Wednesday, May 11, 2011

Why Mail Matters: Macy's

Macy's today announced its First Quarter 2011 earnings this morning and provided another clear indication that the courier, express and postal industry provide the an increasingly important role by delivering web based sales to consumer's homes. 

The description of Macy's sales in the press release provides an indication as to how important web-sold and home-delivered sales are to Macy's

Sales in the first quarter of 2011 totaled $5.889 billion, an increase of 5.7 percent, compared with sales of $5.574 billion in the same period last year. On a same-store basis, Macy’s, Inc.’s first quarter sales were up 5.4 percent. Online sales ( and bloomingdale' combined) were up 38.3 percent in the first quarter. Online sales positively affected the company’s same-store sales by 1.3 percentage points in the first quarter. Online sales are included in the same-store sales calculation for Macy's, Inc.
A back of the envelope calculation provides a rough idea what this growth means to FedEx, UPS and the Postal Service.   
  • For on-line sales to have such a large impact on Macy's total same store sales, home web-based and home-delivered sales has grown from 14.5% to 18.4% of Macy's retail revenue.  
  • If one assumes that an average shipment has a $200 invoice amount, Macy's first quarter home deliveries grew from just under 4 million in 2010 to 5.4 million.    
  • If Macy spends on average $7 per shipment, then it spent nearly $40 million on parcel delivery and express charges in the quarter.
Macy's illustrates how the business of FedEx, UPS and the Postal Service is changing.   Increasingly parcels that would have been delivered directly to stores are shipped less frequently or in fewer boxes.  

Instead, shipments need to be sent from warehouses to homes.   All three carriers are working to adapt to this change.  

One of the results is the growth of the Postal Service's Parcel Select and Parcel Select Return services as these services fit the needs of Macy's for inexpensive and reliable home delivery.   The challenge for the Postal Service is to try to figure out how it can improve its ability to integrate the last mile with the first miles of other carriers to reduce the time from order-to-delivery and make the customer's delivery experience as good as the products Macy's sells.

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