Macy’s is a company that has mastered the art of customer segmentation. For example, the My Macy’s localization initiative created customized inventories at each store location specific to demand in the store’s geographic area. Now, Macy’s is reinventing itself for a new generation of customers. At the same time, the company is retaining its appeal to Baby Boomers.
Last year, Macy’s realized that it wanted to do business with people aged 13 to 30. Millennials spend approximately $65 billion each year for the types of goods that Macy’s sells. To broaden their GenY appeal, the company has launched a new line of clothing called Bar III. Macy’s also hosted winter beach parties at 10 college campuses to persuade Millennials to buy their spring break supplies from Macy’s.
Macy’s successes came from the company’s understanding of different demographical preferences – they knew how to market to one group vs. another, and they made definitive decisions on just how best to do that.
Ann, Inc. is another retail giant trying to target two generations. Sales from Ann Taylor, the company’s professional clothing line geared toward Baby Boomers, accounted for only 25 percent of sales from Ann, Inc. stores last year, a decrease from 40 percent five years ago. Ann Inc.’s Loft stores, on the other hand, target Millennials by stocking both casual and professional clothing. This year, Ann, Inc. predicts gross margins of 55 percent, up from 50 percent in Q4 of 2011. Keeping its two brands segmented has ensured that Ann, Inc., remains viable.
Talbot’s hasn’t fared as well. In its effort to reach beyond the “professional woman” demographic, Talbots started stocking multiple lines of clothing under the same roof and reaching out to both kinds of customers in its blended direct mail. Its failure to segment has meant bad financial news for Talbots. The company has been for sale for months.
The company is a living example of how important it is to understand that when you market across generations, you can’t have only one message.
Macy’s, instead of sending out blended direct mail, sends out customized catalogs to its customers based on their buying history. The company once reportedly produced a print run of 30,000 different catalogs. As a result, Macy’s online sales increased a whopping 40 percent last year, and its same-store sales increased 4.1 percent in May 2012.
Successful retailers like Macy’s and Ann, Inc., have maintained relationships with Baby Boomer customers. At the same time, these companies have adapted to appeal to the Millennial generation, which is just beginning to flex its buying power.