Macy’s Retail Experience Risk: The Billion Dollar Lesson

With the holiday season fast approaching, it is a smart time to seek lessons from retail customer experience leaders and laggards. At the root of those lessons is the importance of honoring customer promises and creating a holistic experience across your business (whether retail or any other sector). We have a billion-dollar example to share, from seasonal favorite and retail customer experience leader, Macy’s.

Today we are talking about the source of 6% of Macy’s revenue which, in 2023, equated to $1.5 billion of Macy’s annual $24.45 billion revenue. This is the revenue that comes from Macy’s furniture department, the site of a significant customer experience breakdown that uncovers the experience vulnerabilities of working with third-party vendors. And the imperative to align CX strategy with business strategy.

What Macy’s Gets Right About Customer Experience

Before we highlight this lesson, let’s take a moment to look at the overall view of Macy’s customer experience. Notably, Macy’s gets a lot right with customer experience. Their revenue arc over the last few years is a testament to that. In 2023, the fourth quarter gross margin rate was 37.5%. That was up 340 basis points year-over-year. Additionally, 2023 saw the department store achieve full year net sales guidance and exceed adjusted earnings guidance.

Macy’s has made strides in personalization and introduced a variety of intuitive, engaging technologies that give shoppers more autonomy and creativity, and save them time.

Macy’s Promise: A Bold New Chapter

The introduction of innovative digital tools, new advances in in-store design, and other CX initiatives are consistent with the department store’s “Bold New Chapter” announced early in 2024. Macy’s states the Bold New Chapter is “designed to challenge the status quo to fundamentally reposition the company, enhance the customer experience, deliver growth and unlock shareholder value.”

Looking back at 2023 and ahead to the new chapter, Tony Spring, chief executive officer of Macy’s, Inc., praised employee teams for “their continued commitment to our customers during the holiday season.” He also noted the department store “delivered an improved omnichannel experience… and a clear demonstration of value that resulted in a strong close to the year.”

But what happens when $1.5 billion of your revenue comes from a source you do not control? A source that breaks your much hailed, investment-heavy omnichannel experience?

Third-Party Vendors for Furniture Sales

Third-party vendors manage Macy’s furniture orders. These vendors, both retail and non-retail, partner with the department store through Macy’s Marketplace to provide merchandise like furniture and home decor. Macy’s Marketplace promises shoppers a seamless purchasing and shipping experience. Though a Marketplace purchase is actually completed between a shopper and the third-party, the aim is the shopper feels like they never leave Macy’s. Ostensibly, that process from order through receipt of product is designed to be easily completed on the store’s website and app.

In this context, the Macy’s Marketplace promises an effortless end-to-end customer journey. In keeping with best practices, such a journey includes transparency across channels relating to order status, shipment, and payment. Aligned with the Bold New Chapter CX promises, customers should expect empowered call center employees to address problems with one-call resolution. And an integrated help ticketing system that does not require a customer to interface with multiple companies to resolve issues.

What we learned is the expected experience is not guaranteed. And the absence of integration exposes serious experience vulnerabilities related to third-party vendor relationships with major retailers.

Risk for CX: The Third-Party Problem

One of the greatest risks third-party vendors pose for customer experience is lack of clarity to the customer about who the seller is. By extension, there is lack of clarity about accountability. Here is where maintaining the perspective of the customer is critical. The customer is not aware of – and does not need to be aware of – the mechanics of your operation. When the customer accesses a product through a Macy’s website, or any other channel in the branded Macy’s space, the customer perceives they are interacting with the Macy’s brand. There is no clear communication to the customer about the complexity of the third-party relationship. Or that a third-party relationship exists.

More significantly, the customer receives no information about what to expect from a third-party affiliated transaction. Or how that might differ from their expectations of Macy’s. Again, Macy’s is a storied brand with loyal customers whose affinity for the experience often stretches back generations. Think of the brand awareness and loyalty that come from the 28.5 million viewers who watched the Macy’s Thanksgiving Day Parade last year, alone.

Shoppers are right to have a set of expectations from the brand. It is incumbent upon the brand to fulfill those expectations. And to include a unified customer experience in their agreements, processes and procedures with third-party vendors.

Absent arrangements like that, shoppers face failed integration that breaks customer experience. They can’t access or change orders. They can’t attempt to receive timely updates. And, most significantly, when a customer reaches out to Macy’s – the brand they know, trust, and assume they have been interacting with directly – customer support does not know how to help. In some cases, customer support cannot access any information about the order at all.

Case Study: How a CX Expert was Burned by a “Macy’s” Furniture Purchase

Recently, I made a furniture purchase over the phone using my Macy’s store credit card. Following my phone order, I received an email stating the purchase was complete. However, I never received shipping information, updates, or communication of any kind on my Macy’s app or via email. I could not access shipping information on any digital channel I tried to access.

So, I reached out to Macy’s customer support via phone. What unfolds is a snapshot of the billion-dollar customer experience lesson and how important it is to build cohesive customer journeys, implement customer-centric communication, and empower employees with data and autonomy to provide the help customers seek. Imagine how many customers third-party vendor relationships affect and how much revenue is at risk, both for the furniture department, and the brand overall.

