Why Macy’s is winning with omnichannel

Macy’s is poised to have its best digital Christmas ever thanks to a major expansion of ship from store fulfillment capabilities that enable the company to provide an omnichannel experience.

This holiday season, Macy’s will be able to fulfill orders placed online from 500 of its more than 800 stores, a major expansion from last year when ship from store was available at 250 locations.

“The way we view omnichannel is about having stores serve as another fulfillment location,” said Pam Sweeney, Macy’s SVP of logistics systems.

Speaking recently at the annual meeting of the Council of Supply Chain Management Professionals (CSCMP), Sweeney detailed how the execution of Macy’s omnichannel vision began years ago when the company became an early adopted of RFID and electronic product codes. The result was improved inventory visibility which enabled the company to offer the ship from store service which was a contributing factor in Macy’s growing online sales by 42% last holiday season after 40% growth in 2011 and 29% growth in 2010.

Offering the ship from store service has required some obvious adjustments at store level with the availability of packaging material, equipment and employee training, but behind the scenes technology was the key driver, according to Sweeney. For example, she indicated that the key driver of ship from store is RFID which allows for more frequent and accurate inventory counts. Those counts drove greater accuracy of Macy’s item file. Because of the enhanced visibility of store level inventory, Macy’s gained the confidence to offer ship from store for orders placed online because it actually new what inventory it had in stores.

According to Sweeney, that tends not to be the case when a retailer conducts a physical inventory only once or twice a year.

“If you don’t have an accurate item file you won’t be able to optimize your inventory because when inventories are conducted infrequently the item file becomes distorted,” according to Sweeney.

For example, in categories where RFID is present physical inventories can be conducted quickly and accurately between 12 and 24 times a year.

“That is huge for us because it helps sustain item file accuracy,” Sweeney said.

Item file integrity may not be the sexiest of retail topics, but in Macy’s case it underpins the company’s approach to offering an omnichannel experience that is dependent on inventory accuracy. In Macy’s case, the potential for inventory distortion is higher than it had been in the past as a result of the company’s decentralized approach to merchandising that was begun five years ago called, “My Macy’s.” The retailer wanted to more effectively tailor assortments on a market by market basis so it pursued the My Macy’s strategy to move merchant decision-making closer to it store network aligned in 69 districts and eight regions.

Despite the progress Macy’s has made with inventory accuracy and e-commerce growth, Sweeney said the company has a long way to go to further integrate systems and leverage big data. For example, she said Macy’s has 60 applications in its logistics area alone which leads to fragmented data sources and less real time visibility than is desired.

“We have lots of data all over the place. We want to get to one version of the truth and more collaborative systems,” Sweeney said. “The priority now, even though there are so many use cases for RFID, is this year we want to make sure that we execute flawless cycle counting.”