Photo: @dunahoot217 via Twenty20
Will free same-day delivery boost Macy’s online sales?
Macy’s last week announced plans to relaunch same-day delivery in 30 markets for qualifying purchases of $75 or more. In a switch, delivery will be free for a limited time, instead of the standard $8 fee.
Free same-day delivery will launch Oct. 1 and seems timed to maximize holiday shopping. No timeline has been given for when the free option will end.
Orders placed Monday through Saturday by noon local time, or 10 a.m. local time on Sunday, will be delivered the same day through an existing partnership with Deliv.
Macy’s played up the fact that shoppers do not need to be part of a paid subscription program like Amazon Prime to qualify for free deliveries.
In 2014, Macy’s launched same-day delivery with a fee in five markets for a limited selection of products. By 2017, the retailer had expanded same-day delivery to 33 markets, but the overall service underperformed. The new program covers “hundreds of thousands of products.”
Jill Ramsey, Macy’s chief product and digital revenue officer, told attendees at the WWD Digital Forum last week that the offering “was hard to find on the website. It didn’t get a ton of traction.” She added, “Over the last two years, we’ve made significant investments in new technology in our stores and on our website that have given us the ability to better serve our customer’s needs.”
In the second quarter, Macy’s reported its fortieth consecutive quarter of double-digit e-commerce growth.
Macy’s relaunch comes as retailers are pushing the accelerator on speedier deliveries. This past spring, Amazon.com cut its two-day delivery promise to one day for Prime members. Amazon also offers free same-day delivery for over three million items in larger markets for orders over $35.
In May, Walmart began rolling out free next-day delivery for its most popular items with a minimum order requirement of $35. On September 12, Walmart expanded its Delivery Unlimited subscription that provides same-day delivery for groceries. Target offers same-day deliveries on groceries and other items to Shipt subscribers.
Walmart, Target, Macy’s and other retailers are also increasingly promoting free same-day, in-store pickup to consumers.
- Macy’s to Give Same-Day Delivery a Spin – WWD
- Macy’s will test free same-day delivery in select markets for online orders over $75 — here’s where you can get it – Business Insider
- Walmart to Roll Out Delivery Unlimited to More than 1,400 Stores Across the Country – Walmart
- Will same-day delivery flexibility give Target an edge over Amazon and Walmart? – RetailWire
- Did Walmart just one-up Amazon on next day deliveries? – RetailWire
- Should (can) rivals meet the free one-day delivery bar being set by Amazon? – RetailWire
- What will it take for retailers to win the last-mile race for customers? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: How appealing is the offer of free same-day delivery for apparel, footwear and other soft lines categories prevalent at department stores? What execution hurdles do you see for Macy’s as it seeks to ramp up same-day delivery?
Poll
BrainTrust
Zach Zalowitz
Founder, Salient Commerce Consulting
Brent Biddulph
Industry Marketing Lead, Retail & CPG
Free same-day delivery is becoming the “arms race” of online retailing among the largest players. Unlike Amazon and Walmart who have far more sophisticated and developed logistical systems for managing same-day delivery, Macy’s is still a work in progress. While I understand Macy’s pressure to be in the same-day delivery game with the other major players, I’d be concerned that a poorly executed service will turn customers off. For example, clarity around what products qualify and which don’t will be challenging to communicate.
Totally agree with this comment. Yes, the pressure is on but they will place themselves in a worse position if they don’t get their ducks in a row first. Putting in some extra time up-front always makes a difference.
For instance, will this be full of the same fine-print exclusions as the in-store offers? Those are so frustrating and insulting…
Same-day delivery with free shipping is a great way to compete with other online businesses as well as brick-and-mortar retailers. However, it’s important to remember that the more we keep the customer out of the store, the harder it becomes for Macy’s stores to survive. So while this is an excellent offer, my suggestion is to take it one step further and provide in-store shopping incentives and rewards for customers taking advantage of making an online purchase and getting same-day free shipping. Macy’s needs to be creative with what the offer could be to customers, but it is essential that they can continue to get the customer to visit stores as well as shop online or Macy’s will not survive.
Delivery is becoming a place to compete. Free two-day, next-day and now same-day is becoming the norm. And, the concept of “free delivery” is an interesting term. It’s not free. The consumer pays for it in the cost of the goods they buy. There’s just no extra charge.
I am guessing that it is utterly impossible for free same-day delivery to be profitable, so this is an investment in market share for the holidays and beyond. Will it promote loyalty in the long run, or will customers flip to the next “free” offering when the competition responds? I give Macy’s credit for stepping up to the plate. It’s not easy when the competition isn’t overly concerned with making money.
The complexities of operating same-day delivery are well known, however the customer expectations have changed to the point where they expect their products sooner rather than later. In some sense, same-day delivery and the fulfillment wars are ultimately a race to the bottom. The supply chain and logistical challenges will only increase for Macy’s with these new promotions. The shipping costs will have an immediate impact on their overall gross margin profitability.
