Interview: A Macy's Fragrance Experience Points To The Future Of The Department Store
Trevor Sumner, CEO of Perch Interactive, discusses how the retail marketing tech company created a dynamic fragrance experience for Macy's, as well as why today's department stores should focus on engaging, digital-rich, limited-time experiences to compete with their DTC counterparts
Department stores are continually experimenting with new formats and concepts to remain relevant and drive engagement in the face of tough competition from ecommerce and niche brands. While Bloomingdale's took a rotating carousel approach to its merchandising strategy, Selfridges has taken a live-theater tactic, integrating a space for events as well as a skateboarding ramp into its London flagship.
American department mainstay Macy's has experimented with various store innovations and experiences over the past few months, from Facebook and holiday popups to large-scale VR installations, and is now slated to launch an interactive fragrance experience to bring its beauty department to life this spring, made possible by retail marketing technology company Perch Interactive. PSFK caught up with Trevor Sumner, CEO of Perch, to learn about what dynamic olfactory discovery can accomplish for the retailer, as well as why he sees opportunity and a favorable future for department stores that focus on leveraging the excitement associated with in-store shopping and use their physical footprint to create unique, limited-time experiences.
What spurred the collaboration with Macy's? What did the retailer hope to achieve for its stores by seeking Perch's assistance?
Macy’s was looking at its online customer behavior and realized that when its customer shopped for fragrance, she would search by fragrance family, like sweet, citrus or floral. However, in-store, because brands pay co-op dollars to make sure that their product marketing messaging is properly represented, fragrances are organized by brand, like Dior, Gucci or Chanel.
This business model with co-op dollars and brand promotion is actually at odds with how consumers want to shop for products. This problem can’t be solved unless you are able to bring that brand messaging in-store and allow shoppers to explore by fragrance category.
The prospect of solving this problem is what inspired this collaboration. Macy’s wanted to redefine the fragrance destination to allow its shoppers to shop for fragrances the way they desire to, and enable the brands to maintain their product messaging and its integrity.
In practice, if you were to pick up Dior content, Julia Roberts would come up. If you were to pick up Sauvage, you can learn about the brand’s company history, intention behind the design of the bottle, tasting notes, videos and more. In addition, each product has a QR code enabled for mobile app downloads, allowing a shopper to scan a product, pay through the mobile app and pick up from the in-store merchandiser.
We worked with the Macy’s team on designing this intentional seamless experience, and It has been a wonderful collaboration with an innovative partner. It is a really powerful way to merge the best of both worlds giving brands the ability to deliver the digital media that keeps their brand marketing intact and drives 30-80% sales lift, while allowing shoppers to discover products with the serendipity that they enjoy when discovering fragrance families.
How do you think ecommerce has influenced a transformation of department stores, and physical retail more broadly? What are some of the ways you've seen department stores evolve, and how does Perch fit into that?
In-store is 90% of retail sales right now, and represents a $4 trillion market. In ecommerce, Amazon owns 50% of that market, so is ecommerce dominating or is Amazon dominating?
The cost of acquisition is higher online than it is in-store, actually doubling in the past two years. Furthermore, return rates are lower in-store than they are through ecommerce platforms, with the cost of delivery infrastructure being another problematic factor online compared to in-store.
I would argue that physical stores have been dominating, with ecommerce taking a respectable share. However, if we look at direct-to-consumer brands like Warby Parker and Casper, they are opening more physical stores and selling more product in those physical stores than they are selling online. Clearly, physical retail is dominating, with ecommerce being a shiny new tool for brands to leverage.
I think the heart of the issue is how department stores have been competing with DTC brands, who are developing a more authentic brand message and connecting to their clients. A department store has a plethora of products and product categories, making establishing an authentic connection with clients a bit more of a challenge.
The biggest opportunity for department stores is to create engaging, digital-rich, limited-time experiences. Macy’s is an exceptional example of this, which can be seen through its investments and acquisitions of companies like b8ta and Story, its partnership with Facebook as part of its “The Market @ Macy’s” initiative, the launch of the Samsung Experience and its mobile app penetrations, which are far beyond any other retailers'. All of these components are creating a dynamic destination that drive engagement and dwell time.
