An AI overhaul at Macy’s is fueling the 168-year-old retailer’s turnaround

After Macy’s launched its AI-powered “Ask Macy’s” shopping assistant in March, executives quickly noticed that one feature was a particularly big hit with customers. The chatbot’s “Complete the Look” virtual try-on feature invites users to upload a photo of themselves and then suggests different looks—either complete ensembles, or items to compliment what they’re wearing. Its popularity is paying off: Shoppers who use the feature spend almost five times more per session on Macy’s web site than those who don’t. 

Like many retailers, Macy’s spent a good chunk of the 2010s throwing spaghetti at the wall to see what stuck when it came to tech innovation. But now executives hold up “Ask Macy’s” as a model of the kind of innovation they are pursuing.

“Innovation needs to either solve a customer issue or unlock a customer opportunity or unlock better effectiveness,” says Max Magni, Macy’s chief customer and digital officer. Innovation for the sake of innovation just doesn’t cut it anymore, no matter how dazzling, he adds. 

Magni’s boss, Tony Spring, on whose watch Macy’s has staged an accelerating turnaround, hired him away from McKinsey in 2023 and made clear he wanted more focus and discipline in any innovation the venerable company pursues. “We are not buying shiny objects,” Spring told investors recently.  

Magni says that soon after he arrived, he jettisoned some 50 smaller innovation projects, finding them distracting, not relevant to shoppers, and not worth the time and money. One such project was live commerce à la QVC via streaming, which no customers were asking Macy’s for.

Indeed, much of Macy’s innovation lately has been focused on the nerdy things that make it a better retailer. Last year, it opened a state-of-the-art and highly automated distribution center in China Grove, N.C., that has allowed faster deliveries of e-commerce orders and better store inventory control; it’s also scalable to accommodate future growth. The company is also a leader in using AI, leveraging it to forecast demand and to better target suggestions to customers on Macy’s app.

Though not as dominant a retailer as it once was, Macy’s has a long history of innovation. Founded in 1858 in New York City as a dry goods store, Macy’s pioneered practices we take for granted now: It was the first retailer to set fixed prices rather than have customers haggle, and one of the first to have a Santa Claus in stores during the holiday season. 

In the early 2010s, it was also among the first of its retail peers to equip stores to also serve as e-commerce hubs for both order pick up and shipping, allowing it to quickly build a massive digital business. 

By the mid-2010’s, many retailers, from Macy’s and Target to Walmart and American Eagle Outfitters, were falling all over themselves to show Wall Street investors, who worried that Amazon was going to scorch traditional retailers, that they too embraced innovation. That led to a whole lot of silliness. 

Who can forget those beacons designed to zap you with special offers as soon as you entered a store, but which most people balked at? Or the now long-gone shoppable fitting-room smart mirrors that the likes of Macy’s, Nordstrom and Neiman Marcus were breathlessly touting as a modern way to shop? Or the augmented-reality goggles you were supposed to put on while shopping to imagine a whole look?

Today, the big chains continue to spend on tech, but more judiciously: Forrester Research estimates that U.S. retailers will increase their tech budgets to $113 billion in 2026, up 6.6% over last year. 

Nowadays, Macy’s is seen less as a pioneer in retail innovation than as a faster adopter of new tech. Where Macy’s has landed in the innovation sweepstakes is on a philosophy focused on improving the nuts and bolts of the core retail business, rather than on often expensive gimmickry. “They cannot possibly jump on every passing bandwagon. Some of those bets don’t pay off and the cost of capital is way up,” says Neil Saunders, managing director at GlobalData.

Macy’s doesn’t seek to use tech to dazzle its customers, who are focused more on the right fashions and on getting good prices, and aren’t impressed with things like drone delivery or other quasi-sci-fi services. “That’s not their core customer,” says Shelley Kohan, a former Macy’s executive who’s now a teacher at the Fashion Institute of Technology in New York.

Innovation of course can only go so far without a workplace culture that enables some sense of risk-taking, along with curiosity and experimentation. Macy’s was notorious in its industry for how siloed its teams and culture were, characteristics that impeded prior turnaround efforts until Spring, CEO since 2024, instilled a culture of self-examination and an ability to admit mistakes before quickly moving on. “I didn’t hire you to fit into the culture, I hired you to break it and innovate,” Magni recalls Spring telling him early on.

The term “innovation” typically evokes cool new tech. But it exists in other spheres of corporate life too. In talent recruitment, Macy’s has updated its leadership development, with new moves such as giving each of its 200 vice-president leaders a one-on-one personal executive coach and using AI to offer similar training to 6,000 management-level staff. At the more analog level, Macy’s has also opened a museum-like Heritage Room, to showcase its history and foster pride among employees—and by extension, buy-in to make innovation work.

“It does always start with people, doesn’t it?” says Danielle Kirgan, Macy’s chief human resources and corporate affairs officer.

This story ran in the June/July 2026 issue of Fortune as part of a feature called “Innovation Giants on the Rebound.” For more Fortune 500 innovation stories, click here.

This story was originally featured on Fortune.com