- Macy's announced Tuesday that it will be partnering with Best Buy to introduce electronics offerings through Best Buy concessions within 10 of its stores. The Best Buy concessions will be staffed by Best Buy employees and will offer expertise and products not found at Macy’s.
Macy’s also said Tuesday that early next year it will close 35 to 40 stores, some 5% of its 770 brick-and-mortar stores nationally that represent 1% of its annual sales.
The retailer last week also opened several of its new Backstage discount stores, which include last season’s merchandise as well as specially made products at discounts. They include mobile checkout stations, mobile charging stations, WiFi, Sunglass Hut concessions, and, in New York, a cafe with Starbucks coffee and food.
Through these initiatives, Macy’s for now appears to be muscling past the investor pressure to capitalize on its real estate holdings. Closing underperforming stores is hardly a ground-breaking move, but closing so many stores is especially assertive considering that Macy’s isn’t struggling all that much.
Macy's is attempting to find a new way to be a department store, in an era well away from that kind of retail’s heyday and amidst the still-emerging importance of e-commerce.
Macy's CEO Terry Lundgren has said before, and reiterated in a statement Tuesday, that brick-and-mortar is essential to Macy’s operations. But the retailer is apparently taking no chances on weaker stores in areas where it faces stiff competition from nearby shopping centers.
The retailer’s acquisition of beauty and spa retailer Bluemercury is also a strong play for a segment of retail that is thriving at a variety of price points. Bluemercury is an upscale enterprise whose spa features offer a way to connect with customers.
And the partnership with Best Buy is a testament to Macy’s attempt to return to a retailer that offers customers a wider range of goods as well as to Best Buy’s own turnaround. Nordstrom has found success enlisting pop-ups and concessions that draw in customers looking for items not always thought available in today’s more staid department stores.
The move is in line with what Mark Cohen, Columbia University retail expert, has told Retail Dive would be good for Macy’s.
“If it were me — I would be using the Internet platform to go back to the businesses that they excited people with years ago, like home electronics and home furnishings, and try to re-establish their franchise with the consumer at large,” Cohen told Retail Dive earlier this year. “Unfortunately, apparel is off trend.”
Cohen noted that the retailer’s Cellar departments, which started in San Francisco decades ago, was “a pure play on lifestyle that was interesting and innovative, with really compelling product."
"Did the marketplace for that disappear?" he said. "Of course not, but they couldn’t sustain the effort” in an era when apparel sales had large margins.
One question for Macy’s is whether it can shake the habit of offering heavy discounts. It may hope that discount Backstage stores can leave the flagship brand to edge away from all those deals, but customers may not be ready for such a change.
Many of these moves bring to mind J.C. Penney’s similar attempts under CEO Ron Johnson, who brought in beauty retailer Sephora and tried to end discounts by offering better prices in the first place. Penney customers rebelled over the price changes and Johnson was run out of town. The Sephora partnership, however, has remained a winner for that retailer.
Perhaps Best Buy will also be a win for Macy’s, although sales of Apple products aren’t part of the retailers’ current agreement, despite the fact that Best Buy is the first retailer outside Apple stores to sell the Apple Watch.