Customer Care Retail Experience Fracture

The agent with whom I spoke told me the transaction never took place. As such, she said, Macy’s would not charge my card. After confirming there was no charge on my card, she explained the order number I provided from the one email I received right after completing my phone purchase, “does not exist.”

Such things happen, she said. And so, I would have to order my item again. The agent refused to match the discounted price of the original order, so I asked to speak with her supervisor who might be able to authorize more personalized customer recovery efforts. When I connected with the manager over the phone, he apologized. Then, he gave me an even bigger discount and ordered the piece of furniture again. This felt like the Macy’s customer experience I and my fellow shoppers expect from the storied department store.

The Recovery that Wasn’t

But this is not the end of my story. Soon after, two identical pieces of furniture arrived at my home. And my card was charged twice. Confused, I called the number on my Macy’s credit card statement. The agent I reached informed me he could not do anything about the double charge because he could not see any of the transactions. He further explained he could not access any more information because the purchase was tagged as an “online purchase.”

I continued to clarify that I had made the purchase over the phone. The agent responded that “online purchase” is what they call all third-party orders. Learning that the purchase was made with a third-party for the first time, I concluded I should connect with someone at Macy’s who could resolve my issue, return the unwanted order, and get my money back on my Macy’s card.

In response, the agent tried to transfer the call unsuccessfully. Then he said he could not connect my call because “they were too busy.” The wait would be 45 minutes. When I offered to wait, the agent said no. Instead, he gave me the direct number to call at another time. Keep in mind, this number appears nowhere on the Macy’s credit card statement.

A Secret Phone Number

Let’s look at this through the lens of the customer journey and best practices of customer-centric communication. The phone number on the credit card statement is not valid for the (common) scenario in which a shopper makes a Macy’s website or phone purchase from what turns out to be a third-party vendor. Because those items are actually sold by a third party, Macy’s customer service has no information to enable them to provide service.

Further, the customer receives no information about that third-party relationship, what kind of communication to expect, or how to resolve issues that occur related to the order. In fact, there is no communication to educate or empower the customer before, during, or after the purchase. At this point, I was interested, not only as an individual shopper who had an extraneous piece of furniture and a bill twice as high as it should be, but as an advocate for and creator of seamless, unified experiences.

To be honest, I was shocked a brand like Macy’s could be so sloppy. And that the store’s reliance on third-party vendors, especially in the furniture department, left it this vulnerable to uncontrollable, fractured customer experiences. I called the secret number and filed a request for reimbursement on the second order since I made that order only because I was told the first did not exist.

In response, I learned three things. First, I would not receive ANY communication about this ticket. Second, Macy’s would ask the third-party vendor to reimburse me, but that “may or may not happen.” And third, I would not receive any communication from Macy’s on the matter. Instead, I should search my Inbox for an email from the third-party vendor.

There is no email in my box. And no refund on my card.

The Solution to Failed Integration

There are two ways to resolve the issue of the failed integration my experience highlights. A brand like Macy’s can successfully execute either, when their CX strategy is aligned with their overall business strategy. The first approach is to put the parameter on third-party vendor relationships such that the distributor owns all customer touchpoints. In this scenario, that means full integration with Macy’s systems. The customer never leaves the Macy’s space, and the experience is seamless from one touchpoint to the next. This requires reliable, consistent data sharing and integration between vendors and the distributor.

A second approach is to reroute the online end user (the shopper aiming to access information about or make changes to their order) directly to the third-party vendor. In this scenario, the Macy’s website (the destination shoppers understand as their trusted point of contact) serves as an aggregator for its vendors. From the moment the customer moves from the aggregator to the third-party vendor site, all financials and communication exist between the customer and the third-party. Notably, this opens the distributor to some level of risk. Even when the departure from one company to the next is direct and easy to understand, shoppers expect some measure of the Macy’s experience because they originated their purchase at Macy’s, or accessed the item for the first time trough Macy’s.

However, transparent customer communication and a clear designation between distributor and vendor does ease the painpoints along the customer journey. And it enables shoppers to complete the tasks they set out to complete by connecting them with the right options and support.

The Billion Dollar Lesson is Bigger than the Bold New Chapter

Macy’s Bold New Chapter promises to challenge the status quo to enhance customer experience. They are investing in innovative technology and making big bets on personalization. All of that is strategically smart. What is strategically irresponsible, however, is promising future-ready, unique experiences to new and loyal customers, but failing to deliver on the basics like fulfilling an order, keeping a shopper informed, and issuing refunds.

Like any brand looking to excel, Macy’s needs to take responsibility for customers’ seamless end-to-end journeys. But you cannot be responsible for what you cannot control. And you cannot control what you do not own. Third-party vendor relationships provide strategic value to retailers, even retailers as large as Macy’s. But the vulnerabilities that arise when those relationships erode customer experience and violate brand promise can outweigh their value.

The key lies in aligning customer experience strategy and business strategy. This empowers your brand to create third-party SOPs that keep continuous delivery of customer care across environments. And to make the needs of the customer central to your operation. From there, it becomes easier to leverage CX technology that helps provide a holistic approach to meeting customer needs, and customer-centric communication that informs and guides customers.

At the end of the day, the brands customers celebrate during the holidays and beyond, are those that deliver on their promises honestly and empathetically. For help with your strategic alignment and building customer-centric journeys ahead of the new year, schedule time with us.