From “North Star” to “Polaris,” Macy’s struggles to execute
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Macy’s CFO announced her resignation this week, adding to the long list of bad news for the department store retailer and further fueling its already documented crisis of leadership.
Macy’s has suffered from strategic missteps over the past twenty years. They spent the aughts acquiring more brick-and-mortar square footage when they should have been developing omni-channel. By the mid-2010s, the results of store cannibalization and underinvestment in digital came home to roost alongside the “retail apocalypse.” The short term fix to the problem is, of course, the closure of underperforming stores:
Macy’s strategy is a mess. It was a mess under Terry Lundgren, but he was considered a retail savant and his word was gospel. His hand-picked successor, Jeff Gennette launched his “North Star” strategy close to three years ago, and when those measures failed to move the needle, he simply relaunched it, with a new name. Analysts and observers were unimpressed with the newly christened “Polaris” strategy. In it, Macy’s is hoping to cost-cut its way to growth, slashing more stores and corporate back office jobs. Included in the plan:
They’re investing in the off-price segment with their Backstage stores, a strategy that reached its apex post-2008 crisis, with players like TJX emerging as champions of the model. For a firm flailing about for a win, it’s questionable that Macy’s would go up against one of the most successful retailers today.
In the same breath (or press release) Macy’s claim they will “strengthen customer relationships” while also “adjusting its staffing with reductions in some stores and increases in others.” There’s scant mention of additional staff training or development. It’s telling that a company that once tested robot greeters costing $20,000 a piece is willing to throw money at anything other than staff development. In our personal experience with Macy’s, getting an associate to say even “Hello” is a challenge, making their continued under investment in their people shocking.
They’ll debut a smaller concept, Market by Macy’s. In 2018, Macy’s acquired NYC concept store Story, naming its founder, Rachel Shechtman, as Macy's “brand experience officer.” She was tasked with creating better in-store experiences, including brand partnerships and events, opening the Story shop-in-shop concept in 36 stores last year. But Macy’s pulled away from the concept earlier this year, so their ability to execute on this path is already dubious.
But none of these new strategies matter if Macy’s continues to fail at the fundamentals. If you walk into a Macy’s store, it’s not uncommon to find messy merchandising, rude sales associates, and lackluster assortment. It’s a catch-22 for Macy’s: to improve the basics, they have to admit to a need for improvement in the first place. Who was it that said “insanity is doing the same thing over and over and expecting a different result?”
Word on the Street
COVID-19 is impacting digital native Direct to Consumer brands (DTC) despite their seeming independence from brick-and-mortar stores. What costs do you cut when there’s less rent overhead?
After the dust settles, luxury M&A activity could accelerate post-crisis.
The restaurant industry is faced with few good options during the pandemic, from takeout and delivery to full on closure. But some restauranteurs have pivoted to feeding those on the front lines of the disaster response, and their communities.
Kroger’s sales rose 30% in March, and now the company has granted $2 per hour hazard raise for its workers.
Google and Apple are creating a coronavirus tracking system.
Bookshelf
In uncertain times like these, it’s helpful to get back to the absolute basics. This is why we’ve fished Tiffani Bova’s “Growth IQ” off of the bookshelf. Focusing on ten paths to growth, this tome highlights how companies use one or two of these strategies to reach their goals. It’s a page turner full of case studies and real world insights. Best of all, it can serve as a reference, supporting strategic ideation and frameworks for your own work.
She Said It Best
“We will be in a position of having a blank page for a new beginning because lots of companies and money will be wiped out in the process of slowing down. Redirecting and restarting will require a lot of insight and audacity to build a new economy with other values and ways of handling production, transport, distribution and retail.”
— Trend forecaster Li Edelkoort, on what comes after Coronavirus. Not all of her predictions seem feasible (“an arts-and-crafts century, where manual labour is cherished” reads as especially whimsical), but it’s a thought provoking interview about how this moment is reshaping traditional modes of demand, production, and marketing.
That’s all for now.
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