Macy’s: A Beacon of Technology

If you thought insurance companies had crossed the line, just wait until you hear what retailers are doing with your location information.

I can’t speak for everyone, but department stores terrify me. I’m not sure if it’s the size, the variety, or shopping in general, but there’s not much about the experience that I genuinely enjoy. However, the in-store experience is ever-changing and Macy’s is on the cutting edge of re-shaping the way we do department stores.

Macy's in-store experience (image from Sarasota Herald-Tribune)
Macy’s in-store experience (image from Sarasota Herald-Tribune)

The experience

Macy’s has long been the center of the department store experience. For more than a century, it has been America’s one-stop-shop for clothes, shoes, cosmetics, jewelry, appliances, and food. However, with so many options under one roof, the department store experience can be a bit overwhelming—as customers are often forced to explore multiple floors, sections, and racks for the merchandise they are looking for. Because of this, many consumers have moved much of their purchasing online, where they likely have an easier time finding what they are looking for at a cost they are willing to pay.

To combat this attrition, Macy’s was one of the first retailers to leverage the iBeacon technology in an effort to enhance the customer’s experience. This technology is a geo-mapping system that—through a smartphone’s Bluetooth technology—is able to provide real-time information on how customers are interacting with Macy’s at the department level (1). Based on a customer’s in-store and online purchasing and browsing histories and their current location in the store, Macy’s can push marketing collateral and offer promotions on products in nearby departments to the Shopkick app on their phone (2).

Example of beacon technology (image from SMB Retail Technology News)
Example of beacon technology (image from SMB Retail Technology News)

Former macys.com President Kent Anderson explained:

Say you’re in the housewares department standing next to our display of KitchenAid mixers, the ability to transmit to you information — a video about the quality of this product, the accessories that we have as part of our assortment that you may not see there — rich content that may, and should, help us close the sale, is where we potentially see the beacon technology going in our stores.” (3)

 

While the concept may sound somewhat invasive, Macy’s was pleased enough with the results of its pilots to roll out the program to nearly all 800 of its stores. For Macy’s, this technology offered new insights into which merchandise was of interest to which customers as well as how they should place products and potentially design stores to extract the most value from customer movement patterns throughout the store (4). And for shoppers, the value came through an enhanced shopping experience and additional savings.

 

The future

Beacon technology has the potential to change the entire in-store shopping experience. In an industry that is struggling to keep up with the convenience of going online, Macy’s and others are using digital technology to pull customers back into the stores. By shifting from an operating model that previously relied on shoppers spending a lot of time in the store, moving from department to department, and interacting with sales reps, to a model that relies on beacons to pull shoppers from department to department while an app informs them of product benefits electronically, Macy’s is on their way to reducing labor costs and making the Macy’s shopping experience more fun and financially beneficial again.

Through the data they are collecting via the beacon systems, their value proposition could one day shift to a leaner, more-personalized experience that allows the shopper to spend less time in the store through leveraging data on their prior behavior. I picture a future state that is more interactive and pulls customers through the store by offering promotions that expire within minutes if they are not added to the cart quickly enough, while also allowing them to pay through mobile and removing the need for POS systems.

While the initial beacon rollouts did not do as well as they were expected to, the future remains quite bright. Many experts believe that hardware development typically lags software development, and in this case, beacon adoption was stunted by unpredictable hardware issues (5). However, as smartphone adoption continues to increase, I’m willing to bet the beacon’s place in retail will too.

(671 words)

 

  1. Umbel Corp, “iBeacons, Retail and Information Overload: How Macy’s is Kickstarting Retail’s Data Warehousing Needs,” https://www.umbel.com/blog/brands-agencies/macys-ibeacons/, accessed November 2016.
  2. Time Magazine, “The Creepy New Way Macy’s Tempts You to Make Impulse Purchases,” http://time.com/money/3432693/macys-shopkick-ibeacon/, accessed November 2016.
  3. Ibid.
  4. Ibid.
  5. CloudTweaks, “Beacons Flopped, but They’re About to Flourish in the Future,” http://cloudtweaks.com/2016/11/beacons-flopped-theyre-flourish/, accessed November 2016.

