Macy’s got it: kill overcapacity before it kills you
August 12, 2016
Macy’s Inc. announces to close 100 of its US stores, 14% of its footprint, to start with locations that are worth more as real estate than as retail outlet, according to The WSJ. It’s smart that Macy’s is doing that now that it’s still writing black figures. Shareholders appreciated the bold move with a 17% stock increase on August 11. Macy’s management must have observed retail competitors going down like Dutch retail giant V&D last December and the windfall of recent retail bankruptcies in US retail. All blamed on a sclereotic response to the rise of ecommerce by old-style management that blame market circumstances in stead of themselves. As there’s a huge overcapacity in retail space in all maturing ecommerce markets, it’s critical for classic retailers to shed the overcapacity before the market value for retail locations tumble further in case that they own the real-estate, reduce staff and operational costs of their outlets, and boost their ecommerce capabilities to service clients online.
Why omnichannel by classic retailers fails
Classic retailers make a lot of mistakes which reflect the lack of ecommerce experience on board level. Developing ecommerce capabilities is often a too little, too late, exercise by classic retailers. There are hardly successes for the hailed omnichannel approach by the traditional players. Why is that? Here are a few of the main mistakes:
- Not appointing an ecommerce director with P&L responsibility on board level with the right experience and fully empowered to do whatever it takes to make ecommerce the most successful sales outlet as fast as possible.
- Tying the webshop to the physical outlet in terms of a limited portfolio, pricing, delivery and service through the physical outlet.
- Not fully developing the logistical, 24×7 service, online promotion, usability and product content capabilities needed to run a successful ecommerce activity.
So, just timely downscaling physical outlets like Macy’s is doing is just half the story. The other half of the story is setting the ecommerce activity free and invest in it to make sure it fully meets the contemporary expectations of online shoppers. The investors in Macy’s shares might have been jubilant too early and they might be confronted with the ecommerce incompetencies when the continued rapid decline in outlet sales can’t be compensated by sufficient fast growth in ecommerce sales.