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

post-2-macys-department-store-sign

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.

Bar Chart, Survey Response, Full Width 01@2x

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.

Column Chart, Metrics Comparison, Full Width 01 Copy@2x

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.

Column Chart, Metrics Comparison, Full Width 02 Copy@2x

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.

Screen Shot 2016-06-08 at 10.32.22 AM

 

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?

Screen Shot 2016-06-08 at 10.30.06 AM

 

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.

Screen Shot 2016-06-08 at 10.36.38 AM

 

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!

Samsung, PS4 and iPad Win with Consumers at Sam’s Club pre-Black Friday Sale

On Saturday, November 14th, Sam’s Club held its first sale of the holiday shopping season. An early ‘leak‘ of the day’s deals had delighted shoppers taking to online forums to debate which ones were the best. With 4,272 Sam’s Club shopping receipts from Saturday’s sale submitted to InfoScout through our nationally representative panel of over 300,000 Americans, we decided to tally the votes based on which deals shoppers actually bought.

 

 

The most outstanding performance goes to Samsung which sold 1.5-times as many TV’s as its nearest competitor: Vizio. Samsung led the charge with a ‘sound bar bundle’ that seemed to resonate a lot with consumers. We’ve previously seen the effectiveness of this ‘bundling’ technique being used for game console sales.

 

Speaking of bundles and games, the PlayStation 4 bundle with the ‘Uncharted: The Nathan Series Collection’ game sold more than three times as many consoles as the Xbox One bundle which included an extra controller.

 

Apple’s iPad Air 2 edged HP Notebooks by a 3-to-2 margin within the converging category of laptops and tablets. The iPad Mini, by contrast, barely even registered in comparison.

 

The real winner here was Sam’s Club which saw a significant increase in shopping trips and gained a 4% in its share of wallet among known Sam’s Club shoppers when compared to the same Saturday one-year ago. To find out if Sam’s Club just shifted sales a bit earlier in the season versus actually increasing their overall share of the Christmas shopping season, stay tuned for our real-time coverage of Black Friday and Cyber Monday.

Press contact for additional insights or data to support custom stories: CJ Acosta cjacosta@infoscoutinc.com

Client contact for real-time insights throughout the holiday shopping season: Ben Ahn ben@infoscoutinc.com

Retailers Face Heavy Deflationary Headwinds this Holiday Season

Powered by over 170,000 consumer panelists, InfoScout’s real-time read on Thanksgiving Day and Black Friday sales indicates that early reports of a strong holiday shopping season for America’s major retailers may be inflated.

With consumer electronics dominating the list of best sellers at Walmart, Target, Best Buy and even Kohl’s, these retailers now find themselves exposed to the deflationary pressures of the gadget industry.   Last year, consumers were exposed to exciting new products, and shoppers swarmed in to seize the new must-haves like the iPad Air, Beats Headphones, PlayStation 4, and Xbox One.  As an industry that relies on innovation, the relative lack thereof in 2014  has left American shoppers unwilling to spend more for only minimally improved versions of their favorite products.  With their top-selling items now on-shelf at reduced prices, retailers will need to sell many more units than last year to keep pace with sales from the 2013 holiday season.

The list of best selling products in each of Walmart’s top holiday categories is remarkably unchanged, with slightly better offerings at predominantly lower prices.

friday_mostpop_walmart

Target carries a similar assortment of products to Walmart and therefore faces similar deflationary headwinds this holiday season.   Sales of iPads had accounted for such a large percentage of Target’s holiday sales in 2013, that the retailer will have to steer shoppers towards other products in 2014 in order to overcome the large year-over-year price reductions.

friday_mostpop_target

Even the highly innovative Amazon has struggled to improve upon its Kindle Fire offering from last year.   In fact, consumers are trading down this year from 7-inch to a 6-inch display at a much lower price point.

friday_mostpop_amazon

It should be no surprise then that average basket values appear to be down across almost every major retailer compared to the year prior.  Early data coming in from InfoScout’s panelists’ shopping in stores on Black Thursday & Black Friday indicate that only Macy’s has managed even the slightest gain in their average transaction.  While this data is just a preliminary read, it is derived from more than 42,000 shopping trips reported thus far at the retailers below.

changevs

To stay on top of America’s shopper journey throughout this retail holiday season, be sure to subscribe (above) for real-time updates.

(Author’s note:  Special thanks to Ben Ahn & Bret Weinberg for their real-time reporting.)

