Macy’s – The Distribution of Things

macys_distributionAgain, in Front of the Trend

I recently wrote about Macy’s distribution brilliance. And even though the ink is hardly dry, here I am again. Actually, I am not going to focus on lauding what most people might view as a great Macy’s marketing program with Plenti (a cross-brand and industry point-generating redemption deal), which I’ll explain in a minute. This new collaboration is really a tactic, albeit very innovative, to support what I view as Macy’s larger distribution strategy and vision.

My recent article was about Macy’s understanding of the broader and more accurate definition of omnichannel. Too many retailers interpret omnichannel to mean simply two channels: online and brick-and-mortar stores.  So let’s get it straight once and for all.  The old term multi-channel meant more than one channel of distribution.  The new concept omnichannel means “all” distribution channels. Under the multi-channel definition, company strategists would align operations, distribution, marketing and all other functions with the needs of each channel as if they were “silos.” For example, the store, catalogs, marketing strategies, etc., would all be tailored to the needs of the specific channel, assuming different customer behaviors for each.  Omnichannel, as Macy’s and other enlightened retailers are employing the model, is the seamless integration of consumers’ experiences in a matrix of all distribution channels, wherever and whenever the consumer wants it: stores, the Internet and mobile devices, TV, direct mail, catalogs, and now, even operating on other brands’ or retailers’ distribution platforms.

“Plenti” of New Distribution Platforms

Rite Aid, AT&T, ExxonMobil, Nationwide, Hulu, and Direct Energy

So, the Plenti deal basically adds many other distribution platforms to Macy’s omnichannel strategy.
It’s pretty simple.  All the aforementioned companies, including Macy’s, are interconnected with each other through Plenti’s program.  Each time a consumer spends a buck at any one of those companies, they receive a point (equivalent to a penny), which then can be applied to discounts at any one of the companies.

As so aptly described in WWD: “Consider pulling into a gas station, filling up your tank and earning a point per dollar, then applying those points to get discounts on shoes at a department store, or cough drops at a drugstore.  Or imagine getting points for discounts at Macy’s or Exxon just by paying for your auto or homeowner’s insurance.”

And while one could argue that these are not, by definition, used for distributing goods, it is, in fact, an indirect strategy of distributing the brand on non-related, but compatible industry and product categories. It all ultimately leads to expanded distribution, acquiring new customers as well as maintaining current customers who will be delighted to build up a bunch of points for new deals.

In fact, Macy’s strategy might more appropriately be called the “distribution of things.”  Borrowing from the term, the “Internet of things,” which describes the interconnectedness of everything, Macy’s is interconnecting and integrating all possible distribution platforms that engage their consumers wherever they may be.

Think about this, Macy’s.  In the future, when you perfect the use of your “big data” and are able to profile each and every loyal customer and what they personally dream for in their lives, you will be permitted into their homes, to be downloaded into their “global communications center” from which they get important and timely information from you and other permitted brands. You will give them information about new styles that you know, from your database, they will love.  A fashion show invitation or Stella cocktail party can be hyped for their attendance.  And you might even be able to deliver products to them that they can keep or be placed in a Macy’s return box to be  picked up by Instacart or some such service that will inevitably spring up over the next couple of years.

The big shift is that the home will be the final distribution platform. The “distribution of things,” indeed.

What is “Disruptive Innovation” Supposed to Mean?

hockingThe IGD’s recent London conference focused on “disruptive innovation.” The organizers brought together industry heavyweights from both retail and brands; several spoke, and all claimed the new reality of business was a universe of shoppers who expected low prices. Let’s call their view “the problem.”

These speakers were then followed by others, mainly suppliers, who presented various forms of technology ranging from Google Glass to 3D food printers, with much of the application of this so-called disruption really centred on being “new” rather than being beneficial to shoppers. Let’s call their tech toys “the solution.”

The whole thing felt to me like an endorsement of that classic phrase, “Just because you can doesn’t mean you should.” Here was a case where the problem was underestimated and the solution overestimated.

Shoppers seek low-price in the absence of additional drivers of value in what they are purchasing. The UK grocery industry isn’t suffering because of a lack of technology; it’s suffering due to a lack of disruptive innovation in the area of “stuff that matters to shoppers that’s different than from what our competitors offer.”

The tradition of much of retail, grocery in particular, is to create stores that are more like warehouses, with very little to inspire shoppers who consistently state their desire to find inspiration when they visit a grocery store. And these are people whose average repertoire includes just four recipes, yet they need to put 21 meals a week on the table. They find even less inspiration online. Grocery retail’s common solution is to streamline operations, strip out value, and claim to pass the savings onto shoppers.

