The Challenges of Modern Retail: Nordstrom and Macy’s Embrace Omnichannel Strategies

QUESTION

Read the article about Macy’s and Nordstrom’s. Why do you think companies like Macy’s have to move to an Omnichannel strategy for selling their products?

How Nordstrom And Macy’s Are Tackling Today’s Retail Challenges

A quarter of the year 2018 has already past. It is evident that major retailers are facing great challenges to win in the marketplace. Challenges include: (1) winning on the internet, (2) being quick and responsive in distribution of merchandise, and (3) especially gaining customer traffic in physical stores. Success of efforts in any of these areas will play out over time; progress for any major retailer can only be measured as the year passes and we track their ability to gain share of market and sustain profitable growth.

What’s involved here? There’s a need to think about retail business in new, broader terms and then make investments from the perspective of how they can improve customer satisfaction.

Omnichannel

While I dislike the word – multichannel would be more appropriate – omnichannel is the key to long-term success for many companies. In a brilliant report on enterprise resource planning shared by CGS (Computer Generated Solutions, Inc.), Nordstrom is lauded for creating constant excellent customer experience across all sales channels. At Nordstrom, it’s always been their culture to think every customer is “family.” They have applied that mindset to come up with new selling models that respond to what today’s customer wants and then they make investments to back up the strategy. Omnichannel success is enabled by technology that invigorates sales, accommodates a fast and flexible supply chain, and keeps the focus on customer service.

Nordstrom has made it possible to buy items from Instagram and find items based on Pinterest favorites. According to CGS, items for sale from the retailer’s feed are displayed as an elegant grid of photos. Shoppers can scroll these photos at leisure and add items to their wish list or shopping cart. By having already invested “millions of dollars” into technology tools that help manage inventory, Nordstrom is prepared to support the use of these digital marketing tools and is able to deliver products quickly to the customer. Even better, it also reduces costs. More initiatives like that will keep a retailer ahead of competition and truly make omnichannel shopping a seamless experience.

Distribution of merchandise

A good retailer has always made it a point to present fresh, new merchandise that would entice customers to shop. That is still critically important, but there’s an equally important factor that goes along with having the right merchandise these days. As I wrote in a recent report, customers demand speed. Delivery in even a few days is no longer acceptable; shoppers want their ordered merchandise now. Amazon’s Prime, Walmart’s 2-day free delivery, and Barnes & Noble same day delivery are all examples of how delivery is changing.

While managing and reducing cost is a priority for every retailer, the customer must be serviced quickly and with charm. Traditional retailers must adopt their own responses to all of this, and I look forward to seeing what these brands will do to connect customers and their merchandise in new, time saving ways.

Gaining Customer Traffic in Physical Stores

Retailer profitability demands sustained store traffic. Macy’s loyalty program promotes shopping in stores. Rewarding customers with extra bonuses for shopping for more of their needs and wants is the first step that will pay-off in more traffic in stores. Adding a concierge service to some key locations is another option that would add to the ease of shopping. Concierge service is already in all Nordstrom stores, where “Everyone is Family.” In addition, to assure good customer service, merchandise has to be in stock through an integrated supply system that ensures efficient and cost-effective operation.

I believe that adding food departments in some stores will add repeat traffic and customer loyalty. I also think that Kohl’s accepting Amazon returns and testing some Amazon electronic departments is another step in the right direction. Apple computer and accessories departments now being tested by Macy’s is equally bold. In a changing world, stores must change.

While I use mostly Nordstrom and Macy’s examples here, the strategies of 2018 require innovative action by all retailers if they want to improve their performance at year-end. Among the priorities is the need to reduce cost while growing the business. In Macy’s, for instance, furniture delivery has not changed much in decades even as customer needs have changed. Similarly, adjacencies in some departments no longer reflect today’s shopping pattern. The new management style of Jeff Gennette demands a culture shift by Macy’s associates, a similar leadership commitment is needed across the industry. And, no doubt, the shift is dramatic. Let’s see how it will unfold.

