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How do you create economies of scale while building customer intimacy? Ask Macy's!

How do you create economies of scale while building customer intimacy? Ask Macy's!

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Six lessons from retailer Macy’s in
how to attain scale economies while
building customer intimacy.
Six lessons from retailer Macy’s in
how to attain scale economies while
building customer intimacy.

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Categories:Types, Business/Law
Published by: Wilson Perumal & Company on Apr 10, 2013
Copyright:Attribution Non-commercial

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09/20/2013

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 Volume 2011|Issue: 1
 Localization with Scale:
 A winning strategy or sustainable proftable growth
Six lessons rom retailer Macy’s inhow to attain scale economies whilebuilding customer intimacy
 
It is a common corporate cycle: migrationto centralization
—in the pursuit o scale—ollowed by a period o decentralization—inthe name o customer intimacy and marketresponsiveness. Each wave can causeupheaval and customer conusion, andneither, as it turns out, is usually satisactory. The act that companies yo-yo back andorth between the two refects how rarelythey nd a stable, satisactory solution.In act, we would argue, centralization vs.decentralization is not only a alse choice buta dangerous one, as it can lead companiesto neglect customer needs and insights in thepursuit o scale economies, or conversely,become awash in complexity in the name o customer responsiveness. Both paths leadto poor outcomes. Instead, we suggest adierent route:
understand where scaletruly matters in your business, createmechanisms or capturing and leveragingcustomer insight (without creatingcomplexity), combining both to create aproftable business with good economicsand competitive dierentiation.
 As simple as that sounds, it is hard to do. That is why
My Macy’s
, the initiative launchedin 2008 by retailer Macy’s, is so notable.Under the leadership o CEO Terry Lundgren,the $25 billion retailer has undertaken acomplex organizational change, recognizingthat the needs and preerences o customersare signicantly dierent rom place to place. The goal o the change is simple: that anycustomer in any part o the country will walk into his or her local Macy’s and say, “This ismy store.
This is my Macy’s.”
Macy’s Snapshot
Founded in 1858
 CEO: Terry Lundgren, since 2003
 Operates 850+ departmentstores under the Macy’s andBloomingdales brands
 Fiscal 2010 sales of $25 billion
 Headquartered in Cincinnati andNew York City
 166,000 employees
 
2 This act o localization has already reapedsignicant benets or Macy’s (see Figure1). As Terry Lundgren puts it, “I youlook around, the retail landscape hasdeteriorated, not strengthened. But ouroutlook is going the other way, and I believeit is because o timing and execution. We’regetting better at our job.”
I you look around, the retail landscape has deteriorated,not strengthened. But our outlook is going the other way,and I believe it is because o timing and execution. We’regetting better at our job.
–Terry Lundgren
Macy’s begins to break awaywith ar higher same-storegrowth vs. competionMy Macy’s roll out15%10%5%0%-5%-10%-15%
   J   a   n   0   9   A   p   r   0   9   J   u   l   0   9    O   c   t   0   9   J   a   n   0   9   A   p   r   1   0   J   u   l   1   0    O   c   t   1   0   J   a   n   1   1   A   p   r   1   1   J   u   l   1   1    O   c   t   0   8
Figure 1: Macy’s perormance against competitors
Source: Macy’s monthly same store sales gures come rommacysinc.com; Data or competitors come rom the US Censustracking o all department store revenues (NAICS 4521; lessMacy’s revenues)
Macy’s same-store salesCompetitors’ sales
% change rom12 mos. prior+5%-1%

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