“Don’t blink. The customer is changing fast,” said Terry Lundgren, executive chairman of Macy’s Inc, who gave the opening keynote at this year’s World Retail Congress.
He identified 2015 as a key moment of change in global retail but claimed that most retailers missed it (Macy’s included). He saw three key shifts.
Firstly, the drop in oil prices didn’t deliver the bounce in retail spending that it has done in the past. Instead, people spent their money on buying cars and purchasing or upgrading their homes. So the automotive, real estate and home improvement categories all performed. But retail didn’t bounce.
Secondly, the demographics of shoppers changed. Baby Boomers are spending less on stuff and more on experiences (predominantly travel and entertainment). And millennials, who are digital natives, are increasing their spending power.
And thirdly, the internet has commoditised everything. “People will see an item in your store and then buy it for $3 less on their smart phone. It even saves them from carrying it home” he said.
But Lundgren maintains that consumers are still spending, they are just spending differently. “Five years ago we didn’t have expenses like cloud storage and streamed entertainment.” So the question Lundgren poses is, why will people choose to spend their money with you?
Macy’s answer to this question revolves around three key strategies.
The first strategy is to develop exclusive product. With hyper price transparency in the market, exclusive product is the best way to diminish the role of price in the purchase decision. Macy’s has executed this by signing exclusive distribution deals with brands like Tommy Hilfiger and DKNY as well as developing quality private labels like INC. Exclusive merchandise is key.
The second strategy is to invest in exciting stores. He believes retailers have fallen down in this area. “We’ve tweaked, we’ve changed, but what have we done that is significantly different in the last five years?” Lundgren believes that the store offers the key competitive advantage over online players like Amazon. “Make your store the advantage”, he said. And that includes investing in your sales associates.
The third strategy is to evolve online. His focus here is to drive utility and create seamless experiences between channels. He claims that customers who use both channels deliver higher value to a retailer than customers who shops one or the other.
Lundgren observed that major social shifts happen every six or seven years. “All major social changes force us into big changes. So I would say this is a good time for our industry.” The key is to keep your eye on social shifts because when it happens, its happens quick. Blink, and you’ll miss it.
Matt Newell is covering the World Retail Congress exclusively for Inside Retail. He is the founder and executive strategy director of The General Store, a company that specialises in retail strategy and innovation.
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For more insights on the World Retail Congress, or to organise a boardroom presentation, contact Matt Newell on matt.newell@thegstore.com.au / +61 403 821 025.
