The Real Story Behind Macy’s Sales Declines and Store Closures, Part 2

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In the previous post, we uncovered some of the driving factors behind recent sales declines at Macy’s, one of America’s oldest and most iconic retailers. These struggles have resulted in two announcements of mass store closures within the past year.

InfoScout analyzed the shopping occasions of 12,801 Macy’s shoppers between June 2015 and June 2016, using our proprietary mobile apps to capture physical and digital receipt images of customer purchase data. We also supplemented this data by surveying 499 Macy’s shoppers to get firsthand accounts of their experiences and find out why Macy’s is losing share of wallet in its physical stores.

Our research uncovered a number of revealing facts and trends about Macy’s shoppers, which we discussed in Part 1:

  • 37% are shopping less frequently at Macy’s.
  • 32% haven’t shopped at Macy’s within the last six months, causing Macy’s to miss out on key seasonal purchase cycles.
  • The top frustration of less frequent Macy’s shoppers is high prices, cited by 50% of shoppers.
  • Other frustrations include store location (23%), customer service (15%), product selection (12%), and poor store organization and merchandising (10%).

 

Purchase data from actual Macy’s shoppers shows that the challenges facing Macy’s go deeper than “people would rather shop online.” Competition from e-commerce is certainly a challenge for all brick-and-mortar retail stores, but InfoScout data proves e-commerce is far from the only challenge that is causing Macy’s share of wallet to shrink.

Explaining Macy’s Low Share of Wallet and Where Their Customers Are Going

Of 21,776 panelists who purchased merchandise in the apparel, electronics, entertainment, health and beauty, sports, and toys categories, 15,494 purchased these products at Macy’s stores. That translates to a closure rate of 71%. But as we look further down the leakage tree, we see that Macy’s brick-and-mortar stores only own a 6% share of wallet.

If Macy’s owns 6% share of wallet, who’s getting the other 94%? The top two beneficiaries of Macy’s struggles are mass retail giants Walmart and Target at approximately 17% and 16%, respectively, followed by Best Buy (7%), Kohl’s (6%) and Costco (5%). Only 6% of purchase dollars are going to Macys.com.

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The Amazon effect is not as significant as one might expect, with the online retailer earning less than 4% share of wallet for Macy’s brick-and-mortar shoppers. However, when InfoScout analyzed the purchase data of Macy’s lapsed shoppers – those who hadn’t shopped at Macy’s in the last six months – we found that these shoppers increased their spend at Amazon by 10% after they stopped shopping at Macy’s.

While e-commerce is certainly a challenge, the data mentioned previously shows that more Macy’s customers are shopping at other brick-and-mortar stores than online. InfoScout confirmed this trend in a survey of Macy’s customers, who were asked where they have been shopping or will be most likely to shop for items that they would normally purchase at a Macy’s store.

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52% said they would turn to non-department stores such as Walmart, Target or Kohl’s, while 33% said they’ll go to other department stores such as Nordstrom, JC Penney or Neiman Marcus. 23% said they would go to apparel retailers such as Gap, H&M or Forever 21.

Of course, e-commerce is getting its fair share of business from Macy’s shoppers. 31% of survey respondents said they’ll shop at Amazon. 19% will shop at another department store website, 18% will shop at an apparel retailer website, and only 16% will go to Macys.com. This would indicate that the frustrations experienced in Macy’s stores are causing many consumers to abandon Macy’s completely, both in-store and online.

What Can Macy’s Do to Stop the Bleeding?

When shoppers were asked what would motivate them to shop at Macy’s more often, 55% said they could be swayed by easy-to-use coupons and promotions. Better product selection came in second at 15%. 10% would be encouraged by better everyday value on merchandise.

When those who claim to be shopping less at Macy’s were asked how they would feel if Macy’s closed their stores, 54% said they wouldn’t care. 41% would be sad and miss Macy’s. 5% said they would be happy and that it’s time for Macy’s to close. The sentiments of those who shop at Macy’s as often as they always have are more positive. 61% would be sad, 37% wouldn’t care, and only 2% would be happy about it.

