Key Strategic Issues
Macy’s, the American department store chain, is a household name known
across the U.S. for its iconic logo and its impact on our culture. In order to better
understand our focal company, it is imperative that we first examine some key strategic
issues the company is facing that we are interested in resolving. Next, we will conduct a
thorough analysis of the external environment, specifically focusing on how trends in the
industry are affecting Macy’s. Then finally, we will offer recommendations that will help
to address the strategic issues we have identified, supported by evidence we have
extracted from both our analysis of the external environment and through our resources.
Founded in 1858, Macy's holds more than 160 years of experience, surviving
uncertainty, troubled waters, and even great success. Lately, it has been called into
question whether or not Macy’s can continue to survive the way they have historically.
Thanks to the exponential growth and traffic of the internet in recent years, we have
seen this affect almost all markets including retail with the help of the major disruptor,
Amazon. Macy's has had an online presence since 1997 almost as long as
Amazon.com has been alive, but has failed to keep up with the growth pace of e-
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WPC480 “Strategic Problem Presentation” Robles, Thompson, Rojas, Taylor
commerce. In the past decade, we have seen Macy’s close stores year after year with
their most recent announcement of closing 37 more stores this year and 125 by 2023
(Pacheco).
Macy’s is an icon, with its world famous Thanksgiving day parade (that holds a
great potential to rival even the Super Bowl), its renowned Harold Square store that is
over 2 million square feet in size, and even in our holiday culture for being the setting for
the classic film “Miracle on 34th St.” It is hard to imagine America without its iconic
shopping symbol (Biron). The problem is that even before the pandemic, Macy’s along
with other retailers began facing losses. After recovering from the recession in 2008,
department stores began to feel hope of recovery only to be defeated again 7 years
later.
Having an immense amount of dependence on the U.S. economy is a major
challenge faced by Macy’s even to this day. Failed expansion plans resulting from the
volatile U.S. economy, creates a special vulnerability that Macy’s is not ready to face.
Although Macy's has several competitive advantages due to the impact it has on our
culture even from recent years, Macy’s still has a lot of work to accomplish in order to
remain competitive against other department stores like Nordstrom.
Macy's needs to continue to remain competitive, but how if we continue to feel
uncertainty in the air as a result of the current times? Macy's is also planning to stick
with its “North Star Strategy” in order to remain aggressive while competing with these
major retail stores and increased online traffic. Part of the issue with this plan is that
there are costs that are outweighed by the profits. Macy’s is currently planning on
opening more of the backstage stores within this plan but has incurred losses due to the
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pandemic. Lastly, the recent announcement of more store closures and job losses, has
affected the image that Macy’s carried around in households. With over 2000 jobs being
lost due to the closures, the image being portrayed is that the retail industry is dying and
thus no need to further shop at a department store level. A damaging image can
ultimately cause permanent damage not only to sales but also the company’s long
standing reputation and positive image that the company has taken years to build.
Seeing the American department store slowly diminish itself is something truly
saddening that reflects how much our culture has evolved over the years. The heart of
the problem most major companies face is lack of change and in this case failing to
keep up with the growth of e-commerce. How is it that a department store which is now
often used as an example to determine the health of other major department stores, not
able to keep up? How is it that being the crown jewel of American shopping with its
single extravagant store in New York City not able to see the rise of e-commerce taking
over?
In conclusion, it is important to analyze which factors in the environment are
causing missed opportunities and analytical failures. These failures could be coming
from failed leadership by failing to innovate in order to stay at a healthy competitive level
with e-commerce retailers like Amazon.com. Staying complacent in a position of
leadership within department stores is the ultimate challenge that is faced by America's
department store, Macy's.
External/Internal Analysis
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As previously mentioned, Macy’s is currently facing a large number of
challenges. Being that the strategic issues we have identified are more closely related
to the external environment than the internal environment, we have chosen to take a
closer look at the external environment surrounding the company.
