Lessons learned from Macy's: Going local can have big payoffs
Recently, Macy's announced that its successful My Macy's merchandise localization initiative would play an important role in driving holiday sales. Already a key sales driver, the retailer expects the program to add as much as three percentage points to the chain's holiday sales.
Launched in 2009 after a successful pilot, the My Macy’s localization initiative has proven to be a powerful competitive differentiator for the retailer, particularly during critical sales periods like the holidays. In 2009, all of the company’s top 12 markets in sales growth were from the initial My Macy’s pilot districts.
At the core of the My Macy’s initiative has been a restructuring of the chain’s merchandising strategy to a local approach. The retailer created more than eight regions and 49 new regional districts, making it easier for district team members to visit their stores. Effectively, this revamp gave the retailer a closer view to what was happening at the store level, while still ensuring a unified, overarching branded message from corporate headquarters.
Macy’s set a benchmark with their localization program, but they are certainly not alone in embracing a localized merchandising approach. Best Buy and Home Depot are also rolling out efforts to custom-fit stores and merchandise to better reflect surrounding neighborhoods and profiling attributes.
If done correctly, a localized strategy not only drives sales and efficiencies by catering to unique geographical consumer tastes, it also enables retailers to stay nimble and flexible with the seasonal promotions and campaigns they execute at each store. Though Macy's final solution in 2009 included the addition of many executives to manage the new process, emerging visual merchandising software solutions are changing the playing field for 2011 and allowing a much faster implementation, lower upfront cost, and extremely short return on investment without adding headcount.
Though they may not be able to completely embrace localized merchandising with the 2010 holiday season upon us, retailers who are cautiously bracing themselves for what could be the most positive holiday sales period in three years can certainly take cues from the localization efforts of retailers like Macy's and lay the groundwork for 2011.
Centralize the merchandising process
In order to personalize the store experience for their customers, Macy’s first had to centralize numerous merchandising functions and automate customer tracking and segmentation so that a clearer view of the consumer could be gleaned. In order for a localized strategy to successfully get off the ground within your retail operations, both your store network and corporate headquarters need to be working from the same foundation. When cross-functional teams within your organization are working on various systems, data silos are created and teams are unable to make an accurate decision or merchandise recommendation.
A single platform or visual merchandising software enables retailers to also extend the reach and relationship with their product suppliers, giving them insight into the merchandising process and ensuring they are able to act more quickly and sharpen their merchandising execution. In addition to the merchandising benefits, retailers implementing a central repository of merchandising will very quickly begin see the cost savings and efficiency improvements across their organization resulting from minimized duplication and errors in the merchandising process.
Communicate, communicate, communicate
Clear and timely direction on merchandising and retail planogram plans is important to the successful execution of any campaign, and emerging visual merchandising software can help streamline this entire process. However, when launching a localized strategy, effective communication between stores and headquarters is essential. Considering the minute merchandising nuances that can take place within a particular region or market, without a two-way dialogue, corporate headquarters can very quickly lose their connection with local preferences. Conversely, your retail store employees need a clear directive on how to execute a particular campaign, or what products to feature, and where in the store.
This holiday season, focus on creating or refining a clear communications channel for your organization, be it the company intranet or a new portal. Whatever your visual merchandising or planogram software, ensure you are able to visually communicate with store employees. This means giving store teams images of how you want displays to be set up and where in the store they should be placed. Store employees can in turn provide faster feedback when a campaign has been executed so corporate has a clear understanding of compliance, the impact an accurately executed campaign has on sales and the customer feedback from that geographic market.
As with any major shift in strategy, a localized approach will take a concentrated and coordinated effort on the part of your executive team and your retail store network. But the rewards can be big, and the sales gains of a localized approach can be realized sooner than you think.
Dan Wittner is chief customer officer at RBM Technologies. (Photo by Tim Pierce.)