 

The Family Dollar Saga Part Two: Choosing The Better Suitor

InfoScout-Dollar-Stores

In Part One we showed why we believe antitrust concerns are a non-issue in the battle to acquire Family Dollar. In Part Two, we assume that both Dollar General and Dollar Tree could overcome any potential attempts by the FTC to block their acquisition of Family Dollar, and focus entirely on the question of which bid Family Dollar’s Board should support. Certainly Dollar General’s higher, all cash bid seems more attractive in terms of immediate return for Family Dollar shareholders. But which suitor would make integration easier?  Which suitor is more likely to ensure operational and financial success once the companies are combined? Again, we look to our data for answers.

Product Assortment and Pricing

Dollar Store Product Category Ranks

When we look at product assortment, Dollar General and Family Dollar have the most overlap in terms of items they sell, with a significant emphasis on grocery items such as chips, soft drinks, milk, pet food, paper products, and candy at both retailers. As we saw previously, their pricing models are also closely aligned. Dollar Tree on the other hand, depends more on party supplies and seasonal items, while sticking to the $1 price point. There is assortment overlap between Dollar Tree and Family Dollar in categories such as candy, soft drinks, paper products, and household cleaning products.

Dollar General’s wide assortment overlap with Family Dollar would give it several advantages over Dollar Tree. For one, it would potentially lead to better purchasing power with its existing vendors given the higher volumes it would be ordering. This could allow it to save costs and/or lower prices for consumers (again the FTC is going to have a tough time arguing that prices will rise for dollar store consumers!). Further, the combined Dollar General & Family Dollar supply chain would be less complicated than with Dollar Tree due to increased volumes with fewer vendors, resulting in more full truckload logistics for lower costs as well as having less dependence on hard to plan seasonal and closeout merchandise.

Lastly, if Dollar Tree wins and decides to migrate Family Dollar stores to its pricing and assortment model, that could potentially drive away existing customers or introduce operational risk at the very least. Perhaps instead, Dollar Tree sees a Family Dollar acquisition as a path to reducing its own dependence on managing constantly changing seasonal and closeout merchandise – a strategy that must be difficult to scale much further. Either way Dollar Tree seems to be at a disadvantage from a merchandising integration standpoint given its very different assortment and pricing model.

Overlapping Footprints

Geographic Overlap

As a recent Bloomberg Businessweek article points out, Dollar General and Family Dollar also share a high degree of geographic overlap. We ran our own analysis based on store zip codes and found that 65% of Family Dollar stores share their zip code with at least one Dollar General store. On the flip side, only 35% of Family Dollar stores share their zip code with a Dollar Tree store. It is to Dollar Tree’s advantage to have lower geographic overlap, because it means they will be getting access to more new territories. Of course it’s what also allows them to say that they have fewer chances to remove competition from markets they operate in after the acquisition. That all being said, even with higher existing overlap, a Dollar General-Family Dollar combo would reach 2,400 more distinct zip codes in total than a Dollar Tree-Family Dollar combo because of sheer size.

Of course what really matters is not just proximity, but the extent to which consumers already cross-shop the potentially merged retailers. As we saw in Part One, many dollar store chain shoppers tend to stick to one chain in any given month – despite shopping for groceries several times each month.  According to our data, while Dollar General and Family Dollar have significant geographic overlap, only 21% of Dollar General shoppers also shop at a Family Dollar store in a given month.

Financial Considerations

dollar_store_count

The financial ramifications of either deal will be interesting. The goal of nearly every acquisition is to obtain synergies, both on the revenue side and the cost side. Dollar General has promised nearly double the cost synergies as Dollar Tree, with a target of $600 million by year three. Revenue synergies will be more difficult since price hikes are a non-starter for dollar stores, but perhaps synergistic promotional opportunities exist. For example the merged entity should garner more trade funds from vendors, allowing greater economies of scale to be achieved through each promotional dollar spent. By virtue of its assortment variety and different pricing model, Dollar Tree might have an edge with cross promotions across, except that it has less geographic overlap and its shoppers are less likely to also shop at Family Dollar. The Dollar General deal would lead to a combined company with a higher initial debt level of about 4.3X net debt to EBITDA (Earnings Before Interest Taxes and Depreciation & Amortization) versus roughly 3.75X with Dollar Tree.

The good news is that either Dollar Tree or Dollar General will likely bring operational efficiencies and margin enhancement to Family Dollar because both chains have higher annual revenue per store and higher operating margins than Family Dollar. That would help either combined company pay down debt faster with increased operating income. Dollar General’s commitment to sell a significant number of overlapping Family Dollar stores while shuttering significantly under-performing stores would seem to increase the likelihood of its ability to improve Family Dollar’s operating margins. In addition, our data indicates that among dollar store buyers, the dollar store channel has seen a slight “share of wallet” increase so far this year. That bodes well for all three chains.

