Macy’s is closing 100 department stores. Where did its customers go?

Macy’s Is Closing 100 Stores. Where Did All of Its Customers Go?

Macy’s Is Closing 100 Stores. Where Did All of Its Customers Go?

Moneybox
A blog about business and economics.
Aug. 11 2016 3:32 PM

Macy’s Is Closing 100 Stores. Where Did All of Its Customers Go?

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Welp.

Drew Angerer/Getty Images

Macy’s announced Thursday morning that 100 of its stores, representing almost 15 percent of its locations, will ring up their final sale sometime over the next year, as the famed department-store chain continues to struggle in the fast-changing retail environment. When completed, this will leave Macy’s with 628 stores across the United States.

Helaine Olen Helaine Olen

Helaine Olen is a former columnist for Slate and co-author of The Index Card. She was the host of the Slate Academy series the United States of Debt.

It seems likely that even profitable locations will be on the store closing chopping block. Sad to say, in the retail environment of 2016, even Macy’s officials admit the land underneath many of their stores is more valuable than the revenues from the actual stores themselves.

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Is anyone really surprised? Chances are that you’re part of Macy’s problem. I certainly am. Do you remember the last time you visited a department store? I don’t.

In today’s retail arena, Macy’s is getting socked by a one-two punch—or maybe a one-two-three punch. There are so many things going wrong.

First, as the middle class contracts, Macy’s suffers. Many former Macys shoppers are trading down, purchasing an increasing percentage of their wardrobes from up-to-the-moment inexpensive options like H&M and Zara.

At the same time, some of those former middle class folks are now upper-middle-class folks. And the Macy’s empire isn’t perceived as being quite as upscale as, say, Saks. And even there, the luxury end of the department-store trade is experiencing problems of its own as the strong dollar discourages shoppers from abroad. Last month, the New York Post reported that same-store sales at privately held Barney’s fell 10 percent in the first quarter of 2016 over the equivalent period in 2015.

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Second, many of us are buying different stuff than we did in the past. Those behavioral-finance folks who proselytize that spending on things we do like dining and travel makes us happier than buying a blender or yet another pair of jeans—well, many of us are listening. A 2014 poll found almost 4 out of 5 millennials said they would rather spend their money on experiences than things.

All this is compounded by consumers’ increasing use of online shopping options. According to UPS, which conducts an annual survey on internet shopping, this year marked the first time a majority of all purchases made by people who use the internet to shop were made online, not in traditional stores. In fact, those surveyed claimed that of everything they bought, only 1 out of 5 came from what could be described as traditional shopping—as in going to a store and buying the item without even checking online options.

As a result, even as the overall employment situation in the United States is improving, the retail sector of the economy is shedding a substantial number of jobs. Companies ranging from Walmart to Ralph Lauren have announced store closings this year. Others are completely going away—Sports Authority filed for bankruptcy, and the entire chain is in the process of shutting down. According to consultancy Challenger, Gray & Christmas, retailers have announced they are cutting almost 44,000 positions since the beginning of the year. That figure does not account for what is likely to be a substantial number of job cuts at Macy’s.

It isn’t entirely bad news for Macy’s. Sales fell less than retail analysts expected this past quarter. Moreover, it seems Wall Street likes the plan to cut the number of outlets, likely because they foresee profits from real estate sales. As a result, shares are up by more than 15 percent as I type.

So far no word from Donald Trump. After Macy’s discontinued carrying his clothing line following his comments about Mexican immigrants last year, he took to Twitter more than once to celebrate the company’s bad news.

His supporters, however, are not remaining silent. Sigh.