In her excellent WSJ article, A Test of Loyalty at Macy’s, Miriam Gottfried says that 9% of Macy’s customers account for nearly half of all sales. This led to Macy’s decision to develop ways to reward these high-end customers with more brands available exclusively at Macy’s, more fashionable products, and more perks.
Exclusive brands makes sense.
It wasn’t so long ago that if you were looking for Ralph Lauren or Liz Claiborne, every big box store sold the same brands and the same items. Who among us hasn’t walked the mall from Burdine’s to Goldsmith’s (or Jordan Marsh or Kaufmann’s or Marshall Field’s or Mervyn’s) to Macy’s to see who has the exact same skirt or shirt on sale? Clothing brands that had positioned themselves as exclusive became designer commodities, a real oxymoron.
Fashion – trying to spot and anticipate trends – is a tough business, and many have failed trying it.
If you’re Macy’s and want to be more fashionable, won’t you be taking on the likes of Neiman Marcus, Nordstrom’s, Saks, and Bloomingdale’s? These are formidable competitors who have been out-upscaling Macy’s for quite some time.
Macy’s planned rewards program may work, but it also may backfire.
No one would argue that a retailer shouldn’t pay a lot of attention to its best customers, but Bloomberg warns “making decisions based on revenue contribution is a dangerous game.”
When a company skews loyalty programs to its best customers, are they thinking the rest will be lured by rewards and come along quietly, or are they saying that the others don’t matter?
How will targeting the few at the highest end be received by those customers who are providing the other half of Macy’s revenue?
Will they be enticed to move up by the promise of exclusivity, or will they see that the bait is out of their reach? Some will feel alienated, and more than a few are likely to leave Macy’s for other stores, not to mention joining the continuing outflow to online shopping that vexes all brick and mortar retailers.
Macy’s might want to remember there is always the issue of unintended consequences. The most common phrase researchers hear when something bad happens after businesses try what they believed to be a great idea is “We never thought of that.”