14 October 2020

How Macy’s can plan for post-Covid retail success in 2021


Every December, around 250,000 people visit Macy’s in New York just to meet Santa Claus. They request presents and the children try to convince him that they are worthy of a visit on the evening of December 24th.

Not this year. For the first time in 160 years there will be no Santa Claus greeting kids at the flagship Macy’s store. But he isn’t going to be in San Francisco or Chicago either. This year, Santa Claus is staying at home - until Christmas Eve.

The Santa Claus inside Macy’s has become yet another victim of Covid-19. It’s not safe to follow the traditional Holiday season strategy of packing in as many customers as possible. This year, the big retail brands are encouraging shoppers to spread their shopping over the remaining weeks of 2020.

Both Walmart and Target have spread their Black Friday deals across the entire month of November, creating a series of weekly sales so the bargains are scattered throughout the month, rather than just at Thanksgiving.

Anyone who has seen The Miracle on 34th Street knows that Macy’s is the ‘home of Santa Claus’ so their decision to cancel his appearance should be greeted favorably - I'm sure it wasn’t an easy decision. There are many malls around the US where Santa Claus is still going to make an appearance and will be up close with kids and their parents. At least the Macy’s management team has decided that their priority is the safety of their customers and employees. They will follow the 6ft physical distancing recommendations, even if it is going to cost them some additional Holiday revenue.

2020 is a tough time to be running a department store. With the physical distancing requirements and consumers switching to online retail many analysts are asking if department stores have a role in the future of retail. I believe that they can find a new offer to customers, but they will need to accept some changes to their existing business model.

Customer Service is a good example. It seems that Macy’s has already accepted that work-from-home (WFH) is a viable model for delivering great service to customers. I’d certainly agree with that. Many brands were wary of WFH until this year, but the pandemic has proven that customer service agents can safely work from home and even deliver better productivity than the contact centers can.

Macy’s has also experimented with the idea of turning some stores into fulfillment centers rather than traditional retail stores. I think this type of innovation is essential. If they have the national store network, but there is not enough footfall to justify the store then creating a fulfillment center to support online sales is a much better idea than store closures. Not only does it improve delivery times for online orders, but it helps the company to really start focusing on how they can improve their online services.

E-commerce now makes up around 54% of all sales at Macy’s so this improvement to their fulfillment operations is vital to reducing delivery costs and improving delivery times. Macy’s has already set a cost reduction target of $2.1 billion by next year so they are on track to both cost reduction and a pivot in services - to really focus much more on their online offer.

I think that there are really two ingredients that could lead to a positive future for Macy’s and that is initially a return of international tourists - in cities like New York the tourists swoop on stores like Macy’s and make an enormous difference in revenue. Additionally, to move beyond just WFH customer service and to start thinking about the customer experience itself as critically important. This will follow from the focus on e-commerce, but it’s not enough to just create an online version of the department store - the entire customer journey has to be planned again so it can include apps, online, and visits to the stores. The future for Macy’s has to be omnichannel.