Out-Amazoning Amazon - L2 Insight





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Published on Dec 3, 2015

In Macy’s 2014 annual report, the company mentioned “multichannel” 26 times. E-commerce was not mentioned once, despite being up 30% year-over-year.

Macy’s has long been one of the most successful omnichannel players, having to take on pure play Amazon head-to-head in several of their product categories.

While Amazon has made tremendous investments in last-mile fulfillment, they currently boast about 66 fulfillment centers in the U.S. market.

However, by shipping from their store locations, Macy’s is able to have 775 unique points of distribution against servicing the U.S.

Macy’s has not been the only omnichannel player to take on Amazon head-to-head from a fulfillment capacity. Target boasts a lower free shipping minimum of just $25 on their site, versus Amazon’s $35.

Both Target and Walmart have also been quite aggressive around curbside pickup. Target currently offers curbside in 11 markets, while Walmart is piloting in about 5 markets in the U.S.

However, when you look at great omnichannel players, many of them—namely Macy’s—have taken a hit in the stock market recently. If you look at what’s happened over the last six weeks, Macy’s stock is down more than 40%, prompting them to enter new product categories like consumer electronics for the first time, in partnership with Best Buy.

While we believe the omnichannel investments that Macy’s have made set them up well for the longer term, the weather, the product categories that Macy’s sells in, as well as consumer demographics, are definitely challenging for them over the shorter term.

With the organizational realignment they made in January of 2015, putting together their buying teams across Macy’s.com and the store’s environment, they also had to make some key compromises around endless aisle capabilities.

Over the longer term, they're going to need to figure out how to compete on endless aisle as the try to take on Amazon head-to-head.

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