Macy’s mined credit card data to avoid taking on excess inventory
Macy’s competitors have been forced to pack-and-hold large amounts of excess inventory, but the department store giant claims that it was able to avoid that scenario in many cases by paying close attention to its co-branded credit card data.
The retailer heads into the holiday selling season with more than half of its merchandise being new, according to The Wall Street Journal. Not a total success, but an improvement compared to Kohl’s, according to the article, which placed large orders early in the year just as consumers began to reduce their spending on discretionary items.
Macy’s was able to identify some key consumer trends early in 2022 that enabled it to cancel orders and adjust its spending on merchandise in demand by its customers.
Executives from various departments began meeting monthly in January and discovered data from its co-branded credit card indicating that consumers had increased spending on food and gas as a result of rising inflation. They also saw that consumers had begun spending more on travel and entertainment outside their homes. The group also determined that demand for business and formal wear was picking up as people returned to their offices and attended social events, such as weddings.
Macy’s, according to the Journal, was able to adjust its ordering more easily than many of its competitors because it sells a lower percentage of private label merchandise, which requires retailers to take ownership of ordered merchandise earlier in the production cycle than with outside brands.
The department store retailer has been successful, at least in comparison to Kohl’s, according to Citi retail analyst Paul Lejeuz, who found that Macy’s gap between sales and inventory was much closer than its rival.
Macy’s and Kohl’s have joined a list of retailers that have been forced to address inventory challenges as demand has waned. Target, Walmart and others have canceled orders this year as they attempt to rightsize their inventory.
Chains are expected to step up their discounting this holiday season, with Amazon.com, Target and Walmart all kicking off pre-Christmas sales in October and putting pressure on other retailers to keep up or fall behind.
- How Macy’s Has Avoided — So Far — the Inventory Pileup Plaguing Other Apparel Chains – The Wall Street Journal
- Walmart and other retailers are canceling billions of dollars in orders – RetailWire
- Amazon is not letting Walmart and Target get a head start on Christmas – RetailWire
- Did Target just move Black Friday up to October 7? – RetailWire
- Did Walmart just guarantee it will be the easiest place to shop for Christmas? – RetailWire
DISCUSSION QUESTIONS: Are some retail forecasting systems missing data important to projecting future consumer activity? How do you explain forecasting misses in 2022 when more retailers are relying on machine learning and artificial intelligence to make decisions?