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14 thoughts on “Macy’s: A Beacon of Technology

  1. I’d never heard about department stores using beacon technology. We have talked in class about grocery stores using similar technology to push customers coupons for products based on their location and past purchases. But I think there’s a big difference between grocery shopping patterns and clothes / home goods shopping patterns. For the most part, groceries are a more frequent and more consistent set of purchases because they’re consumables. This means that even if the coupons are not incredibly precise in the geotargeting, they’re more likely to be relevant. Since very few people buy more than one KitchenAid stand mixer and since beacon geotargeting isn’t perfect, I would be more concerned that customers were getting information about products that they are NOT looking for. For example, what if they’re in the KitchenAid area and are looking at spoons but get a video about a stand mixer? Furthermore, KitchenAid stand mixers are probably one of the few consistent products in the store: most other fashion items turn over pretty quickly. Compound this with frequently-changing displays, and it makes me wonder how Macys will handle coding each dress / accessory / sweater to a location in the store. In theory, this technology should be helpful, but I’m concerned about the actual implementation and customer experience of it. I’m not surprised that the beacon rollout was not successful.

  2. This was a really interesting read. Much like yourself – I typically dislike the department shop experience due to the amount of time needed to figure out the stores’ layout and finding what you are actually looking for. I think beacon could be an interesting solution, but I’d never heard about this before. How quick do you think the roll out and adoption of such new technologies can be? Although I think this is a step in the right direction, I almost feel like the required step of downloading an app an learning how to use it may be too much for someone that goes into a department store once a year.

    Do you think there is anything Macys/beacon can do to lower those hurdles to adoption? I am not sure what the right answer is, but part of me thinks they could lend you a handset when you enter the store that has everything preloaded, much like museums do with their audio guides.

  3. Great post! One of the things I find interesting about this technology is customer adoption at the stores. I’m concerned for many of the reasons referenced by the previous commenters, including usability and value creation in the eyes of consumer. Thus, I believe that in addition to the implementation expenses, Macy’s will have to think about the cost of incentivizing consumers to adopt download and use the app. I read an interesting article about brick and mortar stores and their appeal to shoppers compared to online shopping. For the most part, brick and mortar shoppers are interested in the opportunity to “touch and feel” the item before buying and also the “instant gratification” of walking out the door with the item (https://www.washingtonpost.com/posteverything/wp/2015/01/02/how-brick-and-mortar-stores-can-survive-the-internet-shopping-craze/?utm_term=.644d707b4443). I’m worried that fiddling around with an app detracts from that experience and that digital technology usually appeals to a younger demographic while the demographic of your average department store brick and mortar shopper is a bit different.

  4. Interesting topic! I wonder if retailers might be able to use similar technology to help customers seek in-store assistance. I can remember so many times that I have been at a department store and I couldn’t find a sales associate to help me check out or bring some shoes in my size. Perhaps you could use an store’s app to call for assistance to specific spot in the store. There could also be a feature to electronically request shoes in your size or a different size for a particular dress. Based on your location information, a sale associate could bring the shoes or other item to your location.

  5. Excellent post! It’s interesting how beacons can help department stores to improve the in-store shopping experience by offering more tailored offers and promoting cross selling between departments or through complimentary products.
    The usage of beacons should be a relevant part of the omnichannel experience that most retailer are trying to build and data usage is the biggest challenge. Identyfying a consumer by beacons in a store is not difficult, the hard part is to identify that customer, link him to his online behaviour and generate a personalized offer based on his behaviour accross all channels.

  6. Great post! I’ve always been fascinated by beacon technology and its many possibilities. The data aggregation is incredibly valuable for both retailers and brands. I’ve always struggled with the low adoption rates of beacon technology however, both from a consumer and retailer perspective. I would imagine there is friction with consumers in downloading the application and making sure it is active while in the store. I would suspect also that the technology causes people’s phone batteries to diminish. Also, I would love to better understand how accurate the geo-fencing is on behalf of the retailers.