ANSWER

The Challenges of Modern Retail: Nordstrom and Macy’s Embrace Omnichannel Strategies

As we progress through 2018, it is evident that the retail landscape is undergoing a seismic shift. Major retailers are facing an array of challenges that demand innovative and adaptive strategies to not only survive but thrive in this evolving market. These challenges encompass a triumvirate of imperatives: conquering the digital realm, streamlining distribution efficiency, and revitalizing foot traffic in physical stores. The success of these endeavors is not instantaneous; it will be gauged over time as retailers strive to capture market share and sustainable growth.

To meet these challenges head-on, retailers are compelled to reimagine their business paradigms and channel investments into enhancing customer satisfaction. A central tenet of this metamorphosis is the concept of omnichannel retailing, a term that embodies the seamless integration of multiple sales channels to create a holistic shopping experience. While some might argue that “multichannel” better encapsulates this concept, the prevailing notion is that omnichannel strategies hold the key to long-term success for retailers. A notable case in point is Nordstrom, a retailer that has redefined the boundaries of customer experience through its innovative approach.

Nordstrom’s distinct corporate culture, one that treats every customer as “family,” has been the catalyst for its omnichannel triumph. The retailer has harnessed this ethos to engineer new selling models that align with contemporary consumer preferences. By melding this customer-centric mindset with cutting-edge technology, Nordstrom has crafted an environment where exceptional service is perpetually upheld. The fusion of technology and customer service invigorates sales, facilitates a nimble and efficient supply chain, and sustains an unwavering emphasis on customer satisfaction.

Nordstrom’s forward-looking forays into digital marketing exemplify this transformative approach. The integration of Instagram and Pinterest into the shopping experience showcases the retailer’s adaptability and responsiveness to evolving trends. Through an elegant grid of photos, shoppers can seamlessly navigate and add items to their wish lists or shopping carts. Nordstrom’s substantial investment in technology tools, bolstering inventory management, has laid the foundation for these innovations. This strategic alignment not only expedites product delivery but also yields cost efficiencies, cementing Nordstrom’s position as a trailblazer in the omnichannel arena.

Distribution prowess stands as another linchpin in contemporary retail success. While curating enticing merchandise remains paramount, rapid delivery has emerged as a crucial customer expectation. The era of waiting days for a purchase to arrive has been eclipsed by a demand for instantaneous gratification, as witnessed by Amazon’s Prime, Walmart’s two-day delivery, and Barnes & Noble’s same-day service. The challenge for traditional retailers is to harmonize cost reduction with prompt, delightful service. To this end, industry incumbents must reimagine delivery mechanisms and in-store experiences to forge deeper connections between customers and products.

Macy’s, a venerable player in the retail realm, offers a case in point. Their loyalty program, incentivizing in-store shopping through bonuses, is a testament to their commitment to bolstering physical store traffic. Augmenting this approach, the introduction of concierge services enhances the shopping experience and mirrors Nordstrom’s “family” philosophy. Moreover, the integration of an efficient and cost-effective supply system ensures that merchandise remains readily available, a crucial element in nurturing customer loyalty.

As the retail landscape continues to evolve, adaptation is the watchword. Retailers cannot afford to remain stagnant. Forward-looking measures, such as Macy’s venture into food departments to engender repeat traffic and customer loyalty, or Kohl’s collaboration with Amazon to streamline returns, underscore the need for innovation. Even traditional bastions like Macy’s are not averse to bold experimentation; their testing of Apple computer and accessories departments attests to this dynamic shift.

While the focus here has primarily been on Nordstrom and Macy’s, it is imperative to recognize that the strategies of 2018 demand a panoramic industry-wide transformation. The confluence of cost reduction and business growth is the lodestar guiding retailers towards transformative change. The winds of change, embodied by Macy’s under Jeff Gennette’s stewardship, necessitate a cultural sea change among associates. This clarion call for transformation echoes across the industry, signifying a dramatic shift that will inevitably unfold.

In this era of retail reinvention, the roadmap to success weaves through the intricate tapestry of omnichannel strategies. Nordstrom’s pioneering spirit and Macy’s audacious experimentation demonstrate that only through a comprehensive and innovative approach can retailers hope to navigate the complexities of today’s retail landscape. As the remainder of 2018 unfurls, the true litmus test of these strategies will be their enduring impact on market share, profitability, and, most importantly, customer satisfaction.