Is Macy's new loyalty program missing the big picture?

Macy's Herald Square
Will a new loyalty program be the answer for Macy's slumping sales?

Macy's has announced a revamp of its customer loyalty program. Known as Star Rewards, the new guidelines will allow shoppers to collect points for offers such as free shipping and priority customer service. But is this new loyalty program the answer to Macy's traffic and sales problems?

Simplifying the once-complicated description of loyalty levels, Macy's will now call the three levels of credit card holders silver, gold or platinum. Members are automatically upgraded to the next tier when their annual spend reaches a certain level. 

But will this update ultimately help produce profits at Macy's? Jared Blank, senior VP of data analytics and insights for Bluecore, is doubtful. 

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"Macy's is getting squeezed on the bottom end by discounters like TJ Maxx and Ross that appeal to value-driven consumers," Blank told FierceRetail. "They're squeezed because of the traffic falloff at the B- and C-level malls where so many Macy's doors are located. They're squeezed because younger consumers have so many value-driven options from fast-fashion retailers and digital-first brands. They're squeezed because their fragrance business is being chipped away by service-oriented, accessible luxury retailers like Ulta and Sephora. They're squeezed because their large midprice apparel business is shifting to Amazon. And on and on."

But Blank believes that Macy's revamped loyalty program in no way addresses any of these issues, unless the program is just designed to buy the retailer time while it addresses the real issues.

"This is a put-out-the-fire initiative to try to stem the revenue decline from their top-tier customers. So perhaps if we look at this as the first step in a long road to address massive shifts in the industry, it's perfectly OK," he said. 

As an example, Blank cites a similar shift in Best Buy's business about five years ago. At the time, the retailer launched a massive Renew Blue initiative that used a deep understanding of the customer to roll out changes to how the company runs its business. Data drove this strategy. 

RELATED: Macy's holiday hiring mirrors sales slump

"Deep understanding of customers drove merchandising and marketing decisions. Smart," he said. 

Or, as another example, Sears' Shop Your Way program attempted to address the chain's shrinking customer base and at first, showed promising results. But ultimately, it did not address the underlying problems with the business and Sears' profits continue to decline. 

"A loyalty program has a place in the marketing mix, but it won't accomplish much if the company isn't offering its customers products they want at a clear value. Macy's has a host of issues they need to address around their value proposition, product mix and their huge store footprint that sits inside dying malls before changes to a loyalty program will make a real impact," Blank added.

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