Macy’s Sees Omnichannel, Same-Day Delivery as Competitive Advantage

Bloomingdales, Macy's Inc., macys, omnichannel, omnichannel fulfillment, omnichannel operations, online retail, Operations and Fulfillment, retail, ship from store, ship to store, in-store pickupIn its third quarter earnings call this week, Macy’s Chief Financial Officer Karen Hoguet told analysts the company’s retail network gives it an advantage in the ever-more-crowded same-day delivery sweepstakes, as well as in omnichannel fulfillment.

“I think our store footprint gives us a huge advantage, given where the Macy stores are located and the technology that we have built and have in place to utilize our stores to fulfill internet orders,” Hoguet said on the call. “We are working on take advantage of that as we go forward.”

Rival J.C. Penney said it plans to roll out a same-day delivery service sometime in 2015, chairman and CEO Mike Ullman told analysts in its earnings call, without providing any specifics.

Two weeks ago, Macy’s began running same-day delivery pilots in Chicago, Houston, Los Angeles, New Jersey, San Francisco, San Jose, Seattle and Washington, D.C. Sister company Bloomingdale’s began testing same-day delivery in Chicago, Los Angeles, San Francisco and San Jose. The service is provided by Deliv, a startup crowdsourced same-day delivery provider which is backed by major mall property groups General Growth Properties, Macerich, Simon Property Group and Westfield Corporation.

Deliv has been gaining a head of steam lately, announcing expansion of its same-day delivery services and launching the service for Foot Locker. It offers its services in 30 U.S. malls.

Macy’s same-day delivery service costs $5 for online orders over $99, while smaller orders are subject to standard shipping rates plus an extra $5. Customers must place their orders by 1 p.m. Monday through Saturday and by 11 a.m. on Sundays, and can select a two-hour window for delivery.

Asked about the performance of the same-day pilot, Hoguet said it’s too soon to tell. “As we said earlier, it will probably take this fall and maybe into the first quarter before we could really address it, but so far we are optimistic,” she said.

“Consistent with the test and learn environment at Macy’s, we will assess (same-day delivery) results as we go along, so there are no predictions (on expansion) at this point,” said Jim Sluzewski, Macy’s senior vice president of corporate communications and external affairs.

In terms of omnichannel execution, Hoguet said it’s been progressing. The company offers ship from store and in-store pickup at all 725 of its full-line stores.

“There is no question that we are executing omnichannel better this year than last year and we will do better next year than this year because it really is changing some of the fundamental ways we do business,” she said. “We’ll also manage it in a way that makes it more profitable. Clearly we are spending a big percentage of our capital budget on technology and supporting this (omnichannel) business, but frankly I don’t know how you can compete as a retailer today without doing so.”

For the third quarter ended Nov. 1, Macy’s reported $6.19 billion in sales, down 1.3% from $6.28 billion in 2013. Net income was $217 million or 61 cents per share, up 23% from $177 or .47 in 2013 and ahead of analysts’ estimates.

“We assume that we were not immune to the weaker than anticipated consumer spending which has been acknowledged or reported by other retailers,” Hoguet said. “Clearly, the warmer temperatures throughout much of the country also hurt sales but that alone does not explain all of our sales shortfall in the third quarter. As we look at the fourth quarter however, we are still feeling positive about our outlook and the opportunity for improved topline performance.”

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