Blending art and science in the merchandising, agility, clarity of vision and having a balanced assortment that’s different from last year’s.
Those are among Macy’s priorities and objectives, as the retailer navigates challenges in the supply chain and shifting consumer shopping behaviors, as outlined by Nata Dvir, Macy’s chief merchandising officer, in her discussion Monday at the Jefferies Annual Consumer Conference.
“We are very much focused on sequencing the priorities keeping us focused, and trying not to add anything that is going to distract us,” Dvir said. “A team that is focused can continue to deliver, so we are focused around categories and what goal each category has in our customer journey. It’s not about winning in one or two categories. It’s about building a category strategy that compliments each other, so we can really round out the customer’s shopping basket.”
She cited Macy’s strengths in gifting, whether it’s for Valentine’s Day, Mother’s Day or the fourth-quarter holiday season; tailored clothing, and dresses, though she also cited strides in refined sportswear and the more casual sides of the business.
“We need to have the right mix of key items — great products that customers come back to. That white T-shirt they love, with the quality, the fit. We also need that great dress that makes you feel ready for an event. That mix of product is really important.
“During the pandemic, part of what we got sharp on was how we thought about inventory productivity. A lot of this was in flight, but we really used the pandemic to think through what the sell-through of an item might be, what is the life cycle of a product. It has really taught us to think differently about every receipt dollar we spend, but also about making it easier for our customer to shop.”
The retailer’s chief merchant said there is nothing better than a denim display, sufficiently stocked with the sizes to meet the demand and the most important fits, and having all of it properly presented, neatly folded. “That takes time to really build out, from a stylized perspective, from a curation perspective and an investment perspective,” Dvir said. “Those investments are paying off for us. We are making bigger bets and making it easier for the customer to shop.”
With fall approaching, “I’m so excited about so many things that are starting to check. Our customers are going back into everything — events, working, real life. Every moment now feels like a special occasion. Whether they are going up a size, or down a size, they have to really replenish their wardrobe. We do so well in dresses and tailored clothing. When those businesses start to check, we have the engine, we know how to drive” these businesses.
But Macy’s also has “the muscle to build a great refined sportswear and casual assortment, as customer trends continue to shift we now have a much more well-rounded assortment.”
While occasion-based categories are doing well at Macy’s, there is “softness in some of the active, more casual, comfort assortments,” Dvir said. “Everyday dressing has evolved. The way people are putting their looks together has really changed.”
However, in categories that are slowing, “With the right amount of newness, we refresh the category,” Dvir said. “There is still desire for it. That’s where the focus has been, really updating those items that may have been bought [by consumers] multiple times during the pandemic — how do we get them to feel fresh? They still need something new in their closet or their home. That is a big priority for our teams as well.
“We have identified things we must win with this holiday season. We know what’s important,” Dvir said. “We must make sure those receipts get here. We’re prioritizing that. It means there will be things we may need to cancel or move out of. That’s where strong partnerships come into play.…There is still a lot of uncertainty with supply chain. That’s part of what we need to navigate. There is still so much disruption that is happening.
“We’ve got to get back-to-school right. We’ve got to get the holiday setups right. We’ve got to think about the categories that have slowed down and we already started to do that earlier this year. We started to pull back on those buys [so] we can invest in the things that are most important.” What’s critical, she added, is “staying agile on your receipts.”
Macy’s is conservatively forecasting that sales will be flat to up 1 percent for the full year, but has been on a roll the last few quarters including reporting a net profit of $286 million in the first quarter this year, up from $103 million in the year-ago period, on a comparable sales gain of 12.4 percent.
Dvir also spoke on how working across a spectrum of categories and in planning during her career has served her well. She described the Macy’s organization as being smaller, more agile, having a “collaborative spirit” across the buying, design, planning, fashion office, pricing and Backstage functions, and that she is leading a diverse team of leaders. “We think of it as working as a pod.
“How we use data to make decisions is important, but also how we collect inputs from all those around us [including] keeping the customer in the room” makes us stronger merchants.…There is great alignment across the entire organization, and having a clear view of where our strategy is, that alignment, has helped in the decision making.”
On the pricing side of the business, Macy’s in the past has suffered from being overly promotional and confusing, but according to Dvir, “has invested in so many capabilities to help us be smarter. That pricing science is starting to be implemented. We can see it in our profitability. It’s not only a shift in the tools we have, it’s a mind-set shift as well. That’s a big shift within our team to be thinking through what pricing looks like in the future as well.” Macy’s Inc. executives see the promotional environment heating up as the year progresses.
“Marketplace is a very obvious next strategy for us to be launching,” Dvir said. “We have a very clear line of sight of which categories we want to go after. Marketplace gives us this great opportunity to fill some white spaces in categories and find new categories, and test before we scale them.”
It’s expected that among the categories that will be bolstered or will be new to the assortment are toys, pet supplies and technology. Both Macy’s and Bloomingdale’s will be growing their digital businesses by launching marketplace formats next August. Retailers operating online marketplaces procure merchandise through a few business arrangements including revenue-sharing agreements, commissions, wholesaling and drop shipping. They enable retailers to present wider assortments and reach more consumers whom they hope won’t surf competitors on the internet as much to get what they want.
In addition, Macy’s is embarking on a sweeping overhaul of its private brand business, which accounts for just under 20 percent of the total business.
Asked what’s been the biggest surprise in the business, Dvir replied, “The never-ending change in our customer. The return to the store. We’re so energized to see how quickly our customers were ready to return to stores. It wasn’t just because our store teams were ready for them and had done so much from a health perspective to be prepared. When there were experiences they could no longer to participate in like traveling or going to the movie theater, they chose Macy’s to have experiences.”
Dvir said she’s also been surprised about how dramatically customers have shifted their category preferences. “It’s this never-ending change of the customer. In the past, we were able to predict that. We were able to see some signs, and borrow from other global trends that were happening. Now it’s happening in the moment. The shift has been just so quick. You’ve got to be up for the challenge.”