Macy’s has the advantage of being able to leverage their brick-and-mortar operations to help mitigate the shipping costs. They could offer to ship from their stores, or rather incentivize customers with their BOPIS value proposition if they are under the $75 order threshold. Ultimately, while speed to market matters, it all comes down to execution. There are plenty of more pieces and parts to get the merchandising strategies right, including trend-focused offerings at the right price, location and time.
Many of Macy’s products (especially apparel, accessories and shoes) are impulse buys — so free same-day delivery facilitates this kind of purchasing behavior. Imagine picking out a new dress or pair of pants on the Macy’s app before commuting to work, knowing that the item will be waiting for you when you get home or delivered that evening. And “free” doesn’t hurt, either.
How long will the offer be in place? If Macy’s only plans to use it during the typical retail lull before Thanksgiving, it may find the offer too costly to extend into the holiday shopping season.
When will we learn that promises of free fast delivery made in hopes of gaining market share are a devil’s bargain? We keep training consumers to expect more and pay less, and they have responded by pledging their undying loyalty to … anyone – anyone – offering free and fast. I understand that Macy’s is facing extreme competitive pressure, but I really don’t think throwing logistics margins at the problem is the answer. If it were me, I would invest much more in developing highly curated assortments and store experiences that differentiate and drive traffic, rather than a me-too delivery program that adds very little meaningful value to the shopping journey.
The biggest questions that will determine whether the free same-day delivery is a success are:
Will the number and frequency of “trips” represented by tickets/transactions be incremental? Otherwise, there is potential to cannibalize in-store impulses. Shoppers can absolutely be impulsive online but they are usually better at postponing the decision by “saving for later” than they are in-store.
This is great for shoppers and allows Macy’s to compete in the delivery battleground of online retail. However it will erode margins. Retailers are effectively subsidizing the cost of fulfillment for shoppers and unless they can make it up on volume – which I doubt Macy’s can – they will harm their bottom lines.
To maintain transformational traction and attract investors, Macy’s must improve comparable sales growth and take market share. This is imperative going into the holiday season to ensure the company has the time and space to execute against their path to profitability and to increase productivity.
This time around, Macy’s must execute better and ensure high consumer awareness and buzz on the free same-day delivery program to properly capture and compete for online sales come October.
While this new offer may be compelling for a customer that needs a last minute item for an event or for replenishing a beauty item, Macy’s isn’t selling diapers. Therefore, I don’t know if same-day shipping is top-of-mind when a customer is on macys.com. This offer will not improve sales results if the merchandise offerings are not what the customer wants or needs.
I led a panel on this exact topic (albeit not only Macy’s) last week. The hurdles discussed were:
My take is this – When we say same-day, we really mean “as fast as possible.” Proximity to customer, accuracy of inventory (in stores) and a standardized experience for “the last 10 feet” are what separate good same-day programs from great same day-programs.
The industry still has a lot to learn about this, and kudos to Macy’s (again) for being out-front on having this capability. I expect others will follow in Macy’s and Target’s steps in coming two or three years …
Same-day delivery (SDD) doesn’t have the expected impact that the hype suggests and is just an incremental notch above one- and two-day delivery in terms of value. Various surveys suggest that it is not a significant factor to consumers whether they receive their new designer handbag later that day or two days out. The part that matters is the “free” aspect of it and whether it really translates into a discount or is already built into the costs of the product. However, SDD is a nice to have and there will be a set of customers that appreciate it and will pay for it — so this offer caters to that group. The value for companies like Macy’s is that they might be able to leverage store inventories to reduce costs, especially in dense metro areas – which potentially can lead to higher profits and customer engagement. As Brandon suggests, this will tie in nicely with their BOPIS offerings. Lastly, it’s smartly primed for the holiday season — which means this is more marketing than operational. At first blush it will be a break-even move to drive website traffic and purchases online.
Bon Marche, Galleries Lafayette, and Selfridges have all prospered by focusing on the visiting tourist. Why not the U.S. department store industry? Also remember that for customers over age 40 (read Macy’s core) 80 percent of weekly purchases are replacements. Same-day delivery is just more smoke. And as stated here often – the delivery industry is going to get regulated – it is not climate change friendly.
Certainly this is facilitated by the importance of their main stores in Paris and London (respectively). Macy’s, with hundreds of stores — mostly in suburban locations no tourist will see unless their map app goes on the blink — doesn’t offer quite the same locational advantages. Still, their “flagship” stores are promoted as such (and frequently mentioned in investor calls in connection with the flow and ebb of tourists to the U.S.)
Macy’s (just as other major retailers that are attempting a direct-to-consumer offering online) is going to have the trouble of competing with Amazon being top-of-mind with consumers. When a potential customer thinks of a good holiday present, they are going to Google less and less and more often go directly to Amazon with a very fast search to cart time. If retailers are going to compete against Amazon, it must be on price since it’s impossible to surpass their convenience and logistics network.