Our Closing Thoughts

acquisition_advantage_scorecard

 

Though it depends how you weight each decision factor, it appears the the Family Dollar board is going to have a hard time justifying its rejection of the higher Dollar General bid to its shareholders based on what we have shown here in part two of our Family Dollar Saga blog series. If you are curious to know more about what our data shows, give us a shout at contactus@infoscout.co!

Most avoided retailer on Black Friday?

Walmart may draw in 50% more shoppers than any other retailer this Black Friday, but it’s also by far the most avoided retailer on Black Friday…

storeavoid

By far, the most common complaints of Walmart shoppers today have been checkout lines that are too long and stock-outs on key products.  Digging a bit deeper, however, we thought we’d share some additional comments from our panelists in response to the question, “What would have made your shopping trip even better?”

“The store was difficult to navigate. Typically checkout is a free for all. This the they had a secret entrance that led you through a weaving maze with all of your items to be assigned a checkout station. It created panic and frustration as people did not know where or how to get into the check out line this year. Good try Walmart but not good enough.”

“My wife not calling me four times while I was in the store, adding crap to the list.”

“Nothing!!! Loved the idiots and atmosphere of this shopping experience!! Walmart never fails to grant the perfect Black Friday shopping. Love getting out with the people and crowds that Walmart always packs in!!!”

“Less crowds, less dirty people in pajamas, nicer employees, more open check out lanes, and stop piling items in the middle of aisles!!! Two grocery carts going in opposite directions can’t get through. Wal-Mart always puts me in a god awful mood.”

“Not handing out tickets 3 hours before sale and then people can leave and come back…people should stand in line and wait their turns.”

PRODUCT AVAILABILITY:

“Having more on my list in stock. Didn’t match what I saw online.”

“If they had the grills that were on sale in stock. One hour in stock was a lie!”

“If they hadn’t begun their Black Friday sales on Thanksgiving day”

“If I physically left with iPad vs having it shipped.”

POSITIVE COMMENTS:

“Nothing. This was the most organized Black Friday sale I have ever attended. The lines were enforced and sales associates were knowledgeable.”

“Nothing. A worker even helped me out during Black Friday madness.”

“This trip was good because of the bracelet bands they issued to prevent the madness of Black Friday shoppers. Thank you!”

 

Black Friday Updates

It’s that time of year! Given there are six less holiday shopping days this year compared to 2012, retailers are getting an early start and opening their doors earlier than ever before. Stay with us as we continue to post Black Friday updates throughout the day…

JC Penney versus Macy’s on Thanksgiving Day

JC Penney needs a blockbuster holiday season to stay afloat and all indications are that they’re off to a good start. Early data from the shopping activity of 125,000 Americans in InfoScout’s consumer panel indicate that JC Penney managed to draw just as many shoppers and sales as its much larger rival, Macy’s, during Thanksgiving Day. JC Penney’s sales per shopper increased by 12% on the day, while the number of shoppers in their stores increased by 2.5-times its normal volume.

Walmart v. Target 

One-third of Americans planning to shop in-stores this Black Friday will start their shopping at Walmart and another quarter (24%) will start their day at Target, leaving all other retailers pursuing what’s left-over in shoppers’ wallets.

While doorbuster deals and ‘everyday low prices’ may be the easiest explanation, new data from InfoScout says that’s only half the story. The company surveyed 500 members of its shopper panel this morning to find out what drove their first choice when deciding where to shop this Black Friday. Surprisingly, one of the biggest differentiators in Walmart’s favor appears to be Walmart’s early opening hours, followed by the convenience of its 4,000+ locations. Target benefits from offering a greater selection of popular gift items at doorbuster prices.

Screen Shot 2013-11-29 at 1.19.19 PM


Department Stores race to Christmas, who’s taken the early lead?

InfoScout’s 125,000 consumer panelists are submitting pictures of their shopping trip receipts in real-time this Black Friday and early data indicates strong performances from both Kohl’s and J.C. Penney.  Kohl’s average shopping basket today is $93 versus $73 in the days leading up to Black Friday.  This compares favorably to Department Store king Macy’s who is seeing smaller baskets than usual this Black Friday at $57 per trip.   J.C. Penney’s gaining the most share among its peers – something it must do throughout this holiday season to keep the lights on according to many industry analysts.

… stay tuned as we publish more findings throughout the day!