With the traditional department store in its death throes, Macy's Inc is doing its best to keep the concept alive.
The struggling retailer late Tuesday unveiled a strategic blueprint to defend its business against the twin threats of online and discount competitors. The centerpiece is closing 125 of its department stores - almost a quarter of the total - over the next three years, including some 30 locations it previously targeted for shuttering last month. These are the so-called "neighbourhood stores," leftovers that Macy's was reluctant to close sooner. It should have, but at least it's getting to grips with it now.
Alongside the closures, Macy's is also cutting about 2,000 corporate jobs, and shutting offices in San Francisco and Cincinnati, in an effort to save US$1.5 billion ($2.3b) a year by the end of 2022.
But no one ever cut their way to growth.
While taking an axe to the store estate was badly needed - and with department stores under so much pressure, costs probably needed to be reined in, too - Macy's must ensure that what is left of its estate is compelling. Having the right products, at prices that customers are prepared to pay, and in settings that appeal, is crucial.
In that regard, the decision to accelerate store renovations is encouraging. Since 2018, about 150 locations have been given a face-lift. A further 100 will be rejuvenated this year, with around 400 stores refurbished by the end of 2022.
Plans to invest in building four $1 billion "power" private-label brands are also welcome. These not only offer merchandise that can't be found elsewhere, giving customers a reason to visit stores, but exclusive items are more difficult to compare with products available in other stores or online, such as at Amazon.com. That should help Macy's wean itself off of its discounting, something that is also badly needed if the strategy is to work.
New store concept Market by Macy's also has potential. This paves the way for smaller units, in local shopping centers. At the same time, the group will also keep expanding its off-price locations.
To really make a difference, these initiatives must be put into practice effectively. Transforming private-label offerings into brands with a personality and value in their own right is notoriously difficult. And the Market stores can't just be mini-Macy's. They must have the sorts of products that will appeal to customers, particularly younger ones, as well as plenty of experiences to brighten the shopping trip. The stores also must serve as hubs for collecting and returning online orders. At least Macy's will have the cost savings - and proceeds from monetising its real estate, for example, developing above stores or on car parks - to invest in these concepts.
Some of the group's efforts are already paying off. The 150 store refurbishments, for example, helped the Macy's deliver better-than-expected holidays sales.
But it's not clear that even this latest overhaul - which also includes enhancing Macy's loyalty program and staying focused on digital - will be enough to contend with Amazon, which goes from strength to strength. Target Corp., meanwhile, is already a private label powerhouse, and Nordstrom Inc. is further down the line with small-format stores.
Indeed, it looks like Macy's is trying to emulate elements of both Target's and Nordstrom's strategies when coming up with its own. It deserves credit for tackling the plethora of challenges it faces, and not just allowing itself to become retail apocalypse road kill. But to really ensure it has a future, it needs to lead, not just follow.