But there’s a greater need that’s being overlooked.

There’s an old saying, “Low prices only rent you customers, not build loyalty.” If I were the CEO of a UK grocery retailer, I’d be asking my team to figure out what it will take beyond price (with its accompanying lousy margins) to earn the hearts and minds of their customers what some refer to as “loyalty beyond reason.”

My plea is to put away the big data, the technology, and the built-in biases that say “But that’s the way we do it” and get back to the basics by asking ourselves if what we offer matters enough to the people we count on to pay our salaries. Knowing what matters to people – truly, deeply matters – isn’t something you find on a spreadsheet and it can’t be spied through a Google Glass. It’s found by thinking like people about real human needs.

Making Athletes Better, Socially

under_armourOn the heels of a strong close to 2014 and annual sales and profits growth of 32% and 28% respectively, Under Armour hosted a meeting with the investment community, addressing its recent acquisitions that, when combined, create the world’s largest digital health and fitness community. Aptly named Connected Fitness, CEO Kevin Plank, along with the leaders of the newly assembled Under Armour digital team and CFO Brad Dickerson, spoke to rationale, strategy, and opportunities.

In true entrepreneurial fashion, Plank started Under Armour as a football player who couldn’t understand why there wasn’t a T-shirt on the market that was light and wicked sweat, which would improve his (and athletes generally) performance. The rest, as they say, is history. The guiding principle from his inspiration 19 years ago, to the more than $3 billion in annual sales just reported, is the goal to make the athlete perform better. This remains the goal with the MapMyFitness acquisition (in 2013), Endomondo (acquired January 2015), and the MyFitnessPal purchase (closing in the current quarter). In the digital world, Under Armour now has more than 120 million unique registered users in its online community. [Read more…]

Wallet Wars

iStock_000000409904Consumer behaviorists are mulling a new question: Will they swipe, tap, Tweet or text?

Whichever they choose, consumers, particularly the much sought after Millennials, are looking for new ways to pay. We’re approaching a tipping point where mobile payment systems, or mobile wallets, will move into the mainstream with cash, credit and debit cards becoming as archaic as stone tools.

An article in a recent issue of BCG Perspectives by The Boston Consulting Group put it this way: “Never in the history of the payments industry has there been a time of such disruption and opportunity across regions. Digital technologies will upset the competitive order and the role that payments play both in the operations of businesses and in the daily lives of consumers.” [Read more…]

Dumb and Dumber — A Tale of Cyber Security

hackerIf I were a Sony executive I’d be more concerned about getting punched out by Angelina Jolie for making snide email comments than offending North Korea’s fearless leader, Kim Jong-un. She looks tougher.

Of course, there’s the little matter of some 12,000 CDs filled with internal data from Sony Pictures that the so-called Guardians of Peace threatened to release — a Christmas gift from your friendly neighborhood cyber-terrorists.

But Hollywood, and its ego-fueled denizens, is not cyber-central. By now, every company, large and small, should know that neither data nor email is a whisper but rather a shout that keeps echoing. This latest breach not only reveals a massive gap in cyber security, but a lack of common sense on the part of seasoned business executives who should know better.

Therein lies the tale of data defense dysfunction. [Read more…]

Washington Crossing the Delaware on Black Friday

alpert_washingtonIt all began in Philadelphia, birthplace of innovative and uniquely American ideas and products: Philadelphia Cream Cheese (proof that God exists); Rocky I-V (more proof); and kites flying into lightning storms. Imagine, all this and more emanating from the sparkling urban jewel on the Delaware known affectionately as the City of Brotherly Love, a moniker richly deserved, given the kind and loving sports fans that inhabit this much-maligned metropolis.

Philadelphia was the site of our nation’s first capital and cradle of our revered United States Constitution.  It was here at Independence Hall where George Washington became the first General of the Continental Army, gallantly leading us into freedom from British tyranny. He was elected as our first president, and then moves the nation’s capital south to a city he named after himself. He crossed a roiling and treacherous Potomac River, standing triumphantly in the bow of that overcrowded rowboat, thus rendered in that famous painting he named after himself, Washington Crossing the Delaware on Black Friday. The painting was too big to stow in his little boat; he had a bridge built from New Jersey to New York so he could get the painting to the Met, where it still lives. Guess what he named the bridge?  Unbelievable.

