Macy's plans to close 100 of its 675 department stores following a drop in its profitability. It will use some of those resources to double down on its digital operations.
As plans go, it isn't a bad one — that's what Walmart, after all, is doing. Earlier this year, Walmart announced plans to close 269 stores, with 154 in the US. It still is willing to invest in new stores in strategic markets — it has plans to open more than 300 stores for this fiscal year — but it is determined to crack the online sales nut. Just this week it announced it was investing $3.3 billion to acquire Jet.com.
The playbook, in other words, is a familiar one in these post-Amazon days. Integrate online sales with the brick-and-mortar operation so it is one seamless entity for consumers who don’t want to be limited to one channel.
To be sure, the solution is not as straightforward as all that. In Macy's case, many of its stores represent valuable real estate that the company is better off monetizing. At least that has been the argument of its activist shareholders for a while.
Can Macy's Get It Right?
But leaving such complexities aside, why can't retailers get the main point right — that is, deliver a worthwhile omnichannel solution. More urgently, can Macy's finally get this formula right?
One sign that it really does intend to shake up the house was the announcement in June that CEO Terry Lundgren was stepping down. A luminary among retail executives, Lundgren was responsible for putting Macy's on the retail map back in the day. Unfortunately, he is also a strong — and some might say stubborn — supporter of the brick-and-mortar department store model.
This could be just how Lundgren came up in the industry, but there are other reasons why Macy’s and retailers in general are not enthusiastic fans of online sales: they make pricing just a wee bit too transparent. In the first quarter, Macy's lowered its guidance for margin in part because price transparency was increasing online, according to comments made by CFO Karen Hoguet.
Specifically, she said this in response to a question about her view of longer term consolidated gross margin: "Well, I think the transparency is in part why we've lowered the guidance for margin. When we release the fourth quarter we had talked about the gross margin being up this year and we no longer think that will be the case. So I think that's where that came into play."
Macy's Is Big on Retail Tech
The irony is, Macy's has been a fervent believer in investing in retail technology as can be been in this CMSWire interview with Yasir Anwar, head of Digital Technology and Group Vice President at Macy's. Anwar is also the founder of Macy's Labs, which is focused on experimental digital initiatives.
"We have built an organizational DNA that allows us to innovate frequently," Anwar told us in February 2016. "We are able to easily build something and experiment and make changes quickly so the shape of the product we are creating is defined by the customers."
One example, he said, was m by Macy's, an experimental mobile optimized website in which curated deals are offered in various categories.
More recently — just last month in fact — Macy's announced the pilot of "Macy's On Call," a mobile web tool that uses IBM Watson to answer natural language questions about a store's product line up.
Tweaking the Experience
But it may be that Macy’s would be better off focusing on that original formula — the omnichannel experience, Tom Caporaso, CEO of Clarus Commerce, told CMSWire.
"There are simple things Macy’s can do to marry online shopping, the retail experience and shipping," he said. Based on Macy's statements about its store closure plans, the retailer plans to invest some of the savings in back office operations, better logistics and its private label stock.
All of this, Caporaso said, can be woven into an omnichannel plan. If, that is, Macy's really wants to do so.
Title image: Final days of a Macy's store in Columbia, Mo. by robertstinnett