While Amazon’s continuing success is indicative of consumers’ shift towards the convenience of online retail, established bricks-and-mortar retail chains are facing the brunt. Macy’s is one of these.
Macy’s Reports Earnings Decline
In the first quarter, Macy’s Inc. reported an earnings decline of 7.4% year-over-year. It closed down 41 stores. Its comps also declined by 5.6%. The diluted earnings-per-share were $0.37 as against $0.56 in last year’s quarter.
The retail chain has witnessed a decline in full-year sales, and is now looking to keep shareholders happy through greater dividend as well as consistent buybacks. However, it still is hard for investors to take their eyes off the 41 stores being closed down. This can be an indication of problems faced not only by Macy’s but other conventional bricks-and-mortar businesses as well, since consumers are moving away from department stores to online shopping.
Consumers Moving Away from Branded Apparels
But another trend has also been noted by Macy’s. Consumers, particularly the Millennial generation, are moving away from spending on apparel and accessories towards electronic goods such as iPhones. The youth are no longer keen on selecting popular brands for apparel, but prefer individuality. That’s why department stores are no longer preferred as much as fast-fashion stores.
And that also explains the preference for online retail, with Amazon already standing tall in this segment. The more the people spend at Amazon, the greater is the chunk of consumer base departing from Macy’s and other conventional bricks-and-mortar department stores.
However this needn’t be an indication that Macy’s is clueless about tackling the new challenges. Its chairman and CEO, Terry Lundgren has clear ideas about handling the challenges faced by the retail chain.
Macy’s Winning Omni-channel Approach
Lundgren has moved ahead with an omni-channel approach, combining mobile and online shopping with the bricks-and-mortar experience, with the slogan being, “Wherever, Whenever, and However They Want.” This has already given Macy’s an edge over its competition. To directly compete with Amazon, Macy’s also provides same-day delivery to certain cities. Macy’s Backstage, the off-price outlet selling products at prices that are 20% to 80% off those at department stores, is another winning initiative especially since it also contains juice bars, Macy’s Taste Bar Café, mobile checkout and free Wi-Fi.
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