As is obvious in that nautical painting, G-Dubya was taller than everybody else. We know he could not tell a lie: “I just outgrew Philadelphia, it was time to move on.” So G-Dubya moves to the new capitol and takes his football team with him, which he names after a few Native American friends (or potatoes).

But I digress. Back to Philly. Jeopardy fans there will surely know this one:

American Holidays” for, DING DING DING DING — The Daily Double!!! Contestants, you have 30 seconds for this question. What famous or infamous day in America has Philadelphia given to the world? Ben, would you like to go first? What is, Black Friday? YES!!! You win a week in Philadelphia. Betsy, as runner-up you get two weeks in Philadelphia, a wheelbarrow of South Philly cheesesteaks and all the Yuengling lager you can drink.

What’s in a Name?

In the mid-1960s, Philadelphia’s Police Department coined the name “Black Friday.” The name denoted the day after Thanksgiving, a day characterized by an overwhelming volume of traffic due to a confluence of two events: the onset of Christmas shopping madness, plus the torrential influx of West Point cadet and the Naval Academy midshipmen family and friends attending the Army-Navy game on Saturday at Franklin Field. Holy Liberty Bell, Batman! The entire police force was tasked to cover every intersection in Center City, stretching the force to the max, requiring even the Philadelphia Police Band members to pitch in. Philly’s Finest were not happy about this day and so it got its dark nickname.

Retail legend has it that most merchants make their first profit of the year on Black Friday. It was the first day of “being in the black” financially. For years, Black Friday was the spiking pinnacle of a one-day volume of sales. Black Friday pushes balance sheets into rosy American Dreamland, making CEOs, executives and stockholders feel good about themselves. But there’s also that robust lay-of-the-landscape benefit downstream. This is advanced retail capitalism at its absolute max, prompting a flash mob frenzy of shelf emptying and inventory clearing out at fast-forward pace all over this great nation. And now it’s trending abroad.

Trench Warfare

To date, there have been seven fatalities and 90 injuries at various retail stores that have attracted the Black Friday hoards of shopper mobs since 2008. Doors have been torn off their hinges as unruly crowds give way to their basest knuckle-dragging instincts. But who can blame them when flat screen TVs are going for $400? There have been shootings by male customers who have entered stores with fully loaded firearms. Black Friday lore has is that two wives get into a little tiff on the checkout line and one husband reaches for his loaded pistol, resulting in a wild chase through the mega-store, then resulting in a shooting and a death. Thankfully the shooter could buy more ammo at the store; don’t want to go home with an empty clip, now do we?  But hey, he defended the honor of his wife — and then had lots of time to think about his wife’s honor while serving a chunk of the rest of his life in prison, where it’s Black Friday every day.

Collateral damage is a decidedly negative way of expressing the downside of the phenomenon of Black Friday. Let’s just call it the creepier side of human greed and reckless disregard for one another.

Sentimentality Aside

But hey, look at the bright side.  Retailers are now spinning the Black Friday phenomenon forward or backward, depending on how you look at it. What the hell, retailers have finally gotten smart, and EUREKA, they open shop for business on the actual Thanksgiving Day. Yes!!! Huge Win!!!  Who cares about eating turkey anyway? Honestly, which is more American: a family dinnering-down with a large earth-bound bird; or flying through the malls, enjoying a day shopping together? Bonus point: at the store, the family football fans get their holiday football fix watching somebody play somebody, and then the Cowboys playing somebody else on the endless expanse of flat screens. I mean, c’mon!!!

But wait, there’s a wizard behind the curtain: Big Data! Retail data from Adobe Systems (proof of God, again) tell us that the biggest sales are no longer on Black Friday, but the Sunday before Thanksgiving. The really good news is that Black Friday is not even Black Friday anymore. Nope. It’s Black November!  Even old G-Dubya never thought of that! Just as Hurricane Sandy changed the coastline of New Jersey, the 2008 Recession changed Black Friday and spread it over the whole month of November. Let’s use the WHOLE MONTH not just that one Friday. But hold on, what about Cyber Monday? Over $2.29 billion spent on that day. That’s billion with a, ‘b,’ friend. This is what is so good about America. We really know how to make a buck!

So after the final whistle of the last football game on Thanksgiving Day, thanks to the City of Philadelphia, the Philadelphia Police Department, and the founding father himself, I will be zooming down the NJ Turnpike to Philadelphia, Black Friday – Ground Zero – Holy Grail.  I will be armed and dangerous, credit cards polished and sharpened, ready for serial swiping.

Happy Thanksgiving and be careful out there!

