Macy’s to Close 100 Stores as E-Rivals and Discounting Hit Legacy Retailers
The great American consumer is very much alive. It’s just that people aren’t shopping like they used to, reluctant to pay full price or even leave the couch — cutting deep into the business of many top retailers.
For legacy stores, the fallout from this shift has been profound, perhaps never more apparent than this week. Macy’s, the country’s largest department store, said on Thursday that it would close 100 stores, saying they were more valuable as real estate properties. Walmart, the world’s largest retailer, announced on Monday that it would buy a small online rival for more than $3 billion. The hope is that the deal will reverse its sputtering online growth.
Other retailers have taken aggressive action, too, trying to turn their fortunes around. Billions of dollars have been poured into e-commerce efforts. Stores have turned to sharp discounting, temporarily lifting sales but hurting profits and upsetting partners.
But almost always, these efforts have led to mediocre results. And the decisions by Walmart and Macy’s, two towering figures in the industry, have sent a clear message: The pressure to keep up with customers is at a boiling point.
“These legacy players are having a terrible time navigating through that shift successfully,” said Mark A. Cohen, the director of retail studies at Columbia Business School.
For decades, Americans have relied on the country’s dense footprint of shopping centers and department stores for their prom dresses, paper towels and everything in between. Often, they were willing to drive to the mall, pay full price or wait for annual sales to get a deal.
But that has been transformed in the last decade, with the meteoric rise of the online giant Amazon, discount and low-cost stores like T. J. Maxx gaining popularity, and a long recession that reset the value of a dollar.
People continue to spend. In the spring, household spending rose at an annualized rate of 4.2 percent, driving overall economic growth. But more and more, they now want bargains and convenience — in stores and online — and know how to find them.
“Given the convenience of e-commerce, the consumer needs a really good reason to go to a store and park their car,” said Edward Yruma, a managing director at KeyBanc Capital Markets. “It has to be exciting and have something new, because if not, why wouldn’t I sit on my couch in my pajamas and shop on my iPad?”
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Originally Posted by Zippyjuan
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