Reflecting on Virtual Success

Reflecting on Virtual Success
Tags: Customer Experience, Department Stores, Digital Merchandising, Loyalty Programs, Marketing, Merchandising, Retail - Apparel, Shopper Marketing, Technology
December 8, 2010

Macy’s has installed an interesting feature at its flagship store in Manhattan – a 72-inch digital “mirror” that enables customers to virtually try on all the tops, bottoms and dresses they like.

What a fitting perk to reflect Macy’s own image these days. The Cincinnati-based parent of Macy’s and Bloomingdale’s recently posted a better-than-expected 7.1 percent increase in sales for the first three quarters of the fiscal year – or $19 billion. Confident, it rose its fourth-quarter earnings projections $1.44 to $1.49 per share, from $1.42 to $1.47 per share. Analysts are expecting it to deliver on the high end.

Selection certainly had much to do with it, aided by the My Macy’s regional merchandising program rolled out nationally in 2009. And clever ideas such as the magic mirror certianly help distinguish Macy’s, while also promoting loyalty.

But inventory maintenance and cost controls also are guiding Macy’s profitability, which rose to $10 million in the third quarter from a loss of $35 million one year ago. The retailer’s third-quarter sales, general and administrative expenses (the biggie of line-item costs) declined as a percentage of sales – to 36.9 percent from 38.5 percent – because of the jump in sales. Meanwhile, total cash rose, to $715 million from $581 million.

The improved performance is a welcome sign following the wost recession in generations, and one that derailed many companies. Five years ago, Macy’s CEO Terry Lundgren challenged the notion that department stores were becoming dinosaurs. The jury is still out, but his company’s recent performance is giving the American consumers, and investors, something to look at.