Source: macys.com
Will Macy’s curated marketplace distinguish it from online rivals?
Macy’s plans to launch a curated online marketplace that will recruit “carefully selected” third parties to sell their products on macys.com and bloomingdales.com. The platform will launch in the second half of 2022.
Jeff Gennette, chairman and chief executive officer of Macy’s Inc., speaking yesterday on the company’s third quarter earnings call said the new platform will connect third-party merchants with the chain’s customers “in a scalable way.” He said that the addition of the third parties will give customers access to an “even greater breadth of assortment of exciting products to deliver on our promise of style and curation.”
“Our digital business is on track to generate $10 billion in sales by 2023 and that figure does not include the incremental revenue we expect this new marketplace platform to generate,” he added.
The retailer expects the addition of select merchants to its platform will enable it to react more quickly to new product trends and drive profitable sales without taking on additional inventory.
Mr. Gennette called the marketplace “the next natural step in our evolution as a digitally led omnichannel retailer.” He added that Macy’s is the second largest online retailer in its category and that “we have a lot of competition” from players that have their own marketplaces.
Macy’s is partnering with Mirakl for its platform.
The retailer reported that same-store sales during the third quarter increased 8.7 percent, an improvement over the 5.9 percent gain it posted in the second quarter. Earnings per share were well above what it did during the same quarter in 2019 and gross margins improved by around 100 basis points.
Mr. Gennette expressed confidence that the retailer would have a strong fourth quarter and that it had sufficient inventory to meet the needs of customers during the holiday season. It’s an effort, he said, that began in 2020.
“Our teams activated plans to mitigate bottlenecks and since then stayed agile and flexible, leveraging our strong networks and relationships with international carriers and variants and diversifying how we move product both up and downstream,” he said.
Discussion Questions
DISCUSSION QUESTIONS: Do you expect Macy’s to have success with its digital marketplace? What do you see as Macy’s current strengths and weaknesses as a “digitally led omnichannel retailer”?
Poll
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Doug Garnett
President, Protonik
Bob Phibbs
President/CEO, The Retail Doctor
This is not a terrible move per se, but it seems like every retailer is adding a marketplace so this creates virtually no differentiation. It could also be yet another distraction from Macy’s fixing its core issues, which it has consistently failed to address for many years. At the end of the day, Macy’s could and should be a lot better at retailing than it is. Adding a marketplace does nothing to change that.
Online sales for Macy’s are so good they are considering spinning it off into a separate company. They are coming off a very strong quarter and, having increased new customers, Macy’s is poised for a tremendous holiday season. Their early adoption of RFID has allowed them to really control inventory, eliminate safety stock, and sell to the last item. Who says department stores are dead? And what retailer wouldn’t love to have the same gain in margin that Macy’s is seeing?
The third-party add-on strategy worked has worked fairly well for Amazon, so I think Macy’s is onto something here. Since Macy’s brand equity is enormous, they will also have no trouble attracting retailers to their marketplace.
Name one vendor that will be on Macy’s marketplace and not Amazon’s, Walmart’s or Target’s.
Go ahead, I’m waiting…
Even after Macy’s e-commerce splits from its retail group (which it will), Macy’s online will still need a reason to exist. The marketplace doesn’t answer this question for them.
They just implemented CommerceHub only three years ago and still takes them two to six months to setup new SKUs. Mirakl will change this how and when?
Macy’s had a monster quarter and they may follow the crowd and spin off e-commerce – which is either a trend or a strategy. But Wall Street rewards bold moves and whether the trend is a winning or losing strategy remains to be seen. Its so counterintuitive to all of the yammering about omnichannel but when the department stores are Wall Street dogs, this is a way to create novelty around the stock price. Walmart and Amazon have laid out the blueprint for third-party sellers and it’s probably OK for Macy’s to incorporate it – they can compete better with the aforementioned and also potentially steal market share from Etsy. It also serves as a hedge against supply chain issues.
You can’t find fault with Macy’s wanting to launch a marketplace. Only that it took so long and lost time, marketshare and mindshare in the process.
Secondly, it is head-scratcher why Macy’s is not doing acquisitions in this space. Building this organically again takes a lot of time to both build platform and build audience.
Offering their own marketplace would make more sense if Macy’s had a stronger differentiated customer base. But with Target, Walmart, and Amazon all expanding their product lines to include both luxury and budget ends of the pricing spectrum, there really isn’t a need for Macy’s offering and it just bleeds more cash away from where they earn their best profits – the stores.
Macy’s should be putting all their efforts into making their stores places customers want to shop.
I really hope that Macy’s takes the whole curation process seriously and uses this new marketplace to help establish a brand and market presence above and beyond the One Day Sale.
So that’s the secret? Having more “stuff” online so people will go there like they would a store? Macy’s problems still are the in-person shopping experience and reliance on discounts. Give us a reason to go to the store, not another “we do that too” moment for PR.
Some success? Yes. Turnaround success? No. Macy’s brand simply isn’t strong enough and they are probably too late to the marketplace game. Could a marketplace survive under a separate organizational structure and brand? Maybe. As to what their challenges are as a so-called digitally-led, omnichannel retailer, the problem is that they aren’t a digital brand and their brick-and-mortar problems, while arguably marginally better, are a long way from being fixed. Also just having physical stores and a marketplace don’t make you omnichannel (whatever that means or is supposed to mean) in my book. Amazon touches consumers’ lives in every way they can; at home, online, in their cars, at their physical stores, while they are working, while they are vegging out on the couch, etc. That’s getting close to omnichannel activity and Macy’s isn’t there, and likely won’t ever be.
Adding a marketplace itself is undifferentiated given so many competitors are way ahead of them and undoubtedly way better. However, the keyword might be “curated.” If Macy’s can pull off a curation process that leverages customer insights to have a pre-selected assortment for the right occasion and right moment, they could differentiate themselves better.
Nice to have — but:
Macy’s or Amazon?
Macy’s or Target?
Macy’s or Walmart?
How many more online retailers can we add to the list before we get to Macy’s?
Marketplaces are becoming an increasingly important dimension in the retail industry. The question is whether a Macy’s branded marketplace brings any additional benefit to the equation. They currently don’t have the reputation as market innovators, and they haven’t specifically identified any elements of the competitive dimension (proximity, customer service, price, quality, etc.) that this marketplace will augment. If the only benefit is the Macy’s brand, I don’t believe that will be sufficient for their marketplace to be a success.
Candidly, I think the problem with Macy’s digital strategy lies much more in the first word, than with the last two: that is to say, Macy’s just isn’t a very exciting retailer. Its legacy advantage lay in having an anchor at (most) every mall in the country, and when shopping was centered there, that meant something. But every store can be an anchor on your keyboard, so that advantage has been lost.
If the idea is to succeed, it will have to do so on its own merits, and the casual reader of these e-pages over the past decade is left with the impression that Macy’s excels at putting out buzzword-filled press releases, but lags in the execution.
I agree with the sentiments here regarding Macy’s being late to a game that is declining in value. Amazon’s experience with marketplaces is arguably worse for the consumer — shipping times, returns, and customer service, but I understand why Amazon went this way, Walmart, Target, and now Macy’s — saves money per order: no inventory, DC operations, shipping, returns, or cost of obsolescence. All get transferred to the merchants and the customer suffers under the guise of an “Amazon” experience — sounds like a bad tradeoff to me.