How Macy’s and Technology “Fit” Well Together

How one of the largest retailers gets “smart” about customer shopping experiences.

“Retail is a dynamic business that requires continuous reinvention” – Terry Lundgren, CEO of Macy’s

Macy’s, the 15th largest retailer in the United States with just under 800 stores nationwide, is being forced to rethink about the ways customers shop.  Open for more than 150 years, Macy’s is under intense pressure from a growing number of internet retailers such as Amazon, and is facing declining financial performance and lower inventory turnover [1].  The ease of the online shopping experience, speedier and low-cost/free shipping alternatives, and free return offerings have shoppers gravitating away from the in-store shopping experience [2].  To combat these headwinds, Macy’s is reinventing itself by exploring alternatives to the traditional retail experience and introducing new technology and innovation in their brick-and-mortar stores.

THE MANHATTAN BEACH PILOT

Macy’s Manhattan Beach pilot is marked by its new omni-channel business model, which aims to offer the customer a convenient shopping experience based on the seamless and integrated use of multiple channels. This pilot has prompted Macy’s to partner with Hointer, a technology consultancy, to test the introduction of digital technology to Macy’s stores.  Together, the companies are enhancing the shopping experience by integrating technology into stores thereby “connecting with customers in a new way” [3].

The pilot, launched in 2015 at Macy’s Manhattan Beach, California store, turns the Macy’s salesfloor into a showroom. First, the customer uses her mobile device to scan the items she wishes to try on.  After she enters the fitting room, her items are released to her fitting room stall via a chute within 30 seconds.  She can use a tablet mounted to the fitting room wall or her Macy’s app to request additional sizes or items. In addition, customers receive personalized recommendations based on data from the items they have scanned.

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Not only does this pilot provide for a unique, individualized experience, but this operating model allows the customer to try on 30-50 items in a few minutes, minimizes staff costs, and mitigates the risk of returns [4].  Clothing stores typically allot 20% of their square footage towards fitting rooms, and 80% towards displaying merchandise but this pilot requires less floor space to display products [5].  There is one of every item on display, rather than every size and color [3].  In effect, products are easily visible, and the often time-consuming and frustrating hunt for certain variations of a product is eliminated. In addition, this allows store associates to focus on serving the customer instead of re-folding or re-hanging items on displays.  This new technology also offers the customer a more enjoyable shopping experience by eliminating the hassle of transporting items to the fitting room and the need to exit the fitting room to find another size (an act that often leads to abandoned purchases) [6].

THE ROAD AHEAD

Macy’s has started testing this pilot with swimwear, but has proposed expanding this technology to more stores and categories in the future, earmarking $200 for each fitting room.  Given that 67% of customers who try clothing on in fitting rooms end up making a purchase, it’s hardly surprising that Macy’s is expending time and energy in this area of the shopping experience [5]. While Macy’s has not disclosed the financial performance of this test, the rationale behind the model is that the ease of trying items on would correlate with increasing sales.  Macy’s can increase customer basket size by suggesting complementary items or items that fit with the customer’s fashion preferences through personalized suggestions to customers in its fitting rooms.  Retailer Rebecca Minkoff launched similar fitting room pilots in 2015 and sold triple the amount of apparel in stores implementing the new model [7].

Macy’s must differentiate its shopping experience by investing in new technologies to have a “long-lasting effect on developing greater customer loyalty and distinguishing the store from its competition” [8].  However, Macy’s should not focus exclusively on digital transformation within its store fitting rooms because the company needs to appeal to the differing shopping behaviors of all demographics.  For example, men tend to buy items without trying them on in a store, so are less prone to use fitting rooms [5].  In addition, the trend of millennials performing online research before buying should prompt Macy’s to consider the importance of website and mobile enhancements.  Though the in-store fitting room experience is important, Macy’s could consider offering digital fitting rooms.  Other companies have succeeded with this concept –  Zeekit, a virtual fitting room tool, allows users to wrap clothing items around 2-D images of themselves [9].  Adapting to the new digital and online shopping landscape is vital for Macy’s success, and the Manhattan Beach pilot is a step in the right direction; however, if Macy’s is going to reverse its downward spiral, it cannot ignore the opportunities to transform other areas of the customer purchase journey (e.g. marketing, store displays, and check-out).

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Sources:

[1] Macy’s, Inc.: Retailing – Company Profile, SWOT & Financial Analysis2016, Progressive Digital Media, Basingstoke.

[2] Kapner, S. 2016, Amazon Struts Its Fashion Sense, Challenging Traditional Stores; The Internet retailer is making headway against traditional sellers by attracting a crowd that had rebuffed its utilitarian approaches, New York, N.Y.

[3] Schrank, J. 2014, “Automated Shopping”, Design:Retail, vol. 26, no. 3, pp. 96-101.

[4] Soper, Spencer, Rupp, Lindsey, and Brandt, Nadja, “Macy’s Tests Chutes, Tablets in Dressing Rooms to Repel Amazon,” August 18, 2015, https://www.bloomberg.com/news/articles/2015-08-18/macy-s-tests-chutes-tablets-in-dressing-rooms-to-repel-amazon, accessed November 2016.

[5] Holmes, E., & Smith, R. A. (2011, Apr 06). Dressing up the fitting room — stores try to beautify spaces, ‘seduce’ shoppers to buy more with better lighting, mirrors, design. Wall Street Journal Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/860169506?accountid=11311

[6] Medina, M. (2014, Apr 15). Minding the millennials. WWD, 207, 8. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1636640498?accountid=11311

[7] Dishman, Lydia, “Inside LA’s New, Futuristic, Store- Magic Mirrors Included,” Fortune, October 8, 2015, http://fortune.com/2015/10/08/rebecca-minkoff-technology/, accessed November 2016.

