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Macy’s Beat Asos in L2’s Digital Ranking

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2016 has been a rough ride for Macy’s.

The department store retailer started the year by slashing thousands of jobs and 36 locations, narrowly avoided a massive strike at several New York stores in June before revealing that longtime chief Terry Lundgren would step down in 2017, and then announced 100 more closures in August.

On top of that, sales continued to slip (by 3.9% in the most recent quarter) and profits are feeling the pinch.

But while all this was happening, Macy’s was aggressively investing in digital and mobile behind the scenes in order to build a better customer experience across all shopping channels. And according to the latest ranking of department stores’ digital prowess compiled by L2, the investment has paid off.

Macy’s is number two on a list of four brands ranked “genius,” behind Nordstrom but beating Kohl’s and J.C. Penney. On the parent company side of things, Macy’s Inc. (which includes Bloomingdale’s) took the top spot by a wide margin—141 versus Neiman Marcus Group, in second place, at 118.

“Genius brand Macy’s improved upon its already stellar iOS app by adding in-store messaging capability, along with a redesigned landing page that clearly communicates the benefits of opting-in to location services, push notifications and in-store messaging,” the report said. “Bloomingdale’s significantly boosted its mobile site by adding geolocation, dynamic mapping with directions to the nearest store, and mobile-optimized live chat.”

What makes Macy’s a “genius”? L2’s report cited how the retailer leveraged its “Fashion’s Front Row” event during New York Fashion Week to generate the index’s highest site traffic. In addition, the MyStylist section on the main website allows shoppers to quickly and easily book appointments with personal stylists.

Bloomingdale’s ranked “gifted,” only one point behind Asos, and L2 noted how its high-quality editorial content aids product discovery, while the ongoing investment in mobile and omnichannel delivers strong online-offline integration.

Despite nearly three-quarters of indexed brands now providing some form of omnichannel functionality through their brand sites, such as click-and-collect (60 percent), consumer adoption has been slow, largely because of hiccups during pickups.

“Clearly, greater investment in the backend as well as expanded training is necessary for the reality of a ‘frictionless’ customer experience to live up to its full potential,” the report said, adding that expedited fulfillment is also essential if department stores want to survive the next paradigm shift.

Omnichannel

Even though 25 percent of online shoppers in the U.S. and U.K. say they’re interested in using click-and-collect services, only 15 percent and 8 percent of shoppers in those corresponding countries actually do so. That begs the question: invest in the service now or wait until the demand is there?

While 62 percent of indexed brands now offer click-and-collect, compared with 56 percent a year ago, overall investment in essential omnichannel features has barely budged. In fact, the number of department stores offering an in-store return policy for online purchases is unchanged this year from 2015. Furthermore, J.C. Penney and Kohl’s are the only U.S. brands on the list that enable users to filter find-in-store results.

“Retailers can reduce the cost of offering omnichannel services by investing more and facilitating a seamless shopping experience across channels,” L2 said. “Further investment in store configuration, systems and staff training are all needed to ensure that brand omnichannel investments made to this point generate the desired returns.”

Digital marketing

Earlier this year, Google removed text ads from the right side of its desktop search results and announced plans to increase the size of the remaining ones, making the search engine more of an e-commerce platform. These changes, coupled with shifting shopper preferences, present a host of new challenges for retailers. Indeed, average search growth on branded terms, such as Macy’s or Nordstrom, slowed to 1 percent across major markets over the last year, while search volume on non-branded category items (think: cocktail dresses, high heels, lipstick) surged 15 percent.

In addition, when L2 performed searches on hundreds of non-branded search terms, the group discovered that Nordstrom and Macy’s appeared on 37 percent and 34 percent of first-page results across 611 non-branded queries, respectively. But 74 percent of indexed brands registered less than 10 percent visibility, prompting some to utilize search engine marketing (SEM) to achieve comparable visibility to their peer set. For instance, J.C. Penney uses AdWords to boost its visibility from 10.5% to 30 percent.

Others turn to email marketing, but most struggle to “strike the right balance between quality and quantity.” Neiman Marcus, for example, sent nearly four times as many emails per week as the average indexed brand but only achieved a read rate of 15.6%. Rather than resorting to discount-driven subject lines that people are becoming increasingly numb to, L2 suggests department stores take note of Nordstrom’s highly-targeted lifestyle campaigns to facilitate higher open rates.

When it comes to mobile advertising, which now accounts for more than half of total digital ad spend in the U.S., L2 heralds Macy’s approach. In an effort to strengthen relationships with key partner brands, Macy’s assigns a large portion of its budget to brand-specific ads and generates 14 and 13 times the number of impressions across desktop and mobile, respectively, than the index average.

Social media

Nearly 100 percent of indexed brands are present on Facebook, while 91 percent are on Instagram and 95 present are on Twitter. Snapchat is still an experiment (37 percent), but 89 percent appear on YouTube and Pinterest.

However, when L2 studied total post interactions generated by indexed brands, Instagram commands 69 percent of engagement among department store brands, compared with Facebook’s 29 percent, while Twitter accounts for a mere 2 percent. Given the fact that more than a third of Instagram users admit to using their phones to purchase a product digitally, it’s no surprise to learn that 45 percent of indexed brands have integrated a path to purchase within their profiles on the platform—a substantial jump from 27 percent in 2015—though no one actually says how many sales they’ve generated.

Mobile

Almost half of online shopping traffic in the first quarter came from smartphones, but 90 percent of consumers still abandon their mobile shopping cart. That being said, 54 percent of shoppers claim to make a mobile purchase at least once a year and 28 percent say they do so once a month, so retailers need to step up their mobile game to boost conversion rates.

L2 said mobile optimized checkouts with integrated support for expedited payment options, such as PayPayl, Visa Checkout, Masterpass and Amex Express Checkout are key when convincing consumers to purchase.

Some demographics, such as millennials, prefer shopping on apps versus mobile websites. That’s why 86 percent of indexed brands have at least iOS app and 30 percent have more than one. However, only 63 percent of the department store apps facilitate m-commerce and only 58 percent offer in-app checkout.

According to the report, best-in-class brand apps (including Nordstrom, Neiman Marcus and Macy’s) “are updated frequently, offer a seamless in-app mobile shopping experience, and elevate the in-store experience through timely offers and inventory updates, as well as innovative tools that help the shopper quickly and easily find items.”

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