What the Hell Is Wrong With Macy’s?

Customers leave a Macy's store, symbolic of the company's recent business failures

Customers leave a Macy’s store, symbolic of the company’s recent business failures | Scott Olson/Getty Images

Macy’s, the legacy retail department store found in just about every mall in America, is going through a bit of a rough patch. The company has seen sales and foot traffic steadily decline over the past several years, and just recently, announced a wave of store closings and layoffs in an attempt to regain its footing. Macy’s isn’t alone in its struggles, however. The entire retail industry has been undergoing some rather dramatic changes.

And when the game changes, you need to change too. But when it comes to longstanding, old-school companies like Sears and Macy’s? Change isn’t something that comes easy. For that reason, these titans of retail are finding it hard to stay relevant.

Just what in the hell is wrong with Macy’s? It’s a combination of factors, but mainly it comes down to three things: increasing costs for labor and resources, a consumer base that is changing the way it shops, and an influx of more agile competitors.

It’s a veritable tornado of trouble for department store brands, which are having an incredibly tough time finding a way to get customers in the door. And the signs of desperation are there — it’s why everything in Macy’s seems to be 40% off at any given time.

What’s sinking Macy’s?

People shop at Macy's retail department store in New York City

People shop at Macy’s retail department store in New York City | Spencer Platt/Getty Images

Macy’s isn’t alone in its recent troubles. JCPenney, Sears, Kohl’s, and many other retail department stores are also trying to keep their brands relevant. For some, it’s not going so well. For others, new strategies are proving at least somewhat fruitful in the short term. But the numbers paint a fairly ugly picture. Retail sales are down, and forecasts predict that the slide will continue.

Why is it happening? Primarily, for the reasons previously stated.

We’ll start with labor costs. Retail jobs are notoriously awful — they require you to be on your feet for a long time, facing customers who can be rude and unforgiving. These jobs also don’t pay well, on average. As the labor market has tightened, it’s become harder to fill these jobs. So, costs of finding, training, and retaining employees have cut into margins. Also, many states and cities have bumped up the minimum wage, further hitting profit margins.

Second, the business model itself is proving that it may no longer be sustainable. Consumers are changing the way they shop, and it seems that many are no longer willing to wander around giant retail stores to find what they want. Why do that when you can simply buy something from your couch with your smartphone?

That leads to the third factor: More agile competition. The most obvious threat, as far as this goes, is Amazon. But others are catching up — Wal-Mart, for example, recently purchased Jet.com to better position itself for coming online sales battles. But companies like Macy’s? They’re still dependent on physical sales, largely. Without the additional costs of huge stores, stocked with slow-selling merchandise, a company like Amazon will have an edge going forward.

Picking at the bones of retail stores

They're practically giving the store away at most Macy's locations

They’re practically giving the store away at most Macy’s locations | Spencer Platt/Getty Images

The retail industry’s troubles go deeper than that, of course, and aren’t easily fixed. Large, physical storefronts were and continue to be the bread and butter of companies like Macy’s. When you look at the numbers, sales at brick and mortar stores are still where the vast majority of economic activity is taking place.

This doesn’t mean, however, that these companies can survive without evolving. Retail stores operate on fairly thin margins to begin with — and any cut into those margins is going to make it that much harder to flourish.

The retail industry’s struggles can be good for consumers, though. As mentioned, if you walk through just about any Macy’s, JCPenney, or Sears store these days you’re bound to come across aisles of clearance racks and signs reading “50% off.” They’re pulling out all the stops to move merchandise — and for shoppers? It’s like Black Friday, every day.

More competition (from online companies, particularly), has forced brick and mortar retailers to start fighting pricing battles they’d rather not, and that means savings and deals. Macy’s is even experimenting with a concept that Nordstrom has also pushed: Discount stores.

The long-term outlook for companies like Macy’s may not be positive, but at least for the time being, consumers can take advantage. The question is whether or not retail companies will be able to evolve and survive into the 2020s and beyond. Right now, things are up in the air.

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