Macy’s Looks to Digital to Mitigate Impact of Store Closures on Loyalty

As Macy’s closes locations by the hundreds, the retailer is turning to digital to keep customers engaged even as they lose their local, physical stores.

The company shared in its fourth-quarter and full-year fiscal 2023 earnings results Tuesday (Feb. 27) that it intends to close roughly 150 stores by 2027, focusing on its remaining 350 locations. On a call with analysts, CEO Tony Spring shared that the retailer intends to use digital communication to keep customers coming back when they no longer have their typical brick-and-mortar touchpoints.

“[As far as] digital demand recapture, we have stores in these markets beyond the stores we’re closing — not every market, but most markets,” Spring said. “So, we’ll be looking at neighboring stores to capture that demand, as well as digital outreach to make sure that we lose as little as possible.”

Many consumers are digitally engaged. PYMNTS Intelligence’s study “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar Shopper and What It Means for Merchants,” commissioned by Visa Acceptance Solutions, found that 29% of consumers across the seven countries surveyed are remote shoppers, using online channels exclusively.

Yet, a greater share of consumers — 39% — prefers to combine the digital and physical for a seamless, omnichannel shopping journey. The study found that 14% of consumer prefer to shop online for in-store pickup, and 25% use digital technologies to improve their in-store shopping experience.

The Checkout Boost

One of the ways that the retailer is looking to drive digital use is by improving the checkout experience — a strategy that, data shows, can go a long way toward boosting customer adoption, satisfaction and loyalty.

“Our digital team is relentlessly seeking to better understand our customers’ pain points across mobile, app and desktop platforms,” Spring said. “We have reevaluated our foundation to improve search and navigation tools. Customers will be offered personalized communications and recommendations that have a definitive Macy’s point of view, culminating in an efficient and speedy checkout. Rewriting this digital journey should generate greater loyalty and increased conversion.”

Seamless checkout experiences can go a long way toward driving eCommerce engagement. The PYMNTS Intelligence study “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces,” which drew from a survey of more than 3,500 U.S. consumers, revealed that 50% consider how easy a merchant’s checkout process is when deciding where to shop. Plus, 40% said the same of merchants having an easy-to-navigate online store.

Plus, checkout can have a strong impact on loyalty. The 2022 PYMNTS Intelligence report “Building a Better Online Checkout Experience: The Key Features That Matter to Customers” found that 91% of consumers said a satisfying checkout experience influences the likelihood that they will return to a given merchant, or not.

Putting on the Ritz

As Macy’s closes its own-brand stores, the retailer intends to open more locations of its luxury subsidiaries, Bloomingdale’s and Bluemercury. Spring noted that the company expects to open 15 more locations under the former banner and at least 30 more under the latter.

Included in the company’s expansions of these brands is a push to further grow its digital reach, harnessing the hold that the former already has in eCommerce and looking to grow that of the latter.

Spring called out Bloomingdale’s “strong digital presence,” citing its “compelling content updated regularly” on its “highly curated marketplace.” Plus, looking forward, he noted that digital innovation poses a “meaningful opportunity for Bluemercury.”

The Private-Label Opportunity

Additionally, as the retailer looks to set its stores up for long-term success, Macy’s is reinvesting in private labels, adding new brands amid the discontinuation of underperforming labels. Macy’s Chief Financial Officer and Chief Operating Officer Adrian Mitchell noted that the company’s I.N.C. brand outperformed apparel overall and that its On 34th brand, launched over the summer, grew 145% quarter over quarter.

Plus, Spring noted that the company’s private brands yield higher profit margins and account for approximately 15% of Macy’s sales, adding that the process of shutting down certain brands is expected to be finished by the end of the year, with goals to drive private-label sales going forward.

“[We’re] making sure that all the work that we’ve done in analytics on our assortments with SKU Rationalization and the pursuit of brands that are missing from our portfolio begin to take hold,” Spring said.

Earlier this month, the brand announced the launch of a sleep- and loungewear brand, State of Day.

Consumers, for their part, have been trading down from their favorite brands to more budget-friendly alternatives. The PYMNTS Intelligence report “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which was based on a survey of more than 2,000 U.S. consumers, revealed that 35% have sacrificed product quality by switching to cheaper, lower-quality goods.

Overall, by using digital channels to maintain customer engagement and enhance the shopping experience, Macy’s aims to mitigate the impact of store closures and foster long-term growth. Through initiatives such as optimizing checkout experiences, expanding luxury subsidiaries like Bloomingdale’s and Bluemercury, and reinvesting in private-label brands, Macy’s aims to better position itself to cater to the evolving needs of today’s consumers.

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