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Macy’s Rethinks Distinction between Clicks and Bricks

Could E-Commerce Actually Be the ‘Holy Grail’ of Physical Stores?
March 27, 2013
Reports of the imminent demise of bricks-and-mortar stores been greatly exaggerated.

The dread that shoppers would forsake stores in favor of e-commerce and kill brick and mortar retail evokes the famous “Bring Out Your Dead” scene in the movie Monty Python & The Holy Grail in which the 'dead' man protests: "I'm not dead!"

Dead Collector: 'Ere, he says he's not dead.
Large Man: Yes he is.
Dead Man: I'm not.
Dead Collector: He isn't.
Large Man: Well, he will be soon, he's very ill.
Dead Man: I'm getting better.
Large Man: No you're not; you'll be stone dead in a moment.

A recent survey from the Cisco Internet Business Solutions Group found that 93% of products sold in the U.S. are still bought in brick-and-mortar locations. And while technology has upended many product categories and more than a few individual retailers, it simultaneously has created opportunities for retailers to continue to make the store shopping experience relevant.

“I think the whole concept of bricks and mortar needs to go out the window,” Karen M. Hoguet, CFO of Macy's said at a presentation at UBS Global Consumer Conference this month. “It's just so different today. How do you account for somebody who's buying off a mobile device in a store? How do you account for somebody who shopped all day, didn't want to carry shopping bags on the train, went home and bought it all on I really think it's sort of an old way of thinking about the business,” Hoguet said.

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It appears more retailers such as Macy's are viewing store-based and online shopping as complementary parts of the shopping experience rather than as competing against each other.

“The way we're looking at it is sort of the total, and how do we transform our stores to be relevant in a world with all of this technology available to her? It's really quite exciting," added Macy's Hoguet, whose brick-and-mortar stores grew about 1% last year, while its e-commerce sales grew 40% plus.

“One of the things that 290-plus stores have already become -- becoming 500 this year and probably more so next year -- are fulfillment doors,” Hoguet said. “Also, in some cases, we can use our stores to show merchandise that we don't have fully inventoried in the store, but we can pull out of our warehouses. These are categories that were not profitable to have in all 800 doors because they were so slow turning. So again, using our square footage very differently but to be very relevant to the customers.”

“I'm not as fixated on Internet versus bricks and mortar,” Hoguet said. “And in fact, this year, we're not reporting it separately anymore because, frankly, I was concerned about the accuracy of what we were reporting.”

Hoguet, however, did note the fact that Macy’s as a fashion retailer makes its retail strategy far different from that of an electronics retailer.

“Fashion is different. I can't speak to the electronics (sector), but my guess is our customers are probably much more female-based,” Hoguet said. “And all of the research shows that lots of customers like to shop. It's social, it's fun and it's sometimes hard to do online. So we'll often find somebody buying something online, returning it in the store, trying on different things. It all sort of works together, but we find that with fashion, people really do like coming into the store.”

Hoguet also acknowledged that Macy’s does have to rethink the size of its stores.

“The smaller square footage is very interesting,” she said. "As our vision of this omnichannel strategy keeps evolving, we may need less inventory in our stores going forward. At least that's one person's theory. We're not there yet, our systems aren't compatible enough today to know how much is left. But our theory is that we could, in some places, build smaller doors, given what's happening with omnichannel. It's not significantly smaller, but smaller.”

[Editor's Note: Harkening back to the Monty Python movie, it is worth noting that one of the unfilmed scenes from the original script had King Arthur and his knights end up finding the Holy Grail at a Harrods' department store.]

For Hoguet, the biggest change in retailing in the coming years is the continual maximization of this omnichannel strategy.

“I actually think, a year from now, this word, omnichannel, is going to go away, because it's just retail,” she said. “That's how you do business, but I think there are a lot of benefits ahead of us.”

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