Lou Gerstner Was Right: Consumer Spending Matters, Not Stock Price

mc_gerstnerUS consumers are discriminating as to where they spend, and while demand has come back in what may seem unexpected categories, there is emphasis on experience and on purchases as investment.

Readers of Lou Gerstner’s book, Who Says Elephants Can’t Dance?: Inside IBM’s Historic Turnaround, or anybody who has heard the legendary former IBM Corp. CEO speak, will remember some sage advice: pay no attention to the stock price.

Let’s expand on this. Pay no attention to the stock market unless, of course, you’re investing in it. But as an economic barometer, the stock market has proven to be a fickle and even inaccurate judge of global economic health. Making cogent statements thereby is a delicate process, and I would argue that the more reliable barometer is consumer spending. The stock market is at best a confirmation of one’s previous calculations, not a factor in any of them.

What drove Gerstner to make the statement was his epic turnaround of IBM in the last century’s final years. Many friends and associates had congratulated him on the company’s resurgence based on a rebounding equity price. Gerstner warned them the number meant little, and the hardest work was yet to do. [Read more…]

Defining the Value of Omnichannel Shopping

Mobile banking wallet on screen of smartphone isolated on whiteBefore investing in an omnichannel strategy, retailers need to understand the true value of this consumer shopping behavior and the opportunity it presents. A new MasterCard study suggests the right approach is to start with the customer. How does their omnichannel spending behavior differ from spending in a single channel?

Conventional wisdom suggests that retailers should invest in bolstering the omnichannel experience they offer consumers on the basis that more channels will result in increased sales. Makes sense, but merchants can either invest in an omnichannel strategy and technology because it seems like the right thing to do, or they can make informed decisions based on data that details the value to be gained from key customer segments. Imagine the following scenario: A working mother of two needs a simple dinner solution for the evening. She logs onto Pinterest for “quick kid-friendly dinner” and decides on the “Cowboy Casserole.” The list of ingredients she needs is automatically saved onto her mobile phone, and dropped into her local grocery store shopping app. She opens this app, and decides to pick up the order on her way home. She stops at the store, where her order is waiting in a cart. She notices a sale on blueberries and adds two pints to her cart. She picks up a single-serve sparkling water for her car ride home and a few magazines to wind down later. The kids love dinner and the mom has illustrated the type of behavior that merchants of all classes are moving to better serve. She is an omnichannel shopper. As such, she is highly sought after but not very well understood. [Read more…]

Wellness on the Verge of a Revolution

shutterstock_185901890The past 50 years have seen a transition in healthcare from the Marcus Welby model of a kindly physician taking charge, even ownership, of a patient’s well-being to a phenomenon called participatory medicine, where physicians play the role of senior, expert collaborators with an individual in their plan for health.

In the past, the medico/hospito/pharmaco players were gatekeepers who doled out medical information and care with schedules at places that served their needs. Today’s patients demand greater and more convenient access to health information and medical care. They want care to be provided with the convenience of any other retail service. Simply said, they want it now, wherever they want it… now.

Healthcare On Demand

An early manifestation of “retail” convenience in healthcare was the standalone, limited service clinic. This movement began in the workplace with employers contracting with companies such as CHS Health Services to operate health clinics. These services have offered free services to employees as a benefit, and for the employer as a means to reduce absenteeism and healthcare costs. CHS, newly merged with Walgreens-owned Take Care, operates more than 500 workplace clinics for major US companies. [Read more…]

Target’s Big Leap of Faith

targetNot long ago, Brian Cornell was appointed Target’s CEO, becoming the retailer’s first CEO hired from the outside instead of being appointed from within the company’s hierarchy.

At any company, when a long-standing practice concerning the appointment of the top-level executive is changed, it usually means there is a lot of repair work to be done at the company. Target is no exception to that.

Let’s take a quick look at four key issues at Target and then see how — or if — Cornell’s experience addresses them. [Read more…]

International Intrigue: How Retailers Can Gain Share of Cross-Border Spending

crossborderInternational travel has been remarkably resilient in the post-financial crisis period. In fact, MasterCard research shows that since 2009, international visitor arrivals and spending have grown faster than real global GDP. Despite its size and strong growth, cross-border spending is a challenging area for retailers. When international travelers arrive, many merchants have difficulty recognizing them, anticipating their needs and catering to them. Even worse, most merchants neither recognize the size of the cross-border opportunity nor understand their current share. This is important, since even a 1% share of a leading market such as New York or London is near $200m in annual revenue. As it does with so many retail issues, data can play an important role in gaining share of cross-border spending. Insights into spending and behavioral trends can help retailers understand their current share of wallet and provide the intelligence needed to attract more cross-border dollars.