[8] Loeb, Walter, “Macy’s Makes Rapid Advancement in Technology,” Forbes, July 22, 2016,   http://www.forbes.com/sites/walterloeb/2016/07/22/macys-rapid-advances-in-technology/#ac6ec1cd2967, accessed November 2016.

[9] Doupnik, Elizabeth, “Zeekit Releases Next Generation of Virtual Fitting Room, New Visualization Features,” Women’s Wear Daily, September 15, 2016, http://wwd.com.ezp-prod1.hul.harvard.edu/business-news/technology/zeekit-virtual-closet-app-10546500/, accessed November 2016.

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6 thoughts on “How Macy’s and Technology “Fit” Well Together

  1. I love this idea Erica! I think Macy’s is taking the right step in turning its space into a showroom, so that customers can experience personalized customer service, even though it’s through a digital channel. I see this as highly successful, however, if demand is not predicted accurately, I think customers will be very frustrated standing in a waiting room if their clothes have not yet arrived. The store is thinking it will take 30 seconds, but what happens when more people are shopping in a given day? Macy’s cannot provide the level of personalized service a super high end store can because Macy’s relies on selling high volume with relatively lower margin than a luxury store. It needs more customers, yet this model will require it to provide those customers with more service. Ultimately, how will associates ensure guests are not waiting, trapped within the small changing room? Fundamentally, the Macy’s changing room is not the ideal way to spend your time, so it’ll be interesting to see whether browsing and shifting through clothes in an open space is an essential part of the value proposition Macy’s has to offer.

  2. I think this is a very interesting article. It shows how one of the mayor retailers is trying to counter the increasing threat from online marketplaces. When I look at what it is happing with retail stores, companies such as Tower Records come to mind. A company that was not able to adapt quickly to disruptive threats.

    One of the mayor advantages of Macy’s is their physical presence and reputation and by pursuing what I would call a “digital fitting room” the company can offer something that online stores are currently not able to.

    The previous comment surfaces a problem with having to accurately manage inventory so that the person in the fitting room doesn’t have to wait more than 30 seconds, I think that there is a way to mitigate this risk. By notifying the customer when the picked clothes are ready to be fitted in the fitting room, the customer would be able to continue browsing the store.

    While this is a step towards becoming more digital, I think that Macy’s needs to find other ways to appeal to lost customers to Amazon and other online retailers. Digital fitting rooms alone will not do the trick. It is a tricky path to pursue given that if you educate customers more and more on digital tools, they will end up switching to 100% digital and will eventually switch to the stronger online players.

    Shopping is a social experience and that is something online retailers are not able to offer. Companies such as Macy’s need to find a way to exploit this matter. I don’t really have an answer right now, but this is where I think Macy’s needs to work on.

  3. Very interesting read, Erica! I personally love the idea of transforming the shopping experience through digital technology. I absolutely see the benefits Macy’s is hoping to capitalize on, but can also see the risks that @Ranj and @Jgilortiz mentioned above including poor inventory planning and minimizing customer wait time. However, I think Macy’s can actually mitigate these risks through the same technology it’s offering for consumers by focusing on the back-end data. I would imagine that this technology gives Macy’s a better understanding of which items customers are trying on the most, which items customers often try on by don’t end up buying, and which items have the best conversion rate. This type of data would be immensely helpful to the retailer. Macy’s can use this to better determine which styles of data to purchase and which brands often look good on the shelf but are actually poor fits for customers. Further, I’m wondering whether the app technology would give the retailer more insights into its customers and allow for customers to select their preferred styles ahead of time so that when they arrive at the store, their inventory is ready. I’m also curious to know a bit more about whether the technology also offers suggestions for customers to ‘complete the look.’ This would also enable to retailer to increase basket sizes for customers while also providing a more high-touch experience. I’m really excited to hear whether this concept really takes off!

  4. Erica the idea of whoosh fitting rooms is intriguing! I think it caters to an opportunity that has not been addressed so far but does cause distress for consumers and is also inefficient for retailers. My concern is that while this technology will deliver a customized experience it takes out the personalized interaction based decision making experience from the shopping experience. Historically customer loyalty has hinged on affinity with sales people. Would this mean that retailers need to redefine what customer service means? And can personalized service be taken out entirely from retailer service model? In my opinion, retailers would need to relook their models in a broader context, as you have also suggested, across the path to purchase to see where plugging in personalization yields higher returns vs. plugging out.

  5. Wow, what a cool idea! Great article Erica! I am curious whether the Manhattan Beach store requires more inventory stock than a typical store. If multiple people are trying 30-50 items at a time, I can only imagine this multiplying the inventory a given store needs and potentially increasing costs in the short term.

  6. Interesting post and a great read, Erica! Very cool to see what Macy’s is doing to continue to differentiate in the retail industry and add value for its customers. I think that retail is a space that is ripe for technological disruption, and I believe that this type of smart fitting room is the first step in that direction. I’m curious to see how companies continue to innovate in this space and believe that it could become increasingly customized.

    One idea I thought might be interesting was if they could upsell you directly from the fitting room / app. If the fitting room algorithm knew what you were trying on and your general statistics (height, weight, etc.), then it could suggest pairings for the outfits and other things you might purchase. This would be similar to how Amazon suggests similar products, but in this case, Macy’s could actually suggest and then quickly deliver so that the customer could try it on. The product would be highly customized – and would be available in real-time – so it may have the potential to drive considerable sales for Macy’s. Could be an interesting next step from what you’ve described in your article, so I wonder if they will pursue something like this.

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