In Germany, department stores are finding it difficult to modernize. In the USA, the famous department store Macy’s continues to enjoy success. What do Americans do better?
Shortly after Christmas there is always a lot going on at Macy’s in New York. While the shop windows are still decorated for Christmas, bargain hunting is underway inside. The largest department store in the world offers discounts of up to 60 percent. It’s mainly tourists who come, including Eva from Athens and Sam from Nice. Handbag, scarf, perfume – she bought all of these, says Eva. Sam is also happy about the offers and the selection. The Frenchman is thrilled with his first visit to Macy’s.
Macy’s operates more than 500 stores across the United States. The department store chain’s financial situation – like that of the entire industry – has deteriorated in recent years. According to the US Census Bureau, industry sales have almost halved since the turn of the millennium. Chains like Sears, Neiman Marcus and JCPenney went bankrupt.
Decline in sales
New Yorker Tom Ceci has been working for retailers at home and abroad for decades, now as a consultant. To tagesschau.de He says: “The problem with Macy’s is that the chain has hundreds of branches, millions of square meters to occupy.” It is impossible to stock them with goods, staff them, bear fixed costs and have a balanced profit and loss account.
For the 2022 fiscal year, which ended on January 28, 2023, Macy’s reported a profit of around $1.2 billion on sales of $24.4 billion – a slight decrease compared to the previous year. In the third quarter of 2023, Macy’s sales continued to decline as customers became more cautious about spending money. Sales and profits still exceeded Wall Street expectations.
“Shopping should be fun”
Industry expert Ceci, who also teaches commerce at Parson New School, keeps a close eye on the development of department stores, is well connected and absolutely confident about the future of stationary retail. “Retail is not disappearing. The majority of purchases will continue to be made locally.” Even if, according to studies, online business will increase to 20 to 25 percent in the next ten years. The retail expert is sure that people want to have a physical shopping experience.
In order to achieve this, Ceci believes the industry must rigorously rethink and take tough action. Close unprofitable stores, slim down the product range, rely on strong private labels and become more innovative and creative overall. Shopping should be fun. And it is important to value the customer’s time: through short distances and new service offerings.
Ceci likes to compare shopping to a theater. “The stage, i.e. the store, must be designed in an appealing way and the actors, i.e. the team, must be used correctly. In order to then welcome the audience, the customers.”
New ideas for that shopping experience
And not in a huge area where customers would get lost, but rather in smaller areas. To cut costs and sell real estate, Macy’s has already closed dozens of its stores in recent years, particularly in rural areas. Smaller stores are now the focus of new openings. Often as part of a row of shops – within smaller towns – so closer to the customer. Ceci still sees a lot of potential here too. The changing rooms could be technically upgraded. So that a customer who is wearing an outfit can immediately see how it looks on them in green, red or black – the expert outlines.
Other dealers basically only offer a showroom. You try on clothes there. You buy the one you like, but leave the store without a bag. The purchase will later be sent directly to your home from a warehouse. So there is a lot that retailers can do to appear fresher and more up-to-date.
Takeover offer for Macy’s
The CEO at Macy’s is changing in a few weeks. Jeff Gennette is followed by Tony Spring. During this time of upheaval, a takeover offer burst at the beginning of December. Arkhouse Management, an investment firm specializing in real estate, and Brigade Capital Management, a global asset manager, now want to acquire the remaining shares in Macy’s Inc. for $5.8 billion. Analysts fear that investors are primarily concerned with real estate.
Ceci also knows that takeovers don’t always go well. If Macy’s really wanted to be taken over, he believes they would have to charge a much higher price. Real estate experts estimate the value of the Macy’s flagship store on New York’s Broadway alone to be three to four billion dollars.