NEW YORK — Macy’s Inc. wants to learn the lessons of youth.
On Wednesday the department store chain unveiled a series of initiatives over the next three years to capture more of the Millennial customer, an age group that the retailer said has estimated annual spending power of $65 billion. If all the programs are implemented, the moves will impact not only the products Macy’s offers but also its entire organizational structure.
The programs represent a concerted effort by Macy’s to look beyond Baby Boomers, who continue to be the engine behind America’s retail spending, and begin to lure their children as loyal shoppers. There are an estimated 76 million Baby Boomers and up to 70 million Millennials. RELATED STORY: Macy's Expands Fashion Incubator >>
The Millennial customer is, in Macy’s view, in two distinct groups, with one, the mstylelab shopper, between the ages of 13 and 22 and the other the Impulse consumer between the ages of 19 and 30.
Jeffrey Gennette, chief merchandising officer, said the new strategy is a natural evolution of Impulse, launched over a year ago that addressed different destination points in the stores, such as apparel, shoes, men’s, beauty and the latest category, home.
“We knew we were on to something with the brands...as the customer has been responding very well,” Gennette said.
He added that Macy’s is aggressively building out the mstylelab and Impulse destination departments so they will be available in every one of its doors, as well as developing brands just for the Millennial customer.
Among the highlights:
• Identifying four customer lifestyle profiles on how each sees themselves on fashion and newness for internal use by Macy’s buying, planning, marketing and visual merchandising teams. The profiles are the female mstylelab customer and her male counterpart, as well as the female Impulse customer and her male counterpart;
• Enhancement and localization of merchandise assortments for the two groups, which includes the development of new brands as well as fine-tuning existing product assortments by location based on geographic preferences;
• A bigger push on the “omni-channel” environment to engage the Millennial customer via mobile and digital channels, particularly through social media, whether through the use of QR codes, tablets, texting and tap-and-go transaction processing, or additional blogging opportunities via freelancers and in-house staff;
• In-store changes in visual merchandising including adjacencies, signage and technology to emphasize the brands and lifestyles, as well as special training for store associates so they can better advise customers how to accessorize from head to toe;
• Realigning Macy’s internal organizational structure to speed up decision-making, product development and alignment of resources that has central office buying staff, private brand developers, merchandisers and other support staff collaborating more closely so they execute the same strategy and message.
The latter is particularly important given Macy’s faces significant competition in the Millennial market from fast-fashion retailers like Zara and H&M. In Zara’s case, it can develop and produce a collection within two weeks and get it into its stores.
According to Gennette, some of the differences between the two Millennial groups center on wearing occasions. “They have different casual and dress needs. The bull’s-eye for the mstylelab customer is the high-schooler who’s just starting out in college and out on their own. The Impulse customer is post college, developing their careers and maybe starting a family.”
The sweet spot for mstylelab is 18 years old and 26 for the Impulse customer.
There are also differences in how the two groups shop, he said, adding, “Reaching the mstylelab customer is more about digital, while the Impulse customer likes the catalogue and still does direct mail.” Use of the mobile and digital channel is fairly consistent between the two groups, but the younger group is more self-serve oriented while the older group prefers more assistance.
“The Impulse customer is all about research. It’s a great fitting room opportunity for us with women,” Gennette said, referring to customer service, although there’s no definitive decision yet on how to move on this.
As for new brands, Gennette said product offerings could include both familiar names in the marketplace, but new to Macy’s, as well as private brands under development. Macy’s is currently working on one that is dual gender, and several that are single-gender. The brands in development are also expected to become lifestyle brands that cut across different product categories.
He declined to divulge the target mix between national brands and private label, stating that it isn’t of importance.
“When we build brands right, the customer doesn’t always know the difference. Whether it is INC or American Rag, those are powerful brands that the customer sees as that brand, not specifically private label,” he explained.
So far the store layouts will continue to feature defined spaces for the two destinations, but could evolve later on to an entire floor devoted to the Millennials. Also a possibility down the road are interactive opportunities on the sales floor.
The goal for this demographic is speed, whether in shortening the cycle time in product development or buying product up front that focuses on “tried-and-true best sellers.”
But the benefit is more about what Macy’s learns from these initiatives, whether it’s choice of fabrications and lead-times or tests on how to localize the assortments to the geographic customer.
“The learnings from this we can explode to other parts of the company,” Gennette said, suggesting that strategies targeting this group of consumer can be adapted and fine-tuned to how it markets to other customer groups who also shop at Macy’s.
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