Macy’s Follows Amazon, Walmart in Development of Digital Marketplace

Macy’s is planning to launch a curated digital marketplace for third-party sellers in the second half of 2022, following the model set by Amazon, Walmart, Target and other retailers that have seen success in providing a platform for others, as digital sales continue to outpace in-store purchases.

Jeff Gennette, chairman and CEO of Macy’s, said that the marketplace, which is being developed in partnership with enterprise marketplace technology company Mirakl, will help “enhance the existing Macy’s business, fuel customer acquisition and drive growth across all of our channels.” The marketplace is part of the retailer’s strategic plan, called Polaris, to reposition itself as a digital-first omnichannel merchant.

“Through Polaris, we laid a solid foundation for digital growth, and we’re seeing that growth come to fruition,” Gennette told analysts on a conference call on Thursday (Nov. 18). “We are now able to focus on additional strategic investments to refresh the digital experiences.”

A major benefit of the marketplace for Macy’s, the CEO said, is the ability to more easily expand its assortment in new categories, with which the retailer has seen success in recent months. For example, bringing the Toys R Us brand to Macys.com in August has led to toy sales more than doubling in-store and online compared to 2019.

The announcement of the new digital marketplace came as Macy’s reported third-quarter comparable sales growth of 37% on an owned basis and nearly 36% on an owned-plus-licensed basis versus 2020; both metrics increased by nearly 9% compared to 2019. Digital sales increased 19% year over year and 49% on a two-year stack.

In the third quarter, Macy’s recorded $5.4 billion in total sales. Gennette said the retailer’s digital business alone is on track to generate $10 billion in sales by 2023, not including incremental revenue from the new marketplace.

“Digital isn’t merely benefiting from a shift of sales from stores,” Chief Finanical Officer Adrian Mitchell told analysts. “It’s actually growing beyond that.”

Brick and Mortar 

That isn’t to say that Macy’s is ignoring its physical footprint — Gennette noted that in areas where the retailer has a brick-and-mortar location, digital sales are boosted, pointing to the omnichannel strength of the brand. In the third quarter, Macy’s opened five new locations in the Dallas, Atlanta and Washington, D.C. markets.

“We are focused on establishing an appropriate footprint in markets that drive our sustainable and profitable omnichannel growth,” Gennette said.

Still, with international travel still deflated because of COVID-19, downtown stores have yet to return to 2019 sales levels, and Mitchell said Macy’s doesn’t expect tourism levels to return to 2019 levels next year. The reopening of many offices in early 2022, however, could provide a boost, and suburban stores have seen better traffic levels, executives noted. This has led the company to reconsider 60 planned store closures.

“Our team is committed to accelerating and sustaining … the continued successful execution of our digitally-led omnichannel strategy,” Mitchell said.

New Payment Partnership 

Mitchell said Macy’s is close to finalizing a new partner for its credit card programs, with a decision set to be announced in the coming weeks. As a digital-focused retailer, the CFO noted, Macy’s aims to find a partner “with strong digital capabilities today and a strong innovation pipeline, with the prospect to further expand that pipeline in the future.”

Though the new credit card programs will be a growth driver in the long term, Mitchell said that over the next few years, credit card revenue levels will likely be slightly lower than the 3% Macy’s has historically experienced. “Our loyalty and personalization initiatives are the key growth levers in our ability to obtain and retain more customers to drive omnichannel sales,” he said.

Originally posted on November 18, 2021, by PYMNTS.com