The International Traveler of Mystery

For those who are successful at attracting the international traveler, the ‘prize’ can be substantial: MasterCard research forecasts that cross-border visitors to the 10 leading destination cities will spend $136 billion during 2014. Narrowing that down to the biggest cities for cross-border spending and the opportunity becomes even clearer. In London, the leading global destination this year, this translates to an average of more than $1,000 per visitor. Average spending is even more impressive for other major travel destinations, such as New York ($1,600) and Taipei ($1,700).

Retailers seeking to gain cross-border sales should consider four approaches to anticipate the arrival and needs of the cross-border customer, to capitalize on the opportunity:

1. Benchmark the Current Competitive Set

Retailers and other types of merchants typically lack data on their share of cross-border spending, and have even less visibility into their share of spending by visitors from specific countries. A first step should be to measure current performance and compare it to that of competitors. In doing that, merchants can gain valuable insights by analyzing key indicators based on recent transactions and determining how they stack up against their competitive set.

2. Leverage Existing Customer Base

After benchmarking competitive performance, retailers can capture a greater share of cross-border spending by analyzing existing customers. As an example, many types of merchants – including airlines, hotel chains and luxury fashion brands – have established relationships with travelers through loyalty programs. Analyzing the spending patterns of frequent traveling members of the program can help identify the merchant types with which members engage most frequently. This may uncover partnership and ancillary revenue opportunities for the brand.
Analyzing the membership of a hotel chain affinity program, for example, may show that affluent customers from certain countries engage frequently with particular luxury industries. Such insights may yield partnership potential as a means of attracting customers from those markets and gaining share of spend while they visit.

3. Understand Spending Habits of Cross-Border Customers

Another strategy to gain share of wallet with international travelers is to analyze past spending activity by international traveler customer segments for predictive insights. As an example, a retailer at a shopping mall in London could see that high-income customers from New York City are likely to have shopped for apparel before they come to the mall. The retailer may also notice that the international traveler segment frequents bookstores at some point after leaving the mall. These insights may help the retailer evaluate partnerships or category expansions.

4. Choose Influential Partners

Cross-border travelers interact with many different travel market participants, including airlines, airport authorities, tourist boards, car rental companies, hotel chains, online travel-related services and banks. These are potential partners to other merchants looking to grow their business with international travelers.

A tourist board, for instance, may wish to attract visitors from certain markets. From some markets, a high proportion of travelers will be affluent, while those from others will be predominantly business travelers. These different cohorts may favor certain types of retailers, restaurants and hotels during their stay. A tourist board will have an interest in connecting the two, both to improve the customer experience of the traveler and to drive business within its region. Insights from spending behavior patterns of travelers from these markets will identify areas of alignment and potential partnership between the tourist board and merchants in its region.

Cross-border spending is growing rapidly and should be of particular interest to retailers in geographies with high penetration of international visitors. With cross-border visitors to the 10 leading destination cities alone forecasted to spend $136 billion during 2014, the opportunity for merchants cannot be ignored and a critical first step is tapping into and understanding the right data and insights.

A version of the article appears in the Fall 2014 issue of the MasterCard Advisors “Compendium.”

Bursting the Bubble on August Retail Sales

BTN-9-16-14Last Friday the Department of Commerce released its August retail sales figures. Total sales rose 5% compared to August of 2013.

The business and economic media heralded the news and what it might mean for retail sales performance over the next several months. The New York Times decided that the 70% of GDP growth dependent on consumer spending would be buoyed by this clear message that consumers are fed up with being cautious and poised to open their collective wallet in a big way.

A look behind the numbers tells a slightly different story, however.

Auto sales were responsible for most of the gain. Sales at automobile dealers and parts stores grew by almost 9% to $90 billion, representing over 20% of total retail sales. Retailers of health and personal care products enjoyed an 8% increase, but represent less than 6% of all retail sales. Sales at non-store, or pure-play e-commerce, retailers grew by 7%.

Department stores, apparel specialty stores, off-pricers and other purveyors of non-auto and discretionary goods, however, posted sales growth that underperformed the average. Apparel specialty stores got only a 3.2% pop from back-to-school. Food and beverage store sales rose by 3.6% compared to last year, boosted by rising prices in some key product categories. General merchandise store sales were up by less than 2%, depressed by a 1% drop in department, chain and specialty stores. [Read more…]