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Macy’s New Discounting Strategy Means Fewer Promotions

There’s a lot going on at Macy’s Inc. right now: the department store has a new discounting strategy in place, it’s testing self checkout in stores, and it’s in the initial stages of putting a new inventory system into place.

In a company presentation Thursday at the Goldman Sachs Global Retailing Conference in New York, Macy’s Inc. chairman and chief executive officer Jeff Gennette, chief financial officer Paula Price, and president Hal Lawton outlined what’s on the agenda.

First, there will be a pull back on discounts, a move that’s part of a push to improve productivity and gross margins. Macy’s also plans to cut costs by reducing selling, general and administrative expenses. In total, the new productivity plan is expected to save between $400 million to $500 million annually over the next two to four years.

Price said some of the savings will come from focused promotions for customers, using analytics to be more precise as to who to target with certain promotions. Data science tools will also help the company improve “efficiency, speed and scale” so it can better serve its customers, she said.

Macy’s is also testing self-checkout kiosks to gauge customer reaction, and provide sales associates with handheld devices to better assist customers.

Lawton spoke about the new inventory plan, called “hold and flow,” that involves holding back on some inventory so it can be shipped to stores that have a higher demand for the items. That would be a change from the current plan, which he said is to ship whatever comes in to all its stores at the same time. But by waiting to see which doors have higher demand and limiting an item from locations that don’t, the expectation is that the retailer will see improved sell-throughs, which in turn helps with margins.

While the CEO noted that the macro environment has uncertainties, as well as doubt on the department store sector, Gennette said he is confident that “Macy’s has the strategy, resources and grit to win in today’s environment.”