Firstly, the COVID-19 pandemic has caused several shifts in the general
environment. Due to social distancing and consumer habits moving towards a more
temporarily-isolated world, many Americans have engaged in some form of the growing
working-from-home economy. Although there is a large number of Americans who
cannot work from home due to the nature of their jobs, nearly half of the workforce is
still able to do so. This means that the working-from-home economy is here to stay
permanently and will possibly continue to grow in size. This poses new, unique
challenges for companies as city centers begin to dissolve. For instance, shops,
restaurants, and bars will likely continue to see a drop in foot traffic and patronage
because of an increased lack of telecommuters (Stanford University). The positive
flipside to this is that rural areas and suburbs could see an uptick in their businesses,
offering Macy’s a bit of opportunity to explore possible strategic moves in these regions.
Not only has the pandemic affected the working habits of Americans, consumers
have also moved away from brick and mortar stores and have instead shifted towards
shopping online, as e-commerce continues to grow. With a significant amount of
consumers avoiding brick and mortar stores entirely, those who do choose to shop in-
person have also begun showing a preference for smaller strip centers, where Macy’s is
not currently a big player.
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As it pertains to the industry environment, sales amongst both department store
chains and malls have plummeted in the midst of the ongoing COVID-19 pandemic.
More specifically, apparel sales have experienced a significant drop-off due to the fact
that many occasions requiring people to dress up were not occurring during this time.
This phenomenon has been dubbed as the “retail apocalypse,” and in a report released
by Coresight Research last August, it anticipates that around a quarter of American
malls will close down in the next three to five years (Hartmans).
This is of significance to Macy’s because of the company’s ties to many American
malls housing its brick and mortar stores. In such cases, Macy’s physical department
stores are attached to the ends of malls and take up lots of space, including multiple
floors of the mall. This large retail sales floor and surface area has been a strategic
advantage, allowing Macy’s to house a wide variety of goods and encourage large
amounts of spending from its consumer base.
The trend of malls closing can be seen occurring right within the greater Phoenix
Metropolitan area. MetroCenter, a mall that was a staple of its community for decades,
saw a rapid decline—even before the COVID-19 pandemic—and recently decided to
shut its doors for good (Pela). Once a robust and thriving center with both a lot of foot
traffic and a Macy’s department store, the mall became a shell of itself within its final
days, a microcosm of the industry at large.
This external environment has admittedly imposed pressures and constraints on
Macy’s determination of strategic choices, including decisions regarding leases on real
estate property and the location of its department stores. Having recognized some of
these challenges, we considered the resiliency of both the company and the industry it
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belongs to. With this information, we would like to provide our recommendations for
Macy’s survival and longevity in the aftermath of both the “retail apocalypse” and the
COVID-19 pandemic.
Solution
Macy’s has been a long-time leader in the department store industry, but in
recent years the company has clearly begun to fall behind. Between new and emerging
technologies, the competitor landscape changing, and the rapid changes in the industry,
Macy’s needs to make changes to the way they run their business if they want to be
successful going forward. Large department stores are on the decline and consumers
are shopping more and more online. The pandemic has only made these trends more
dramatic. Although Macy’s has made certain small changes, such as offering a “buy
now, pay later option” in order to generate more future revenue, the company will need
to do more (Kapner). Based on these challenges that Macy's faces, we recommend that
they develop a more aggressive e-commerce strategy in order to keep up with changes
in shopping habits caused by technology and the COVID-19 pandemic. Although the
brand has offered online services for a long time, they do not stand out in the digital
space, which is a necessity to survive in the technology-driven future. We would also
recommend directing their focus away from larger department store locations, and
rather opening up smaller, more niche Macy’s locations in order to keep up with the
changing consumer landscape and demise of larger shopping malls.
Technology has been changing rapidly, shifting the focus of shopping from in-
person locations to primarily online shopping options. The pandemic has only made this
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change more dramatic. Due to this decline in in-person shopping, they will be closing
“60 stores already announced but not identified for closure” by the end of 2023 (Loeb).
In order to keep up with this landscape, we recommend developing a more aggressive
digital strategy. By closing certain stores and focusing more on e-commerce that has
less overhead fees, Macy’s will be able to increase revenues by improving their online
experience and driving more traffic. This would allow Macy’s to connect more frequently
with it’s shoppers, encouraging them to engage with the brand more.
