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Macy’s turnaround strategy already at large in Oz

macysUS department store retailer, Macy’s new ‘North Star Strategy” is remarkably similar to that of local giant Myer’s own turnaround strategy launched two years ago, according to Daniel Lees, director of research at Colliers International.

Macy’s held its 2017 investor meeting earlier this week where it outlined its new “North Star Strategy,”effectively its turnaround strategy. Speaking to Inside Retail, Lees sees this as another example that the Australian retail market is ahead of US counterparts.

The strategy will focus on using data and analytics to deliver a more relevant product offering to consumers (loyalty program); providing in house experiences that can only be found exclusively in-store; a focus on private brands (exclusivity and higher margin); creating a seamless omnichannel experience for consumers; and enhanced marketing to Macy’s most valuable consumer demographic.

“I find it interesting that many of these concepts have been in play within Australian department stores for almost two years, when Myer launched its turnaround in September 2015,” he said.

To combat loss of market share to ‘off-price’ shopping, Macy’s launched its own concept over a year ago, implementing ‘Backstage stores’ which are an in-house off-price/outlet concept, to lift productivity at stores with excess capacity.

“Essentially this was launched to combat the leakage to external off-price retailers, and per the most recent investor presentation, the concept has become more successful with every iteration,” said Lees.

“Backstage concepts have been rolled out within existing Macy’s full line stores and are typically 1,300-2,300sqm and have assisted in improving store productivity – especially in poorer performing stores. Macy’s management have explained that customers will often shop at both formats within the same trip, thereby capturing more share of wallet.”

Lees pointed to parallels between much of the North Star strategy with that of Myer’s own turnaround – with a strong emphasis on using data and analytics to deliver a more relevant product offering to consumers.

“The realisation that Macy’s needed to offer a unique in-store experience was also very similar to what Richard Umbers announced to the market in 2015,” he said.

“Macy’s and Myer have noted the importance of creating a seamless omnichannel experience for consumers, which is obviously important given the weight of disruption being driven through new online competitors.

“Finally, Macy’s has emphasised the importance of enhancing marketing efforts to their most valuable consumer base. In its 2015 investor presentation, Myer also went into great detail regarding their most valuable consumer demographic together with an engagement strategy.”

When looking at the statistics and track record of many Australian retailers, particularly department store and discount department store operators, Lees said it’s understandable that the media and shareholders have been critical of strategies and performance. “However, I think that on a broader level, much of the Australian retail industry is ahead of US counterparts.

“The Macy’s investor presentation was one example of this, however the ICSC Recon (retail conference) last month was another.”

Lees said the conference saw frequent mention by offshore shopping centre owners that they must now focus on “experiences” and provide “exclusive in-store offerings” in order to stay relevant to consumers.

“Australian landlords such as Scentre Group, AMP and Vicinity have been saying this for a while now. I think Australian landlords are truly world class. They are very talented at curating an optimal tenant mix for consumers.”

The quantum of impact by off-price’ retailers like TK Maxx as a threat to the likes of Myer and DJs is yet to be seen according to Lees.  However, in the long run Lees thinks the off-price model will definitely have an impact given the latest iteration of department store strategies are trying to ween consumers off deep discounting and high frequency clearance sales.

“I think we will continue to see the incumbent majors look to increase sales productivity by handing back space where possible. The impact on incumbent retailers will also depend on the ability of TK Maxx to implement its own strategy effectively and resonate with the Australian consumer.”

Lees said overseas retailers may in fact look to Australian retail for innovation, with the incorporation of experiences within large regional and super regional shopping centres, particularly restaurant courts that have been extremely successful in Australia.

Also speaking to Inside Retail, Michael Bate, head of retail at Colliers International said Australian shopping centre landlords have been the leaders in change and are leading the way for the rest of the world.

“As consumer’s retail habits continue to change, the sector continues to evolve,” he said, pointing to the redevelopment of Chadstone Shopping Centre.

“Australian landlords such as Scentre Group, AMP and Vicinity have been saying for a while now we need to create more experiences and incentives for consumers to visit these centres.

I think Australian landlords are truly world class – they are very talented at curating an optimal tenancy mix for consumers”

Bate said landlords are taking a holistic approach to precinct development, firmly aware that an appealing retail offering whether it be F&B or apparel based, will go a long way to attract the most optimal tenants.

Activation of unused spaces is also a growing trend by developers. “Projects like AMP Capital’s Quay Quarter will bring a range of new retailers, cafes and restaurants to the precinct. And while office and residential tenants are the most obvious beneficiaries of such projects, the wider consumer population of Sydney also reaps rewards in the form of laneway activation, new brands and more sophisticated dining experiences.”

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