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Clearly, the majority of frequent Macy’s shoppers are loyal to the brand, as are a large percentage of those who are shopping less frequently at Macy’s. Collectively, these customers represent a major turnaround opportunity for Macy’s.

For shoppers who are frustrated with pricing and location, offering targeted promotions and discounts for both in-store and online purchases could drive incremental purchases. Also, issues related to selection and merchandising must be addressed. While a large percentage of Macy’s customers are shopping online, not enough are shopping at Macys.com. By delivering a seamless, omni-channel experience, Macy’s can win more online dollars.

Simply attributing store closures and sales declines to the growth of e-commerce is an incomplete, oversimplified rationalization. While a 16% closure rate and 6% share of wallet are disappointing, they also represent tremendous upside for a legendary brand like Macy’s to increase those numbers. Macy’s and other retailers that are struggling with in-store performance need to dig deep into customer behavior and purchase data and adapt accordingly to retain customers and grow sales.
 
InfoScout uses proprietary technology and targeted surveys to provide valuable insights into shopper behavior, purchasing decisions and industry trends. Contact us to schedule a free demo and learn how InfoScout can help you build revenue and enhance your brand.

 

Graduates Win with Aunts and Uncles


 
Graduation Season is here! The time to celebrate a lifetime of accomplishments and the beginning of a promising new stage. Parents couldn’t be prouder, Grandma is definitely going to cry, and aunts and uncles apparently get generous.

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According to one of our recent surveys, more graduation gifts are purchased for nieces and nephews than anyone else. This makes sense, especially in bigger families where people likely have have more nieces and nephews than sons or daughters. So what are they gifting?

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Graduates received mostly gift cards this year, with greeting cards and actual cash also among the popular gift-giving options. Other gifts like coffee and cars—much needed elements of adulthood—get honorable mentions. Female grads were more likely to receive flowers, while male grads were more likely to receive electronics.
 

When deciding what to gift a graduate, the number one consideration was “something that would be useful” in the next stage of their life. One curious data point also related to this decision is that uncles and aunts were more likely to ask the family and friends of the grad for gift recommendations, while mom and dad were more likely to ask the grad directly.

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Gift card purchasers are twice as likely to buy a greeting card in the same shopping trip during graduation season than during the Christmas season. The difference suggests that shoppers try to get gift and greeting cards in the same trip for graduates, while spreading the purchase of those two categories across more trips during the holiday period.

 

Another tip for all retailers out there: an overwhelming 61% of shoppers return to buy their graduation greeting cards at the same retailer where they bought their Mother’s Day card. So if you’re capturing that Mother’s Day shopper, you’re more likely to capture the graduation greeting card shopper.

 

As to which retailers people prefer for purchasing their greeting cards, the usual suspects of Walmart and Target show up on top. There is also a considerable showing from the dollar channel (Dollar Tree and Dollar General), which achieved significantly high unit sales but underperformed in dollar sales, a common trait for the channel due to its usually lower price points.

 

In summary, parents need to step up their gifting game. Spoiling uncles everywhere are going for the cash game while parents skew towards the traditionally more emotional and thoughtful greeting cards.
 
As a marketer, are you interested in knowing more about seasonal gifting in your category or other aspects of shopping behavior? Are you curious about which brands of gift cards these graduates received? Get in touch with us at contactus@infoscoutinc.com and we’ll be happy to help you out!

Walmart and Kohl’s Winning Share Among Shoppers on Black Friday

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InfoScout analyzed the baskets of more than 160,000 Black Friday transactions made from midnight through 1:00pm Friday at brick-and-mortar retailers to see how shopper spending shifted compared to last year’s big event.


