The Macy’s Decision to Close 100 Stores and the Future of Retail



A prototype store in Ohio may point the way toward the future

The decision by Macy’s to close 100 of its “cash-flow positive” stores, representing about 15 percent of its fleet, was cheered by Wall Street—if not, one can assume, by its employees. It comes barely a year after the company closed 41 different stores.

Explaining the move, chairman and CEO Terry Lundgren told CNBC that the United States was overstored, noting that there is 7.3 square feet of retail space per capita in the United States, compared with 1.3 square feet in the United Kingdom and 1.7 square feet in France. Of course, that has been true for a long time, and a tough economy and competition from dot-coms have exacerbated the situation. (There are probably too many jewelry stores as well, which is why many keep closing.)

Plus the whole raison d’être of department stores—that they offer a wide variety under one roof—means less now that consumers can find anything with the click of a button. 

But there is more going on here besides the macro issues; as Business Insider documents in an embarrassing series of photos, Macy’s has neglected the appearance of even its vaunted New York City flagship.

As a Minneapolis blogger put it:

Many stores look rundown.… The sales associates, when you can find them, are beaten down. It’s not their fault the carpet is stained, the merchandise is mostly mediocre, and the promotions are incessant. The overall experience feels dated and out of touch with today’s customers, who actually are willing to leave their laptops, but pickier when they do—demanding a personal connection, entertainment, and a feeling that something special is happening. Something you couldn’t get online, or at another store down the street.

At a time when brick-and-mortar retailers have to scrap for every dollar and every customer, Macy’s is not succeeding at a retailer’s basic task: keeping its stores presentable. Indeed, one argument for closing the 100 stores is that Macy’s has neglected them for so long it’s cheaper to close them than to fix them. 

Macy’s move means that Amazon will almost certainly overtake it as the world’s largest apparel retailer, and while that title is primarily about bragging rights, it feels like traditional retail is waving the white flag here. If Macy’s can’t keep 100 profitable stores open, where does it intend to see growth? It is experimenting with discount formats, which is sensible given the spectacular success of T.J. Maxx, but that format is in danger of becoming “overstored” too. And of course, it’s targeting digital. But while omnichannel is the buzzword of the moment, a proper omnichannel strategy requires digital and brick-and-mortar to work together. That isn’t easy when you are shutting 100 stores. For now, there is not much reason to shop Macy’s online as opposed to any other dot-com.  

If there is any hope here, it’s that Macy’s may be copying one of former J.C. Penney CEO Ron Johnson’s smarter, if never-realized, plans: turning the store into an destination that is about more than just as retail. (Malls have been increasingly doing this as well, giving more space to restaurants, entertainment, fitness, and health-related tenants. The Macy’s closures will only accelerate that process.) A new prototype Macy’s in Columbus, Ohio, features a spa, a wedding and stylist services, and fitness “ambassadors.”

As retail consultant Lee Peterson told RetailDive:

We have to start to measure the success of physical stores in a much different way. It can’t be as quantitative as it was in the past. It must be more qualitative. Did customers have a good time? Did they engage with the brand? Did they receive great customer service? People are buying goods in stores less and less often, especially stores like this. Stores have to become something.

If Macy’s can turn itself into more than a haphazardly stocked repository of perpetually-on-sale items, it will truly have reinvented itself. America may have too many stores. But when it comes to retailers that offer a good, fun, and engaging customer experience, we still don’t have enough.

 

Top: Macy’s Herald Square in New York City (photo courtesy of Macy’s)

JCK News Director