Near-Field Communications (NFC) device in order to transfer funds to Macy’s. Google Wallet is one of several approaches to mobile payment competing to become the dominant alternative to traditional credit cards. Mobile payment is expected to become widespread in the near future as banks, retailers, and telecommunications companies gain experience with the technology. (Read more about mobile payment in Section 8.5.)

Figure 8.3 Customers at Macy’s can pay for purchases with their smartphones by using a mobile wallet app. ©

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In an augmented reality strategy, during the Thanksgiving and Christmas holi- day season, Macy’s runs a program to benefit the Make-A-Wish Foundation. Over the past few years, Macy’s has donated $1 for every customer who visits a store and “mails” a letter to Santa. In 2011 Macy’s made that visit even more fun, inviting customers to take pictures of their children in special holiday displays using aug- mented reality apps that inserted one of the animated characters associated with the campaign into the picture. Pictures could then be uploaded into a holiday card template, shared by e-mail, or posted to the customer’s Facebook page.

While other retailers are still trying to understand mobile consumer behavior, Macy’s is already adapting to a new retail environment where increasing numbers of consumers are using handheld devices. It has shown that traditional brick-and- mortar retailers can enhance the in-store shopping experience using mobile tech- nologies in a variety of ways.

Sources: Compiled from Zimmerman (2012), Tsirulnik (2011), Macy’s (2011), Johnson (2011), Kats (2012).

Augmented reality: A tech- nology that superimposes a computer-generated image onto an image of the real world to provide information or entertainment.

Questions 1. Describe how each of Macy’s mobile retail strategies enhances the

in-store shopping experience for customers. 2. What will most customers think about Target’s attempt to make mobile

price comparison more diffi cult? 3. How does Macy’s benefi t from the use of location-based apps like

Foursquare and Shopkick? 4. Why is it important that Macy’s get customers to “opt-in” to its program

before sending promotional text messages? 5. Does Macy’s Backstage Pass Program really add value to the customer,

or is it just a “gimmick” with short-term benefi ts? 6. Traditional retailers spend a considerable amount of money to maintain

an inventory of products and provide salespeople to service in-store customers. Explain whether or not the practice of showrooming is unethical. What can retailers do to respond to the showrooming trend?

Life is not easy for managers in the retail sector these days. The challenges faced by retailers have never been more complex, frustrating, and fraught with peril. Consumers are demanding, price-conscious, and easily swayed by competitors. Technology is both a blessing and a curse. Countless new and innovative technology “solutions” to retail- ing problems are offered by a dizzying array of both established and new vendors. Many of the newest technologies promise to give retailers a competitive edge in the marketplace, but are unproven. Budgets for technology are limited, and making the wrong decision can lead to financial consequences, operational failures, and lost cus- tomers. However, because of intense competition, retailers cannot afford to be too conservative, or they risk losing out to competitors with technologies that enhance the shopping experience, reduce costs, integrate sales channels, and improve record keep- ing, data collection, and analysis of key performance indicators (KPIs).

8.1 Retailing Technology

KEEPING UP WITH CONSUMER DEMANDS AND BEHAVIOR

Understanding and responding to consumer needs and behavior is the key to sur- vival for the modern retailer. The challenge, however, is increasingly complex as retailers are confronted with a number of difficult industrywide trends and changing consumer behavior (Galgey & Pattinson, 2013).

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