Emerging Issues on Omnichannel Retailing

Emerging Issues on Omnichannel Retailing 1

Case Assignment
Develop a report in terms of the following guidelines based on the articles listed above
and other supplemental articles. At least two additional articles should be included in
the analysis. A well-written report should have a brief introduction, headings or
subheadings, and a brief concluding comment. Note that you should use some keywords
as headings or subheadings such as “Facts Recap,” instead of a sentence or a question.
� Briefly review the facts on the brick and click retailing and multichannel shopping,
as reported in the articles.
� Describe how Macy’s performed in online channel? How Macy’s could do a better
job to manage the online and offline channels? Consider appropriate distribution
concepts to support your arguments.
� Considering the changing consumer shopping behaviors and new technology trends,
how would you recommend Macy’s compete with Amazon and other retailers in the
future?

Introduction

Digital technology has significantly caused a new change in the way the traditional brick and
mortar retailers have been retailing (Breugelmans, & Campo, 2015). In Macy’s case, it has
ignored the 158-year history of traditional in-store shopping. With these changes, traditional
brick and mortar retailers have to keep up with the trends of consumer behavior and demands
of online shoppers. This comes with a constant challenge to maintain a competitive edge in
the market where shoppers spend at least 3 hours per day on the mobile phones and enjoy the
customer experience of shopping 24/7 round the year. The omnichannel retailers also
appreciate sales round the clock. Omnichannel retailers like Macy’s need to continually
leverage on this rise to capitalize on the convergence of channels. Distribution channels
include wholesalers, distributors, retailers, catalog sales, e-commerce platforms, direct sales
force, and consultancy among others (Griffiths, & Howard, 2008).
Online Shopping Current Status and Outlook

According to BI Intelligence forecast, a Business Insider’s premium research service, U.S.
consumers would spend $385 billion online in 2016. BI Intelligence forecasts that this could

Emerging Issues on Omnichannel Retailing 2

rise to $632 billion by the year 2020. Since the U.S. retail average growth rate in the first half
of 2016 was just 2% for total retail, the e-commerce segment of retail stood at 16%. Not only
did 2016 experience an increase of 20 million new online shoppers but that these shoppers
are spending more than the previous years from $61 billion in the first quarter of 2015 to $68
in the similar period 2016. The number of transactions has also increased. According to the
UPS Report of 2016, omnichannel shopping grew by 38% (UPS Report on Pulse of the
Online Shopper, 2016). E-commerce channel is growing four times faster than the in-store
retail channel. The omnichannel retailers who will not elevate their strategies will not
survive in the field for long. With Macy’s announcement of the closure of 100 stores and
eventual closure of 66 stores, there will be an increased number of store closures and reduced
in-store shopping in the current retail environment. The bulk of the volume sales happen
through the offline channel, but Macy’s needs take a prudent approach not to disregard in-
store experience in favor of its online presence. (UPS Report on Pulse of the Online Shopper,
2016).

Effective Inventory Management and Control

Omnichannel retailers should continuously maintain a profile and a database of the online
and offline shoppers or both. To ensure success in excellent customer experience, the brick
and click retailers need to guarantee efficient inventory management and control. Macy’s has
done well in her use of Radio Frequency Identification (RFID) to track products increasing
efficiency and effectiveness in deliveries. Management needs to facilitate quicker
deliveries and target same day deliveries. The online shoppers need to experience value
addition of ease and convenience of online shopping and in-store shopping experiences. Free
delivery prime membership promotion is a marketing option to be implemented by the
management as it seeks to achieve sustainable customer retention. (UPS Report on Pulse of
the Online Shopper, 2016)

Emerging Issues on Omnichannel Retailing 3

Management needs to periodically review shipping times with the aim of reducing shipping
costs to increase sales and subsequently overall company gross margins. Free shipping
promotions can work to ensure customer retention amidst rising competition levels. This
category of online shoppers could be price sensitive and are seeking to avoid delivery costs
that come with home deliveries. (UPS Report on Pulse of the Online Shopper, 2016).

Macy’s Omnichannel Distribution Strategies

Macy’s looked to close 68 of its 880 stores location as a restructuring strategy and shift
towards its online sales platform. Macy’s retrenched about 10,000 staff and invested
 $550 million in funding the online channel. This would include capital injection in mobile
commerce and market surveys and competitive market analysis. Macy’s “Buy Online Pick
Up In-Store” program has worked well for the company as it achieves increased sales since
the online shoppers who have come to pick up their products would buy from the physical
store and this also helps with keeping up with competition activities. Macy’s has been
targeting same day delivery to keep up with competition to retain her online customers.