Walmart, Kohl’s, and Best Buy are the stores capturing a greater overall share of Black Friday dollars, along with a greater proportion of trips and shoppers. Early data shows Target experiencing the largest declines in terms of transactions and dollars.

 

About the Data
More than 300,000 Americans snap pictures of their everyday shopping receipts via InfoScout’s mobile apps: Shoparoo, Receipt Hog and Receipt Lottery. The first 161,849 receipts reported by 1pm on Black Friday were analyzed to provide a quick read on this year’s performance by retailer.

 

Stay tuned to the InfoScout Blog for further analysis of Black Friday 2015. For further information, please contact press@infoscoutinc.com.

Walmart’s Millennial Problem: 5 Reasons Dollar Stores are Beating the World’s Largest Retailer

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It’s no secret that Millennials’ widespread adoption of technology has helped transform many industries. Their use of social media has shifted how we communicate, their adoption of smartphones has changed how we shop, and their use of taxicab replacements like Uber and Lyft is altering how we get around. Even Walmart’s tried and true grocery business has not been spared. As Millennials enter their 30s, they are beginning to influence a grocery sector traditionally dominated by multi-person households. 3 factors are driving this:

  1.  The Millennials (born between the early 1980s and 2000s), at 78 MM, are the largest U.S. demographic group today
  2.  As shoppers, Millennials favor convenience and wear their ideals on their sleeves
  3.  Due to societal trends and poor job prospects, Millennials are delaying marriage and family formation

From 2007 to 2012, the percentage of young Americans who are married fell from 30% to 25%.  As Millennials wait to marry and have kids, their grocery behavior deviates from those of past generations. A single-person household has fewer needs than a full family, and thus purchases a smaller quantity of products in a given week. As a consequence, single Millennials can complete their grocery trips more quickly than someone stocking the pantry for an entire family. So why would a Millennial spend close to an hour pushing a cart around a giant Walmart store when he or she can get in and out of a smaller dollar store in half an hour or less? Using InfoScout’s database of U.S. grocery shopping behavior, we determined this is more or less exactly how consumers shop at Walmart and dollar stores. For example, at Walmart, the average basket is 13.5 items while at Dollar General, it’s only 6.3. We also studied where else Walmart shoppers bought groceries in the first half of 2013, discovering that more than 1-in-4 started spending relatively less at Walmart and more at dollar stores over time. Who are these dollar store ‘converts’?

  •  Lower income: 50% earn less than $60K per year
  •  Unemployed: almost 2x as likely to be unemployed
  •  Young: 43% are between age 21 and 34

By means of InfoScout survey data, we also identified the top reasons these customers are leaving Walmart for dollar stores:


spending#1 Consumers are having a hard time making ends meet:
31% of dollar store ‘converts’ either lost a job or had hours reduced within the last 6 months

#2 Their grocery budgets are falling: 37% of dollar store converts decreased their grocery budget over the last 6 months

#3 The Walmart brand doesn’t resonate: converts are 2.5x as likely to complain about the Walmart brand

#4 Dollar stores expanding and getting closer to Walmart’s customers: Family Dollar, Dollar General, and others opened hundreds of new stores in 2013.  24% of converts had a new dollar store open nearby within the last 6 months (often within walking distance, important to Millennials who are less likely to have a car compared to earlier generations at the same age)

#5 Shopping at Walmart isn’t convenient, especially for quick trips: 24% of dollar store converts say Walmart stores are inconvenient, too big, or confusing to navigate.  In addition, 77% dollar store shoppers name location and convenience as the primary reason why they shop at dollar stores versus just 60% for Walmart.

 

This trend is not limited to Walmart – So what can retailers and brand marketers do?

  • Offer great prices on the products that matter most to this segment
  • Invest in new smaller-footprint store formats, and make it easier to get in and out quickly
  • Reach Millennials where they spend their time (online and social media), support causes Millennials care about, offer innovative products to save them time, and reward them for their loyalty

Now what Millennial wouldn’t take interest in that?