On the whole it has been exciting to see how fast innovative companies like Macy’s are moving. You see it in their financials, where they snapped 12 straight quarters of same store sales decline, and now they have had three or four quarters of straight growth. The teams that are embracing digital and innovation are the teams that will succeed.
Describe how the fragrance experience works, and what it accomplishes for the shoppers as well as for the retailer.
The fragrance experience is a destination where, after a customer walks up, they will be prompted with a sequence of questions that will assist the customer in identifying the fragrance that will be a good fit for them. These fragrance recommendations are based on their interests and brings a new level of personalization not seen at this scale for this product category.
In addition, customers who engage with the experience will be able to get the product information that they care about, like ratings and reviews, the strength of a scent and when they should utilize the scent. There is a concept of wardrobing in fragrance, where you do not simply have one fragrance, but you have a collection to choose from depending on your need at that time. Having this information available in-store will help customers gain insight on which products will be a good fit for them, which will accelerate the overall buying process.
The retailers see 30-80% sales lift across all deployments. Furthermore, these deployments are usually paid for by the brands, who are attracted by the possibility of a premium promotional real estate, where dwell times and engagement will be significantly higher than the traditional co-op model. The reality is that if you are a fragrance brand/company, you cannot afford to not be part of the Macy’s fragrance destination island.
Ahead of your launch in May/June, what consumer insights do you hope that the experience could yield?
The Macy’s fragrance experience will be launching in-store in late May or early June, but so far the response from the Macy’s team has been outstanding.
We are extremely excited by the consumer insights that we will be able to analyze once the experience is officially launched. Right now, retailers have insight into store traffic and sales data. However, a pivotal part of the sales process that has been missing is, what are shoppers doing in the middle of the funnel before they convert to a sale?
With our experience, we will detect how many people walked by a display, how many people approached the display, how many people who approached the display touched the products, how many people who touched products interacted with the screen and how long they interacted with the screen. All of this information will give Macy’s deeper insight into the behavior of its customers before they finally buy. With these middle-of-the-funnel analytics, Macy's will be able to A/B message test each product, monitor real time changes to engagement and ultimately generate more sales.
This data creates the possibility of another revenue stream for the retailers providing this premium real estate. The retailers can sell the user engagement data to the brands, so the brands can improve their in-store messaging, product presentation and price. All of that middle of funnel behavior is now available to the retailer and brands, because of Perch.
What do you think could pave the way for a successful future for department retailers like Macy's? What strategies will we see them turn to?
I think ultimately department retailers need to leverage the excitement associated with the in-store shopping process. I think a huge opportunity for these retailers is leveraging their spaces to create unique limited-time experiences like “The Market @ Macy’s” initiative, which frequently brings in different direct-to-consumer brands. This creates buzz around physical locations, and a level of urgency for the consumer to come in often to the retail space so they could experience something new.
In addition, I think department retailers could do a better job of leveraging their online data to improve their local marketing initiatives. They should leverage their CRM data and gain deeper insight on their customers to discover what inspires them to come in store. With this data, the retailers could design promotional experiences that drive traffic to the store, improve engagement and increase dwell times.
More broadly, what do you imagine the future of brick and mortar could look like, 1-2 years out?
I think 2019 is going to be an interesting year for brick and mortar. 2017 was the retail apocalypse, 2018 was retail reinvention and 2019 is the return of the king.
People realize 90% of retail is brick and mortar, and as a result we will see more concept stores and three-month build outs, similar to Showfields. We are going to see places where brands will go into physical spaces and engage with customers without worrying about the fixed cost overheads that make it prohibitive to test physical spaces. We are going to see more agile models with increasing pressure on DTC brands to go in-store, but with smaller footprints.
For every organization that is closing a store, there are two organizations that are opening one. It is a matter of smaller spaces that are more experiential, as opposed to towering static warehouses. We are going to see rapid adoption of embedded sensors, screens and better payment processes.
The industry is talking about how the store is a form of media; however, why is there seldom digital media in-store? Remember when you first got Uber, and how cool and unique it seemed that you could get a ride anywhere at anytime, but now has become the standard for ridesharing? We are in a similar space with retail at this time, where shoppers are going into Kate Spade, Jo Malone or Macy’s and they are going to have these unique experiences that will become industry standard and expected by all shoppers.
Lead image: stock photos from andersphoto/Shutterstock