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Macy’s Focused on Store Operations to Combat ‘Ferocious’ Competition

“Every single day is a fight.”

That’s how Macy’s CEO and president Jeff Gennette characterized retail in 2018 at the Merrill Lynch 2018 Consumer & Retail Technology Conference in New York on Tuesday.

Calling both off-price and Amazon along with other online pureplays, “ferocious,” the chief executive, who took over the post one year ago this month, sounded confident that Macy’s is ready for the battle. “It’s a very exciting time to be in retail,” he said, adding that he’s never seen a more competitive environment.

Like its peers, Macy’s has been working to overhaul its entire business to address today’s omnichannel demands.

“If we were to give you the recipe for success for any retailer, it’s having a very robust digital business coupled with a healthy brick-and-mortar business,” Gennette said.

That said, the retailer, which has had 34 quarters of double-digit growth in digital, is now focused on improving the in-store experience. To that end, Macy’s announced Growth 50 during its fourth quarter earnings call. The new initiative will essentially turn select Macy’s locations into a series of incubators across the country to test a variety of ideas spanning aesthetics, assortments and events.

The plan follows the company’s test, iterate and scale approach, which in locations like Woodbridge, New Jersey, has provided it with the confidence to scale ideas that have shown promise. “What we learned was hyper curation, editing duplication and ramping up those investments that were right for that local store—going after the merchandise that is right for those buildings, which is really My Macy’s on steroids,” he said, referring to the retailers’ longstanding attempt to get the right merchandise into the right doors.

Experiments like that are what also led Macy’s to launch and expand its Backstage off-price concept. Led by the knowledge that 70 percent the coveted millennial demographic are fans of off-price, the retailer was anxious to enter the space—but Gennette said the team worried about the effect it might have on its full-price business. By testing, they found that rather than hurt existing sales, having Backstage in the regular stores lifts the whole business by seven points on average.

“We have opportunity because our buildings are generally underproductive from where they were five years ago, so by condensing down the existing business into a smaller space and opening up a space for Backstage, it works because it’s a destination,” he said.

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As a result, Backstage will expand from 45 to 145 doors by the end of this year.

Macy’s recently announced employee incentive plan, which is designed to motivate every Macy’s staff member to push the company’s North Star turnaround plan forward, is another initiative that began as a test, resulted in positive sales results and has since rolled out company-wide.

Bolstered by these successes, Macy’s will continue to try new concepts and processes with an eye toward expanding those that prove most beneficial.

Up next is mobile checkout, which the retailer is experimenting with now and plans to have in 450 doors by the end of the year.

“The single biggest pain point in our stores right now is the checkout process,” Gennette admitted, saying too often customers are either left to wander around looking for sales help or worse, face a daunting line at the register. With mobile checkout, shoppers use their Macy’s app to scan their products and head straight to special express lines to have sensors removed on their way out the door. “Being able to turn that control over to a customer, to scan and check out themselves, we think is a big win.”

Macy’s is anticipating more big wins as tests in the select locations reveal even more sales and productivity opportunities.

“Expect us to exit 2018 with the right investment model based on what worked in the Growth 50, and we’re going to roll out what worked in future years,” Gennette said.