While leveraging on their expansive network of about 800+ stores, Macy’s developed an
omnichannel strategy of the ship from a store that has served the company well to make faster
deliveries and depress inventory costs and potential mark-downs. The launch of Macy’s e-
commerce platform enabled the company to achieve a gross margin growth of 257% in 2014.
It gained this through a focus on the company’s profile of needs of her core customers who
are women of ages 25-54. It relied on research facts where these customers prefer to shop
online, offline and still manage to pick the product wherever and whenever they wanted.
Having to cut down on staff is an ultimate effect of over-investment in digital technology.
Customer acquisition and relationship management need to remain significant considerations
for brick and click retailers.  There is need always to ensure that the in-store experience is

Emerging Issues on Omnichannel Retailing 4

attractive. (Breugelmans Els & Campo Katia, 2015). Retailers should provide high visibility
advertising for both online and offline shopping platforms. Macy’s should commission
regular market surveys to inform her decisions. (The Financial Times, p. 16. Clicks and
bricks; retailers and the Internet. (2012).

Macy’s Competitive Edge Strategies over Amazon

Macy’s can variously consider cost-effective ways of managing costs by consolidating home
deliveries informed by clients’ location. Management needs to ensure price positioning to
cushion against the costs of periodic free home deliveries promotion. Macy’s can focus on
reducing the cost of direct selling that is complex and expensive. This comes with an
advantage of reduction of customer-staff conflicts in the sales process. The company can
strategize on how to mitigate the loss of personalized attention by implementing feedback
loop mechanisms.

Marketing Surveys, Analysis and Strategies

Macy’s should invest more time in conducting surveys to establish the changing consumer
behavior and competitive market activities through surveys. These surveys also need to
establish how and where products should be sold. This assessment should inform
management’s decision on how best to effectively and efficiently reach the end
consumers. The online sales platform can inversely be used to advertise offline shopping
stressing In-store experience, which includes personalized attention. 
Challenges Facing Omnichannel Retailers

There should be a consideration of a delicate balance of serving both the in-store clients and
online shoppers while keeping an eye on staffing for both. (Newman, 2016) Whereas an
increase in online shopping has dramatically pushed up sales for most retailers, it does come
with various challenges that include: increased costs, technological risks, intense competition,

Emerging Issues on Omnichannel Retailing 5

and loss of control to the tech-savvy online shoppers, heightened expectations and
entitlement, retrenchment of in-store staff among others.  Retailers need to continually
engage all customers with offers through the push notifications on the mobile apps. (Birchall,
2009, May 14).
Retailers should be cognizant of channels cannibalizing one another. Management needs to
understand the algorithm of the cross-channel effects on sales with the aim of reinforcing and
leveraging on synergies. The choice of each of these channels informs the marketing strategy
upon thorough market analysis to establish what best suits the customers or consumers (the
target demography and demand levels) (The Top 10 Trends Driving Marketing in 2017).
Given that physical stores carry the brand and subtly give comfort and security to online
shoppers after all. It is imperative to ensure all the distribution channels are operating at
optimal levels without having any disadvantaged to ensure leverage on synergies. More
channels mean more reach of clients hence the need for balance. Management, however,
needs to monitor and evaluate the impact of the changes in all company’s existing channels as
well as effects of opening new stores. (Katia, & Breugelmans, 2015). Keeping pace with
technology and changing customer expectations are some of these challenges. The shoppers
are taking more and more control of the shopping process through their demands and
expectations. Macy’s can keep a profile of customer expectations and ensure they are
proactively addressed. Given that the satisfaction of the online shopper is higher than that of
counterparts of the offline shopping experience, management needs to continue establishing
smarter ways of retaining them. This is a challenge.
Conclusion

The current trends among the omnichannel retailers are that there is less appetite to commit
capital investment in new stores as more are opting for investment in online platforms. It is

Emerging Issues on Omnichannel Retailing 6

therefore paramount that omnichannel retailers maintain a focus on balancing all the
distribution channels.

References

Birchall, J., 2009, May 14, Adding bricks to clicks: On the Role of Physical Stores in a World
Of Online Shopping. GfK Marketing Intelligence Review, 5(2), 29.
Breugelmans Els & Campo Katia, 2015, Balancing Clicks and Bricks – Strategies for
Multichannel Retailers. Journal of Global Business Issues, 2(1), p. 69.
Griffiths, G H & Howard, A, 2008, The Economist, 402 (8773), 18. Balancing Clicks and Bricks
Strategies for Multichannel Retailers. Journal of Global Business Issues, 2 (1), 69. Kamoy.
Macy, 2014. World Market Intelligence News, Online Order Fulfilment Center Expansion.
Arizona.
Newman, D., 2016, Mixing Bricks with Clicks; Retail, 2013. The Economist 406 (8828),
P. 70.
The Financial Times, p. 16, 2012, Macy’s Online

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