Surviving the Retail Apocalypse: Macy’s User Guide

Search, scroll, zoom-in, choose quantity, add to cart, and check out. Congratulations, you are now the proud owner of a thorough picture book encapsulating life as a soldier during the Second World War, which you plan to peruse before sprinting to the IMAX Theatre to see the summer blockbuster, “Dunkirk”. The best part is, you were able to see the trailer, search for and purchase the book all before “The Big Bang Theory” came back from commercial break where Macy’s ran a pricey advertisement about their “One-Day Sale”. If this sounds like science-fiction, you must be living under a rock, because this is Amazon, and they are revolutionizing how customers shop.

Amazon went public in 1997 at eighteen dollars a share and since then, the company has grown exponentially and the stock price of amazon is currently hovering around $1,000/share. This is no stroke of luck. Amazon has been determined to deliver on its mission to be the “most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”

Clayton Christensen is a Harvard Business School Professor, best known for his research on successful innovation. Christensen attributes the success of a new company to gain market share over larger corporations, which ultimately disregard them as true competitors. While Amazon was scraping its way to the top, it was also acquiring companies deemed as future competitors, halting any potential to lose market share as the company scaled.

This is clearly evident with the acquisitions of, an online marketplace for pet food, and even their most expensive acquisition to date, Whole Foods Marketplace, a brick-and-mortar grocery store targeted toward upscale organic food offerings. In some respects, Amazon has adopted the “If they build it we will buy it” approach to innovation, acquiring companies with a somewhat niche product offering in order to penetrate an untapped market. Thus, extending reach of the family of products offered by Amazon, and eliminating a competitor in the process.

So, one may be curious about the moves and strategies Macy’s has implemented during this twenty-year period to stave off the rise of online shopping, and competitors similar to Amazon. Clearly, their current strategy has been ineffective, which is why they find themselves in their current predicament. Unlike Amazon, Macy’s did not heed the words of famed professor Clayton Christensen, and allowed Amazon and other online retailers to slowly encroach into the bottom of the market by offering a superior experience. This allowed Amazon to gain a foothold in the market, which fostered the company’s growth as it became one of the most profitable companies in the world.

While Amazon has become an industry titan, Macy’s has stood back complacently, watching its stock price tumble. After ample pressure from investor’s, long time CEO Terry Lundgren was fired in June of 2016. Even with new management in place, Macy’s revenue and stock price have continued to nose dive, with investors calling for Macy’s to divest its real estate assets. In a press release from August 2016, Macy’s formally announced the closing of about 100 stores throughout the United States, begging the question, when will the bleeding stop?

Macy’s current management has recently developed a plan to invest in discount retailing, essentially utilizing the strategy employed by Marshall’s and other similar retailers. Macy’s CEO, Jeff Gennette, also released his master plan for the company explaining in great detail the revival of Macy’s flagship store in New York City. In this plan, Gennette also named a Chief Innovation Officer who was tasked with the responsibility of utilizing customer analytics to drive the product offering. All of this sounds like a great strategy if it were 1997 and Amazon had not gone public yet. However, it is 2017 and this plan is destined to fail because it does not consider the customer experience in any way.

In an interview with Reid Hoffman, Brian Chesky, CEO of AirBnB, details the importance of customer/user experience in the building of his platform currently disrupting the hotel industry. He places himself in the position of the customer and imagines a one star experience, a two star experience, and three star experience all the way up to a 45 star experience, as he put it. The importance here is Brian’s ability to empathize with customers’ wants and needs, allowing him to deliver an optimal customer experience. Macy’s Master Plan shows no regard for what the customer wants, but instead showcases Macy’s disconnect with its customer and narrow-minded view of short term gains.

Since Macy’s seemingly refuses to consult its customers, I have taken the liberty of designing an optimal customer experience, which I believe has the potential to correct the sinking ship that is Macy’s Department Store. To begin, I believe the real estate Macy’s owns is imperative to their viability, and is the only way Macy’s has a chance of surviving the “retail apocalypse”. It is no secret that traditional shopping malls are becoming a thing of the past, thanks in large part to Amazon and the rise of online retailing, but this presents a very unique opportunity for Macy’s. As these large areas of land become vacant, the lack of demand sends the price of the land down, which would allow Macy’s to buy these town centers for pennies on the dollar.

Macy’s now has the land and infrastructure to support large numbers of people, but does not have the know-how of attracting people to this area. This is where the customer experience comes into play. Macy’s needs to think bigger than their product offering of clothes and household appliances — people want an experience. To do this, I suggest renting out the space in the mall that Macy’s has acquired with a caveat: it must be to a local business. This would give each space a unique personality, providing a different customer experience depending on which mall you decide to go to.

Since the financial crisis and subsequent recession, displaced employees have begun to strike out on their own, giving rise to boutiques and other small shops around the country. In order to limit Macy’s need to outperform local businesses, I would suggest Macy’s acquire the struggling online boutique marketplace, This would give the boutique owners a space to sell their products online next to larger brands carried by Macy’s. This unique opportunity would allow for Macy’s to potentially work out an equity deal with the boutiques in the town center space. As these smaller brands gain traction on a large scale, Macy’s can enjoy increased profits of growing brands. This would give Macy’s an increased online presence as well, allowing the company to better compete with Amazon online.

Customers want a unique experience, be it online or in store. If Macy’s intends to succeed as a viable business, it must invest in long-term strategical initiatives to create optimal customer experiences, rather than succumbing to pressure from investor’s to implement a short term solution. It is time for Macy’s to take a page out of Amazon’s playbook and become more customer centric; a place for customer to discover something new and exciting online or in person.