If shoppers are looking for something out of the ordinary this holiday season, Macy's is hoping they'll hunt for it at one of its pop-up marketplaces.
The department store chain is beefing up this offering while adding new experiences, such as virtual reality headsets, to make shopping easier and, it hopes, to drive sales.
The retailer will be expanding "The Market @ Macy's" — a small, open space within its stores that rotates a handful of brands in and out — to two more Macy's locations, at Lenox Square Mall in Atlanta and Century City in Los Angeles, in November, bringing the total to 12 across the U.S. These shops are located at what Macy's says are some of its most-trafficked stores, including Herald Square in New York.
In a unique move, Macy's will partner with Facebook to add about 150 brands that currently advertise on the social media platform to sell in its shops.
"We've made lots and lots of changes at 'The Market @ Macy's' based on customer feedback," Marc Mastronardi, executive vice president of new business development at Macy's, said about what's happened since the retailer rolled out the marketplaces earlier this year. "We're bringing the brands to life."
One change is making the marketplaces larger. The newer locations in Atlanta and Los Angeles will be nearly double the size of the earlier "The Market @ Macy's" locations, according to Mastronardi. And the existing shops could grow over time, he said.
The pop-up marketplaces in Macy's stores are, also importantly, one way for the company to use its excess real estate as it tries to cut back on its inventory and stock fewer items at any given time as more retail sales move online. According to Coresight Research, online retail sales are expected to grow nearly 16 percent this holiday season from a year ago, capturing roughly 16 percent of total retail sales. This would be up from a share of 14 percent in the fourth quarter of 2017.
Many of the brands coming into "The Market @ Macy's" have never had a store before, Michelle Klein, director of Facebook's North America marketing division, told CNBC. Some names among the list of 150 include Love Your Melon, a hat and apparel company that donates 50 percent of its profits to benefit children with pediatric cancer, and Two Blind Brothers, a clothing company that donates its profits to research to cure blindness. The products will be sold in Macy's stores in early November and stay there through the new year.
This holiday season, shoppers should expect to see more retailers bringing experiences into stores, as so-called Instagram-worthy museums, where customers can pay money to take photos in glowing ball pits or rooms full of ice cream, are blanketing major metro areas. That's just one thing retailers have to compete with to win shoppers' dollars.
Companies — especially department stores like Nordstrom and J.C. Penney — are meanwhile looking for ways to stand out and compete with the ease of online shopping. Walmart is holding toy events in some of its stores this holiday season, for example, to try to give shoppers something they can't find on the internet.
Virtual reality headsets, mirrors
Some of the experiences by Macy's will be augmented by new technologies. The department store chain is adding virtual reality headsets to some of its stores to make it easier for customers to visualize furniture that is not stocked, or to use an app to "see" it placed in their own homes.
Macy's will have this technology in about 70 locations by November. Stores that already have it have seen customers' overall basket sizes rise by more than 60 percent, the company said. And the technology is also helping reduce the amount of returns made for purchases, according to Macy's.
In the beauty department, Macy's is in the process of adding virtual mirrors to some of its U.S. stores where shoppers can "try on" lipsticks and eye shadows. Similar to what it's doing with furniture, Macy's is working to add new features to its mobile app for shoppers to test beauty products using their cellphones.
To help with employee training, Macy's is rolling out the "Beauty Playground." The company considers this a "handbook" for employees, who it wants to be specialists. Using cellphones or tablets, employees can stay up to date on the latest trends and techniques in makeup and who the top beauty influencers are.
Macy's has already announced that it plans to bring on about 80,000 temporary workers this holiday season, in line with its initial hiring plans in 2017. Some of those individuals will be placed within "The Market @ Macy's" locations, Mastronardi said
Overall in retail, businesses are optimistic heading into the holidays, coming off strong quarterly earnings reports where many companies raised their full-year outlooks. Shoppers are expected to spend more this year thanks to tax savings and against a backdrop of record-low unemployment and strong consumer confidence in the U.S.
Macy's shares have climbed about 44 percent so far this year, bringing the retailer's market cap to about $11.1 billion.