In this Placer Bytes, we dive into the office supplies sector and the data from Macy’s outdoor concept - Market by Macy’s.
Office Supply Wars?
While not quite as catchy as the Chicken Wars the battle for supremacy in office supplies warrants notice, especially with Office Depot recently rejecting a Staples acquisition offer. Looking at both brands, there is a clear narrative guiding the conversation around the sector - how can it survive? And there is some legitimacy to this concerned perspective. Average monthly visits for the two brands were down 7.4% and 5.7% respectively in 2019, and 19.0% and 21.2% respectively in 2020. Now clearly the latter was affected by COVID, but even pre-pandemic January and February marked significant year-over-year losses for the two brands.
So what’s the upside? Just as the home has become a more central focus driving massive surges to brands from Home Depot to At Home, the rise of working from home, could drive a similar rebound for the office supply sector. And the data lends this concept some validity as well. The year-over-year visit gap in December for both brands was the lowest it had been since the beginning of the pandemic. Staples saw visits down just 5.5% year over year, while Office Depot was down 9.5%. For both, it marked the second-best visit mark of the year apart from February - which benefited from an extra day in 2020. And the trend could already be seen in the spring - prompting us to place them on a list of brands to watch.
And weekly visit numbers make the prediction seem even sounder. Since seeing visits drop severely alongside other retail categories as COVID cases surged in November, both brands have seen steady and fairly consistent recoveries. For Staples especially, the end of year momentum carried into 2021. The weeks beginning December 28th, January 4th, and January 11th saw visits down just 9.3%, 5.9%, and 1.7% respectively continuing to shrink the visit gap.
This may also shed light into why Staples was so keen on acquiring its competitor. While Staples holds a much larger visit share, the rate of return may be giving the brand more confidence that it can in fact compete with digital pressures from Amazon and a wider consensus that the overall sector could be in trouble. And considering the latest visit data, they just might be correct.
Market by Macy’s - Redefining the Macy’s Mix?
Macy’s recently announced the launch of a second Market by Macy’s concept in Texas, apparently signifying the success of the first, which was launched in February. This is part of a wider rightsizing effort, one that Macy’s appears to be handling very strategically, where the retailer is launching outdoor locations while also closing existing branches. But what did the first Market by Macy’s location do to drive the initial excitement?
When the location first launched, visits outpaced those of other apparel retailers in the Southlake Town Square shopping area. Unfortunately, that initial excitement was unable to last as it coincided with the onset of the pandemic, pushing visits to plummet in March and April. Yet, upon the brand’s recovery, visits hit a steady pace before surging in the holiday period, again ahead of other retailers in the same area.
Looking more closely at this key holiday period, we compared performance to other apparel retailers and other nearby Macy’s locations. Critically, without year-over-year data it is hard to make an exact comparison, but the differences are still enlightening. When taking the 11 weeks from the week of November 2nd through the week beginning January 11th, average weekly visits to Market by Macy’s that were 54.0% and 227.1% higher than two other major nearby apparel retailers. And this shows why the brand is so excited about the potential of outdoor locations - they enable the brand to reach audiences in different locations where they could potentially outperform. However, during this same period, the location saw 63.9% less average weekly visitors than a group of traditional Macy’s locations.
Does this mean that the new format is doomed? Of course not. But it does likely mean that the focus of these specific locations will be different than traditional locations. If utilized properly, this could enable Macy’s to reach different parts of its vast market with a more focused and tailored approach, optimizing everything from the size of the space to the merchandise available.
Taking this idea further would indicate that what we are seeing with Macy’s is likely a move to better focus its retail fleet. This push to optimize via rightsizing and new formats, if done effectively, could be exceptionally exciting as it would allow the brand to maximize the reach of its standard retail format while adding a new element to its retail mix - one that can be targeted to specific locations and audiences. Additionally, if the latter effort works, it could also filter back to the standard department store fleet driving more innovative approaches to how those locations operate. All in all, it speaks to an important test that could help the brand brighten its future outlook.
How will the office supply battle shake out? Will Macy’s find strength in its optimization efforts? Visit Placer.ai to find out.
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