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US: Will loyalty save Macy's?

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By: RickFerguson |

Posted on June 15, 2017

New Macys loyalty program on the horizon.

US department store retailer Macy's has yet to join Sears at the precipice of retail oblivion, but it hasn't been for lack of trying. Last week the retailer met with investors to lay out its growth strategy, and ended up triggering a mini-panic in the retail sector by revealing another decline in gross margins. The announcement sent its stock into an 8.2 percent tailspin that took the stocks of competitors Kohl's, Nordstrom, Target, and Walmart along with it. Within all of that bad news came another announcement that may mitigate the damage - the retailer's recovery strategy is to double down on its most loyal customers.

By Rick Ferguson


The Wall Street Journal has the story, which tries earnestly to locate a glimmer of silver in the relentless approach of storm clouds besetting Macy's. The latest round of bad news followed the previous round of bad news in April, when the retailer revealed that same-store sales declined by 5.2 percent - the ninth straight quarter of falling sales. Macy's competitors have faced similar declines, but Macy's itself seems to be battling an existential threat not only to its brand, but to its very category. In the age of Amazon, as well as upstarts such as H&M and Forever 21 siphoning off Millennial spend, what reason does a generic department store selling everything from bedding to cookware to high fashion have to exist?

To answer that question, Macy's plans to turn to the 9 percent of its customers responsible for 46 percent of its annual sales. To cater to these best customers, Macy's plans to roll out a new loyalty program in the fourth quarter of this year, which the Journal speculates "could help revive the chain." Money quote:

"Macy's has to do more with its loyalty program than get customers to spend more. It needs to keep its top customers from leaving, which could be devastating. Data the company collects through its loyalty program on the locations and spending patterns of these crucial customers should inform its decisions about inventory purchases and even where to close stores.

"For Macy's, a new loyalty program should reflect its aims outlined at its investor day last week to offer more focused and more fashionable selection of products, including a greater number of exclusive designs. Higher tiers could come with more perks—free tailoring, shipping, gift wrapping, concierge service and invitations to events, to name a few - that lead shoppers to spend more in order to achieve them."

Just savor, for a moment, the sweet taste of the Wall Street Journal touting the benefits of a retail loyalty program. As we've documented in these pages, analysts have come to view loyalty marketing as such a sound retail strategy that the Street generally rewards with a share bump companies who announce that they're investing in loyalty.

Of course, the strategy has to be the right one. As the Journal points out, Macy's was also a founding sponsor of the Plenti coalition program - and while the retailer remains in Plenti, whatever engagement the company is seeing from the coalition hasn't been enough to warrant mention on an earnings call. The above quote, from Journal contributor Miriam Gottfried, is relatively on-point in terms of what a traditional retailer loyalty program should look like.

That, however, may be the problem. While the company has yet to reveal any details of its plan, we do know this: If Macy's new investment in loyalty ends up looking more or less like a dozen other retail loyalty programs, then the danger is that its best customers will merely shrug. Macy's needs to go beyond launching a me-too program; it must seize the opportunity to radically reinvent what it means to demonstrate loyalty to that nine percent.

Is the answer a paid membership program that transforms Macy's into the department store equivalent of Costco? Is it a turbo-charged store card program that lavishes its top tier with soft benefits? Is it an instant-gratification program that appeals to Millennials' short attention spans? It could be any of these things, or all of them. But the time is ripe for Macy's to go big or go home. If the flip side of a problem is an opportunity, then Macy's has a bigger opportunity before it than it has arguably had in its entire 159-year history. Here's hoping they hit a home run.

Rick Ferguson is CMO and Editor in Chief of the Wise Marketer Group.