Macy’s has been utilizing online shopping options for quite some time now, but in
order to truly stand out in this area, they will need to make improvements. One way to
do this would be to utilize consumer data in order to make website offerings more
relevant. A brand that is really good at this is the e-commerce giant, Amazon. On
Amazon, it is clear that the brand really understands the consumer and knows what
they might be looking for and why. Because consumers feel understood by this
company, they continue to return and buy more products. If Macy’s could utilize their big
data to build out a more complete view of their consumers, they could increase their
share of mind by being the primary website that people want to visit for shopping needs.
As stated above, Macy’s has been offering online shopping options for a very long time,
but shifting even more focus to this area and streamlining the purchase process virtually
will be very important if Macy’s wants to keep up with the rapidly evolving technology
within the industry.
Our second recommendation, opening smaller, more niche stores, would help
Macy’s solve the problem of the industry decline as a whole. As time goes on, less
people are shopping at large department stores such as Macy’s across the board. Due
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to consumer trends and easy access to more relevant clothing options, many
consumers are choosing to shop at smaller, more segmented stores. When consumers
shop in smaller stores, they have a better idea of what kind of options the store will
offer, and can shop for clothing that they already know fits their personal style. When
shopping at department stores, however, it is hard to find your personal style since there
is such a wide variety of options offered.
By opening smaller stores that cater to more niche markets, it would allow
Macy’s to narrow their target markets and make their product offerings more relevant to
the consumers they are trying to target. Consumers would be less intimidated by the
store, and feel more comfortable stopping in and shopping for their personal style. This
would increase traffic by creating an in-store experience closer to the experience one
might get at smaller stores, rather than the traditional department store environment.
Even if online shopping is going to be the major focus of Macy’s going forward, it is still
important to drive some foot traffic to in-store locations, and this is a way to do so.
Due to technological changes and external factors such as the COVID-19
pandemic, Macy’s has found themselves in a tough spot, no longer having as firm of a
grasp on the industry as they used to. However, it is not time for Macy’s to panic. By
implementing these recommendations, and increasing their digital strategy as well as
offering smaller in-person stores, Macy’s will be able to adapt to the changing
environment and stay successful heading into the future.
Works Cited
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Biron, Bethany. “The Rise and Fall of Macy's, a Beloved American Retailer That's
Now Closing 125 Stores.” Business Insider, Business Insider, 8 Feb. 2020,
www.businessinsider.com/macys-history-includes-rise-and-fall-photos-2020-2#in-
the-1860s-macys-became-the-first-retail-store-to-acquire-a-liquor-license-and-
serve-beverages-onsite-8.
Hartmans, Avery. “Roughly 80,000 Stores Are Doomed to Close in the next 5
Years as the Retail Apocalypse Continues to Rip through America.” Business
Insider, Business Insider, 6 Apr. 2021, www.businessinsider.com/retail-
apocalypse-means-80000-store-closures-next-5-years-2021-4.
Kapner, Suzanne. “Macy's, Gap, Neiman Marcus Will Let You Buy Now, Pay
Later.” The Wall Street Journal, Dow Jones & Company, 28 Feb. 2021,
www.wsj.com/articles/macys-gap-neiman-marcus-will-let-you-buy-now-pay-later-
11614520800?page=1.
Loeb, Walter. “Macy's On Path To Be A Digital Retailer Within Three Years.”
Forbes, Forbes Magazine, 24 Feb. 2021,
www.forbes.com/sites/walterloeb/2021/02/24/macys-on-path-to-be-a-digital-
retailer-within-three-years/?sh=6a9efef83270.
Pacheco, I. (2021, January 06). Macy's will close another 37 stores this year.
Here's the list. Retrieved April 15, 2021, from
https://www.wsj.com/articles/macys-will-close-another-37-stores-this-year-heres-
the-list-11609959935?page=1
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Pela, Robrt L. “The End of Metrocenter Is More Than Just the Closing of a
Phoenix Mall.” Phoenix New Times, 4, 2 Dec. 2020,
www.phoenixnewtimes.com/arts/the-closing-of-metrocenter-in-phoenix-marks-
the-end-of-an-era-for-generations-11481211.
Stanford University. “A Snapshot of a New Working-from-Home Economy.”
Stanford News, 26 June 2020, news.stanford.edu/2020/06/29/snapshot-new-
working-home-economy/
https://www.nytimes.com/2021/04/10/business/media/wall-street-journal-content-review.html
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https://www.nytimes.com/2021/04/10/business/media/wall-street-journal-murdoch.html
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