This week, Macy’s announced that it is shaking up its discounting practices: The coupon system will remain in place for full-priced items, but the retailer is implementing a different strategy to get shoppers to pounce on its clearance merchandise. The move is effectively a bet that shoppers prefer simplicity over the thrill of demonstrating their shopping savvy. And it could serve as a test case for the broader retail industry, which is grappling with how to win over shoppers who seem less and less moved by everpresent discounting tactics, especially when the Web has made it easier than ever to compare prices.
Here’s how Macy’s new approach works: When an item is on clearance, you can’t apply coupons or other discounts to it. Macy’s said it will apply deeper cuts to the ticket price than it did previously, but the price you see on the tag is the price you will pay. The retailer has also moved all the clearance items to a centralized area in the store — one for men’s apparel, one for women’s — instead of having the racks scattered throughout the store.
So far, Macy’s has seen upbeat results from the change. In stores where it was tested, sales of clearance items were higher and stores were able to sell through the pieces more quickly. In fact, the retailer was so bullish on the tests that it has already rolled it out across its entire store fleet.
Experts say that, in some ways, Macy’s new pricing strategy is a logical change for the current shopping environment.
“With this radical price transparency that’s been enabled through e-commerce, this constant visibility to others’ prices, [retailers] just can’t afford to play games,” said Carol Spieckerman, a strategist at Spieckerman Retail. “Shoppers are on to their strategies and they’re annoyed.”
And in a moment where any shopper can take to Twitter or Facebook to vent about a frustrating experience, the straightforward approach could have some advantages over the complexity that can come with coupons.
“It would avoid some of the disappointment over the fine print of the coupon,” said Alexa Fox, an assistant professor of marketing at Ohio University who studies consumer behavior.
In a conference call with investors this week, Macy’s chief financial officer Karen Hoguet offered this explanation for why the change was getting traction: “I think what happens is, customers want simplicity. And when you are looking for deep clearance goods you could just see the price of the item and not have to do the math in your head. And it’s easier.”
Other retailers also seem to be giving consideration to making deal-hunting easier. While Walmart has long relied on an “everyday low price” strategy, the company emphasized season-long deals during the holiday shopping blitz instead of “one-weekend only”-type offers, saying the latter can be frustrating to shoppers. On Black Friday weekend, instead of staggering its specials over several days like it had done the previous year, it unleashed them all at once. Executives said that was because customers had asked them for a simpler deals schedule.
And in a Thursday conference call discussing Target’s fourth quarter results, chief executive Brian Cornell repeatedly said that “broad, simple” promotions, such as its Cyber Monday offer of 15 percent off the entire site, were fuel for the retailer’s strong online sales growth in the quarter.
In other words, these were deals that required little effort from the shopper, that didn’t reward an afternoon spent scouring deals apps or snipping away at newspaper circulars for a pricing victory.
“Shoppers are indeed looking to streamline the shopping experience, and simplification is a part of that,” said Mary Brett Whitfield, senior vice president at Kantar Retail. “Not just as it relates to deals, but also simplifying routines” by, for example, getting in and out of a store more quickly.
Still, there are potential risks to Macy’s approach. Fox recalls JCPenney’s ill-fated attempt several years ago under former chief executive Ron Johnson to move away from promotions to so-called “fair and square” prices.
“Shoppers felt that it took away a little bit of that sense of achievement,” Fox says, when they didn’t get to play the coupon and promotions game.
And then there’s a question of whether separating clearance items from the regular-priced goods will be a help or a hindrance. Some experts and Hoguet, the Macy’s executive, say it could make the full-priced departments feel less cluttered or disorganized. And perhaps women hitting the full-priced racks are less likely to get sidetracked by a less-profitable clearance item.
But, that could also work in the other direction: Maybe clearance shoppers will be less likely to wander past a full-priced must-have. Marcie Merriman, a consumer-engagement consultant at EY, said, in general, segmenting merchandise this way might bring in a different shopper altogether.
“I think there’s a really good chance that you’re going to get more of your extreme value customer that [previously] might not come in at all,” Merriman said.
Macy’s will surely be watching this closely, especially since it is already aiming to lure a more budget-conscious shopper with its Backstage concept, an off-price chain that it has been piloting since last year. Other industry players will likely be watching, too, for clues on how their own shoppers might respond to a fresh approach to coupons or promotions.