February 13, 2020

A Classic File Power Catastrophe

Macy's, known in 2014 as "America's Omnichannel Store" by a Management Team no longer associated with the brand, represents a Classic File Power Catastrophe.

Think about it this way ... it's likely you run some sort of analysis that corroborates what I've analyzed. You have a customer, a pure retail shopper. This customer is expected to spend $400 in the next year. Then, you demand that the customer interact digitally with your brand. And the customer listens to you! She purchases online.
  • Old Trajectory = $370 in-store, $30 online.
  • New Trajectory = $270 in-store, $170 online.
For this customer, you just lost $100 of in-store File Power. Meanwhile, your brand gained $140 of online File Power. The brand benefits by $40, but the in-store retail channel suffers.

Now imagine what happens when Macy's does this "at scale".
  • Stores lose a third of their traffic.
  • Between 2016 - 2020 (projected), Macy's will have closed 30% of their stores. Thirty percent!!!
Guess what happens when you close a store?
  • Old Trajectory = $270 in-store, $170 online.
  • New Trajectory = $50 in-store (at other stores), $200 online.
You take a customer with $440 of File Power and convert the customer to one with $250 of File Power when you close a store.

I've been analyzing store / online dynamics since early 1996. This pattern repeats, over and over and over again.

The same pattern happens in catalog marketing when you convert the customer from old-school channels to online marketing channels.

It repeats.

Over and over and over again.

And we keep repeating the same mistakes, over and over and over again.

You measure File Power, and you forecast what is likely to happen in the future, right?

If you don't measure this stuff, you become Macy's.

If you measure this stuff and have great merchandise, you become Sephora, opening 100 stores in the next year.

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