Is eCommerce the Remedy for Retail Oblivion?

Macy’s is set to contract this year. But is it on course for retail oblivion?

Motley Fool reports the department store saw eight consecutive quarters of declining comparable store sales through the end of 2016.

This iconic American brand plans to close 68 of its hundreds of stores by the end of 2017.

Business Insider writes that the restructuring will reduce Macy’s workforce by 10,000, opening $550 million to reinvest in its digital business.

It’s the right move for a company whose online investment has been its silver lining.

As physical store sales declined, Macy’s saw double-digit annual revenue growth from eCommerce in 2016.

Its $6 billion in annual eCommerce sales puts Macy’s at number six among the largest US online retailers.

The Path From Retail Oblivion

Macy’s move to shut down stores will have two connected effects.

The first is to reduce the company’s brick-and-mortar commitment.

This is a major problem for all US retailers. Legacy brick-and-mortar retailers have spent decades building out their physical stores.

There are 23.5 square feet of retail space per person in America. That figure for the next two highest per-capita countries, Canada and Australia, comes to 16.4  and 11.1, respectively.

To put it simply, “Across retail overall the US has too much space and too many shops,” Neil Saunders, a retail consultant, told Business Insider.

By closing down many stores, Macy’s is facing up to the obvious problem of spending too much on physical retail as customers shop more and more online.

Which brings us to the second facet of Macy’s move. It will reinvest the money it saves on brick-and-mortar in its eCommerce strategy.

These initiatives include better mobile commerce solutions and deeper data analytics. It is also tailoring its strategy for the omnichannel environment, particularly with planned a click-and-collect option for online orders.

The question is will it be enough?

Reports that Hudson Bay Company initiated acquisition talks resulted in a 12% increase in shares on Wall Street. Investors apparently see this as a good idea, especially as HBC has made selling off physical stores a part of its acquisition of other chains, such as Saks.

But, Macy’s investment in eCommerce has also been seen as savvy.

It is just one more example of the absolute necessity for an eCommerce strategy as part of any company’s omnichannel approach to sales.