  7. Thanks for the interesting article. I can definitely see this technology being applicable in Macy’s especially for size availability, pricing information and additional customer reviews. One issue that I had with Macy’s is the customer service. Many times, I simply cannot find a sales representative to help check on the availability and sales information on certain product. On the other hand, this technology seems to be supplemental to the in store experience and the actual product lines that they carry. It will be interesting to see how Macy’s better integrate this technology into their day to day operations in the future and differentiate itself from the other mid-range department stores.

  8. Loved the post. I spent a little time about a year ago looking at the in-store advertising market and the shift away from traditional print promotion (think signage at the end of the aisle) to digital. The toughest component of the adoption (which I agree is a “when” not “if”) I think is the customer. I think it will be hard to convince customers to download the app and treat it as something other than an annoyance when they are already walking around the store likely using their phone anyway. I think the technology will need to evolve in such a way that it materially improves the experience in order to overcome the annoyance factor while still giving the customer the perception of control (not being forced around the store based on pricing gimmicks).

  9. Interesting idea, there seems to be a trend of tracking consumers in many department store. According to a NY Times article, stores like Nordstrom are using wi-fi and cameras to track user behavior. I prefer the Beacon technology to these other forms of tracking because it is more explicit to users, wi-fi tracked customers may not realize they are being tracked.

    http://www.nytimes.com/2013/07/15/business/attention-shopper-stores-are-tracking-your-cell.html?pagewanted=all&_r=0

  10. This reminds me a lot of my Target experience in the US! Target’s app, Cartwheel is very similar but requires more customer engagement as it requires consumers to scan barcodes. In a past life, I had served a retailer and the type of data that could be captured from Beacon technology would have saved thousands of hours of in-store observations! In terms of application, I see the most impact in how retailers might be able to redesign stores – whether it’s the floor plan or the aisle space!

    On the flip side, I wonder what this would look like once Beacon technology is fully adopted. In a world where the retailers know the consumer’s shopping habits – would they use this information to their advantage? For example, Macy’s could begin to introduce dynamic pricing where different customers have different prices (not just different promotions). Importantly, how does that change Macy’s relationship with its suppliers? Macy’s could force suppliers to bid for promotions to influence the customer’s journey and experience through the store. Whilst I think Macy’s has a lot to gain with this technology, I wonder how it can convince the other players in the supply chain to adapt to it.

  11. Great post and very interesting idea. I was wondering how they might pair up data from beacon technology with information they collect about us from the use of apps? There are certain things I always buy online so I don’t even need to be enticed to other parts of the store to discover those things. At the same time, I wonder if they can use the beacon data to maybe make navigation easier for people who might not enjoy shopping in store as much.

  12. Interesting post! I had never heard or experienced beacon technology being deployed at a retail store. This has the potential to transform the in-store experience for the customer, as you correctly pointed out.

    Beacon technology, if implemented well, can bolster Macy’s operating model (especially if it’s one of the first retailers to do so). For Macy’s, this technology can help push and cross-sell products by making customers aware of promotions available at various sections in the store. I think perhaps customers may take time to adapt to this technology as it can come across as too invasive. Acceptability may improve if other retailers follow suit too.

    While this is an innovative means of strengthening customer loyalty, I’m curious to know the impact of e-commerce on Macy’s sales. Has the retail chain undertaken any strategic digital initiatives to counter players like Amazon? Has there been any move to improve its value proposition to retain or grow market share?

  13. I’m very curious to see where the retail industry is heading in general in terms of personalized advertising and promotions. I will say that I agree with you on the fact that it sounds creepy and invasive (as do most location based services popping up all over the place) and I’m afraid that as this becomes more mainstream, the people will be willing to accept that large corporations follow their every move in the name of “understanding the customer”.
    The other concern I have is that as these advertisements are further pushed onto the consumer, the more saturated he/she becomes and the less impact they will have. I wonder if Macys has thought about that.

  14. I think this technology is very interesting and has huge potential. However, I am concerned about what will happen when any retailer can afford to use this technology. It could be annoying to walk in a store and see a notification with products that you may like. Then, walk in another store and get more notifications. As a consumer, the only thing you would like to do is turn off notifications, making iBeacon technology useless for retailers.

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