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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Business

Business

In a time when the retail industry is struggling, Macy’s is thriving

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The retail world has faced tremendous struggles in the past few years. With the growth of e-commerce and its drivers such as Amazon, Walmart, and Target, increasingly fewer people shop at physical retail stores. However, Macy’s seems to be a diamond in the rough, as they are the only retail store that is sustaining growth.

So what exactly is happening to the retail industry? For the past few years, many retail stores including Ralph Lauren, Urban Outfitters, Sears, and JC Penney have reached all-time lows and have had to close down over a hundred stores. This is due to a couple of factors: the growth of e-commerce and the lack of spending on material items (shockingly).

Amazon is the bane of the retail industry’s existence. The convenience and ease of ordering from Amazon is unmatched. In fact, from 2010 to 2017, Amazon has seen its revenue rise from $16 billion to $80 billion. However, Amazon isn’t the only e-commerce problem for department stores – many startups are making purchases from home easier. For example, Warby Parker, a glasses and sunglasses company, sends potential customers five pairs of glasses of their choosing to try on for free at home. Then, once he/she has decided on a pair (or not), he/she can send them back and order the desired glasses. Hence, the need to go in a store to “see how something looks” is becoming increasingly obsolete.

Of course, technology has a major role in the increase in e-commerce as well. It was possible to order consumer goods online over a decade ago, but it has become more convenient as technology advances. With mobile apps, smartphone wallets with AutoFill features, and virtual tours/try-ons, consumers can view and order a product in its entirety in under 30 seconds. And obviously, consumers cannot virtually test a pair of shoes or feel a new couch, but those capabilities are slowly unraveling themselves.

Additionally, consumers – especially the millennial generation – are spending less on material items such as clothing and paying more for experiences and food. According to the Federal Reserve Bank of St. Louis, sales from food surpassed all other sales from retail in 2005 and has been increasing at a faster rate (almost double!). One might think that millennials have placed value on material goods, but the expansion of social media has shifted the generation’s priorities – instead of spending money on clothes, they spend money on experiences so they can share the experience with their friends and followers online.

So, under dismal circumstances for retail stores, how is Macy’s thriving? In Q1, Macy’s (M) sales were up 4.2%; indeed, their net income rose from $78 million in Q1 of 2017 to $139 million in Q2 – a whopping 78% increase! In fact, since the beginning of the year, their shares are up 26% since the beginning of the year. What are they doing differently than other stores?

First, Macy’s is downsizing – it closed down many stores and warehouses, which generated $411 million last year. They are decreasing the sizes of their stores as well and selling those out to different firms. Secondly, their physical stores are succeeding. With the expansion of subsidiaries Bloomingdale’s and beauty chain Bluemercury, they are expanding their consumer market to generate more revenue, and clearly, they’re succeeding. Finally, their online sales continue to ramp up. They continue to reveal double-digit digital sales growth due to the continued development of their mobile application and website, which is likely the biggest factor as the retail industry continues to migrate online.

Do Macy’s successes forecast a bounce back for all department stores? Or will e-commerce moguls like Amazon and Walmart continue to dominate the market? Only time will tell, but if other retailers follow Macy’s strategies, there could be hope for the retail industry after all.

Featured image via Flickr/MrHicks46


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