Macy’s Closing 100 Stores: That’s a Good Thing

Macy's U.S Store

August 17, 2016

Macy’s recently announced plans to close 100 stores and the stock market had an interesting response: It boosted Macy’s shares by 17%.

What’s going on here?

The consensus of the analyst community is that Macy’s is efficiently adapting to the realities of competition in an online world. This is the continuation of a multi-year strategy. Back in 2011 Macy’s announced plans to remake the company in light of ravenous ecommerce competition. The new strategy aimed to leverage Macy’s stores and new, state-of-the-art distribution centers to optimize selection and service for customers no matter how they engage with the retailer. Recent investments by ecommerce businesses into physical stores is an acknowledgement that programs like Macy’s can be effective ways to deliver service and experience that pure ecommerce retailers cannot match.

A key aspect of Macy’s omni-channel strategy was and continues to be the implementation of RFID in stores and DCs. RFID is one of the few technology investments that has direct, significant and immediate impact on the top line. As retail expert Kurt Salmon Associates wrote in their article, The Compelling case for RFID:

“Beyond just the sales lift associated with improved inventory visibility, RFID has incredible ability to facilitate omnichannel fulfillment and improve the customer experience—both of which are rapidly becoming powerful competitive differentiators.”

Macy’s is adapting by ensuring that stores can deliver not only availability and convenient fulfillment, but also superior consumer experience.

My favorite analyst on this story is Sean O’Reilly of the investment website The Motley Fool, who cited Darwinian evolution in his argument that “Macy’s Plan to Close 100 Stores Is Brilliant.” O’Reilly went on to say that “Macy’s is uniquely positioned to profitably adapt to a world where e-commerce and physical store locations work hand in hand.” RFID technology will be a key part of that strategy.

 

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