Pam Danziger of the Robin Report tells her readers that department stores’ problems are more fundamental than mere competitive pressure. They are failing to evolve. She writes:
The retail department store sector is under siege, threatened by competition from discount big-box retailers and proliferating online shopping. Consumers are increasingly turning away rather than toward the department stores they once depended upon for many of their shopping needs. Sadly, physical stores are considered irrelevant with so many other more convenient and affordable options. But Macy’s innovation strategy may just be working.
“The changes that we’re making in the ‘First 50’ serve as a great barometer and opportunity for us to continue to learn and apply to more stores going forward,” Spring continued. “The fact that all these categories outperformed the rest of the nameplate, the fact that we’re seeing it on the top line, we’re seeing it on the customer service scores, we’re seeing it in better traffic and conversion. So we think we have a model that we just need a little longer to learn from it.” […]
Slow, Steady Decline
Macy’s sorely needs a boost. Revenues dropped six percent from fiscal 2019 to 2023, down from $24.6 billion to $23.1 billion at the end of its fiscal year in early February. Significant cost savings from store closures gave it a slight uptick in gross margin – from 38 percent to 39 percent – and adjusted EBITDA held steady at $2.3 billion.
Considering that department stores overall declined by 24 percent in the same four-year period, Macy’s Inc. didn’t do all that badly, yet it will take more than financial prowess for Macy’s to rebuild the business as consumers continue to drop department stores from their shopping list. […]
What department store retail needs is radical transformation. Evolution is too slow and revolution is table stakes. Sure it’s risky, but the expectations of customers are clear: Give us a reason to come into your store.
The path to radical transformation can be rocky and it takes time to prove it. So, I share Robin Lewis’s positive long-term prospects for Macy’s and Tony Spring’s leadership. As Robin said, “I defer to the cardinal rule: Strategy is one thing; implementation is another. As I look at a revitalized Macy’s future, I believe Mr. Spring can successfully lead both. A big challenge? You bet it is! But hey, that’s what he signed up for.”
Read more here.