Macy’s is simply leveling their odds as consumers today expect retailers to remove friction like delivery fees. Minimum purchase thresholds will become a thing of the past, as traditional retailers need to either revamp loyalty programs to account for free shipping or optimize shipping costs further. Either way, it is now a key element in the overall pricing strategy that needs to be accounted for.
Faster is always better with today’s time-starved lifestyle we all lead. The simple fact is that while for years Macy’s has been battered in the trade press, their online presence has been rapidly increasing and is a shining star that other folks in their sector would love to emulate. This will be a very appealing offer but the final logistics will be a challenge. They have limited markets they can serve and they have a challenge to retool their stores, processes and technology to ramp this up but I believe they will do so and offer a service others will have a hard time matching.
First, will free delivery be available with or without a fee for the service? If there is no fee people will use it even if they do not need it. If there is a fee people will use it only if they want it. Has Macy’s done enough of a test to find out what their consumers want? If there is no fee, is Macy’s ready and able to absorb the additional cost of same-day delivery for people who will use the service because it is there?
There are two separate issues here: how effective is same-day delivery for brick-and-mortar department stores in general; and how effective will it be for Macy’s? The answer to the first question is that it will have some positive effect, but won’t be a game changer since at this point same-day delivery is quickly approaching “table stakes” status. And the answer to the second question is, probably not much since Macy’s isn’t losing that many sales because it doesn’t currently deliver on the same day. In the same way that many supermarkets missed the point by offering more and more things to cook to people whose lifestyles had changed and were cooking less, Macy’s is confusing itself about its core problem. It isn’t that people want what Macy’s is selling delivered faster, it’s that not enough people find Macy’s an exciting place to shop. If you aren’t going to a store, what difference does it make how fast a hypothetical — but, in reality, non-existent — purchase will get to you? So the biggest “execution hurdle” for Macy’s is re-engaging with a new generation of consumers. If they don’t clear that hurdle, delivery — in any form — will be a moot point.
I believe this appeals to a narrow market. Perhaps that market is worth pursuing this way. My sense, though, is that services like this have primary value to the retailer fighting against the myths promulgated by Amazon, passed along in the press, and which shareholders demand answers to. They remain myths from what I can see. So Macy’s is fighting a battle of perception but not one to build stronger services as a business.
I hope it works for them without distracting too much from the core business they need to build.
Delivery has become the battleground among retailers in the race for the consumer’s attention. Good for Macy’s for getting back in the game. They can use this as a spark to motivate customers, not only to use free delivery — but to get back to the stores. Lot’s of empty spaces on the parking lots these days. Now that they are in the game, they need to be sure they can deliver as promised.
If Macy’s had double digit growth in their ecommerce business for 40 consecutive quarters, what makes it so important to introduce free same day delivery at this point, other than a marketer’s dream? The supply chain cost of achieving this will be high and especially as we approach the peak Christmas trading period. Are they so concerned that they will be wiped out at Christmas, are Macy’s customers so transient that they will go to other online retailers? This would seem to be an unnecessary step at this point. We have read on this site recently that customers are not as desperate for same day delivery as the retailers are to push it at them and Macy’s must surely be at the far end of this need.
Once the genie is out of the bottle, it cannot easily be put back. They are setting themselves up for a long and costly marketing campaign. I wonder if the marketing department is paying for this out of its budget?
Last week we had a question about the unprofitability of online selling. Today, as if by magic — the “magic of Macy’s”, I guess — we have a classroom demonstration of it. I won’t say I’m disgusted by it, it’s not illegal or immoral and I understand the pressures on retailers to show they’re “keeping up. “But it’s hard to see this ending well. I’d love to hear about a retailer saying they’re going to dump free shipping, not just for the novelty but also in knowing that their customers are paying for what they get, and no one will be subsidizing someone’s irrational “need” for a pair of size 8s in 2 hrs.
The offer will have an impact, however, the key will be execution of not only the delivery but also the return. The delivery/return arms race is on.
There’s little to be gained in playing another company’s game. I think Macy’s will have some minor wins when it comes to launching free same day delivery. And it could be worth doing. But Macy’s would find more benefit in finding themselves in terms of their core value proposition to the customer beyond what everyone else is already doing.
While same-day delivery will be perceived as a benefit for customers, the question is what will be the impact on revenue. In some categories, such as pharmacy and grocery, same day delivery is more valuable because consumers often have needs for same day usage. I am not sure the clothing category fits the same behavior pattern.
I worry that this benefit will be used by consumers who buy multiple sizes only to return most of them, and also by consumers who may purchase, wear once and then return. If this segment is the younger, less frequent shopper, then the increased cost of delivery will not be offset by incremental revenue per transaction or frequency. I do not see that Macy’s is focusing on a specific customer segment and so fear they are simply raising their cost of doing business without offset revenue.