The American retail industry has been suffering considerably in the last decades. New technology, fast changing consumer tastes and a market that has been making seasons shorter in order to sale more, it’s making big retailers such as Macy’s work harder to keep their inventories and businesses on track.
About new technology affecting the way retailers see their business, The Economist (February 11th, 2017) said that during 2016, one fifth of the trading happening online was generated by purchases of clothes and accessories. And analysts expect that Amazon will surpass Macy’s sales this year.
Additionally, the fashion industry as a whole has been speeding up change in trends searching more profit. In contrast, department stores suffer because of the slow pace that the business implies. Inventory stays longer on stores and discounts are heavily impacted by negotiations between retailers and manufacturers. When the stores finally put items on sale to rotate inventory, margins shrink and their performance suffer. This strategy has affected and seized the entire industry.
In January 4th, 2017, Macy’s, the biggest American retailer, announced actions to execute real state strategy which includes closing 68 stores in order to reorganize the company’s structure and reinforce the remaining stores, focusing on customer’s satisfaction with the in-store experience. In Southern California, the company had already close one store in North Hollywood and is expected to close three more in San Diego, Santa Barbara, and Simi Valley. In February 21, the WSJ said the company earnings for the quarter that includes the holidays seasons sales dropped by 13 percent.
To counteract the declining of their business, Macy’s is opening outlets called Backstage, most of them inside current stores. This strategy, still on an early stage, with most of the stores located on the East Coast, seems to be a successful but rather late answer to the market change. Additionally, online sales still offer room to improve for the company. A better online merchandise, and a wide variety of discounted products that appeal to younger generations may help the company in improving its online market share.
In conclusion, a smaller Macy’s, with less stores and a more aggressive online activity may be the marketing strategy to save the largest American retailer and keep it thriving as one of the industry leaders.