Macys.com: Thinking Outside the Big Box

Way back in 1998, Cincinnati-based Federated Department Stores, Inc. separated its nascent online division (started in 1996) and created a freestanding independent corporation known as macys.com, with headquarters in New York and San Francisco. Other Federated-owned Web sites, most notably Bloomingdale’s, were floundering, and by 2001 they got absorbed into the yet-to-be-profitable Macys.com. The Web sites of Federated’s major new acquisitions, such as Robinsons-May, also got swallowed up and are now seamlessly integrated into the Macy’s site.

“While the sales volume for department store–type goods on the Internet is relatively small today, we believe it is a phenomenon that will continue to grow,” said then Macy’s Chief Executive Officer James Zimmerman in 1998 (Terry J. Lundgren is the current CEO), adding that “Federated’s investment in this new venture will well-position us to capitalize on the growth of e-commerce in the years ahead.”

And he was right.

Macys.com continued to do the right things while so many others crash-landed, growing dramatically right along with the Internet, creating sales of over $450 million last year. Running at an anticipated loss up until 2002, the break-even point was achieved in 2003, and the site has seen black ever since.

There have been a few growing pains along the way, of course, among them a Federal Trade Commission fine of $350,000 levied for too many late holiday 2000 order fulfillments. The FTC’s ProjectTooLate.com publicly cited Macy’s, but it was in good company, along with several other large online retailers including Toysrus.com, KBkids.com and CDnow.com. Better inventory management programs have now pretty much eliminated those problems.

During 2003, Macys.com redesigned its pages to emphasize larger images with a new zoom feature for viewing fine details, and focused on the speed at which shoppers can download its Web pages. “We’re making a major investment in a coding effort to assure the speed of our site,” President Kent Anderson told InternetRetailer.com. He added that he expected the increased speed to boost sales. And it did.

Also since 2003, the company has been working with Akamai Technologies Inc., of Cambridge, Mass., to make online merchandising applications more accessible through strategically placed regional Web servers, thus providing faster access for consumers regardless of where they are located. This has worked for the bottom line, too.

Partnering and hosting the site with IBM’s E-business Solutions since Macys.com’s initial launch, transaction management IT software called Redbook powers much of the inner workings of the site’s customer relationships. Earlier this year, as part of a $130 million capital investment program in online infrastructure, Macy’s added new specialized software created by Chicago-based SSA Global called SSA Outbound Marketing, a component of SSA Customer Relationship Management powered by Epiphany, which now lets Macys.com “enhance its customer relationships through personalized, intelligent interactions.” The software is expected to further increase Macy’s return on investment in its online marketing programs and “strengthen the company’s brand image as a leading provider of fashion and affordable luxury items.”

Other advanced software applications running inside Macys.com now include (since 2005) Mercado for dynamic product browsing that helps customers find exactly what they are looking for—with as much or as little “assistance” as they choose. The Pleasanton, Calif.–based innovator also specializes e-commerce search and merchandising applications for Sears.com, JCPenney.com and Target.com.

To further enhance its retail reach, Macys.com expanded significantly last year with the extended availability of Macy’s products on Amazon.com (www.amazon.com/macys). Everything from exclusive Macy’s brands to its wide selection of jewelry, apparel, beauty and home products are now available to Amazon customers. “Macy’s is excited to join the Amazon platform and make our products easily available to the millions of Amazon.com shoppers,” said Anderson. “We are creating another option for customers to find and shop our vast selection of top brands.”

In what might seem like an about-face from consolidating the various retail elements into macys.com, a new spin-off site was created last year at www.thisisit.com. Responding to the research showing that the macys.com audience is a predominantly 30-plus audience, younger, hipper (and more Web-savvy) shoppers were passing it by. So, a new site that focuses just on juniors was hatched (reviewed below).

Mastering brand identification, cross-channel integration and investments in software innovation are the three big secrets of macys.com’s success. “Online sales represents the fastest-growing part of our business and an outstanding opportunity for continued progress as we serve millions of new customers nationwide,” said Federated CEO Lundgren in a current press release, adding that “we expect our direct-to-consumer sales to grow to more than $750 million by 2008.”

Site Review

Some of the most au courant hit pop tunes set the tone on the home page of ThisIsIt.com—Macy’s new juniors fashion Web site. Right now you can choose from MC Fly, Ashley Parker Angel or Christiana Milian as your soundtrack while you shop this youthful clothing and dorm-living accessories source for “the hottest looks of the season.” Although wildly popular, the Macy’s main site at www.macys.com was being passed over by the Gen X, Y and Z sets in favor of Delias.com, Target.com, Gap.com and others. But Federated wants it all, hence this younger, hipper and much flashier online experience. A limited and tightly focused collection for girls and guys awaits the visitor. Excellent, well-described garment presentation on real models all head toward one of the clearest, most user-friendly shopping carts we’ve seen, all culminating in a subtle pitch to grow up and explore the larger online world of Macys.com. It has a kind of retail graduation appeal.