Anticipating the Parade of Macy’s Store Closures

Market Research Analyst

Macy’s recently announced its decision to close nearly 100 stores across the United States, suggesting that the still-growing influence of e-commerce is lessening the need for a strong brick and mortar presence. The company did not indicate which stores it would be closing, stating that the company would announce its decisions at a later date. We at 1010data didn’t want to wait so, using our Local Market Intelligence (LMI) product, we examined where Macy’s business has declined the most and, if possible, attempted to understand some of the drivers behind their decline.

Using LMI, we identified regions where Macy’s market share experienced the most significant negative changes from 2014 to 2015 when compared to Dillard’s, Nordstrom, and Lord and Taylor. Based on Macy’s evolution into a mid-tier department store, we chose a competitive set of department stores that cater to the customer base that Macy’s is pursuing. On the heat map below, you’ll notice that Macy’s experienced some of the biggest losses in market share in several large cities in the Midwest, like Cincinnati and Milwaukee. 

Although the Midwest is where Macy’s got hit the hardest, areas in the South, Northeast and Pacific Northwest also experienced significant declines. The top 10 cities where Macy’s lost the most market share between 2014 and 2015 are:

 

  1. Milwaukee, WI – 14% loss
  2. Pittsburgh, PA – 12% loss
  3. Hartford, CT – 9.4% loss
  4. Philadelphia, PA – 9.1% loss
  5. Detroit, MI – 8.2% loss
  6. Cincinnati, OH – 7.5% loss
  7. Daytona Beach, FL – 7.4% loss
  8. Louis, MO – 6.2% loss
  9. Columbus, OH – 5.9% loss
  10. Cleveland, OH – 5.7% loss

 

Avoid Cannibalization of Market Share

 This ranking gives us a good starting point for identifying the markets where closures might occur.  As we dug deeper into the data, we found evidence that the challenge faced by Macy’s, and perhaps many traditional retailers, is quite complex.

 In some cases, the market is so saturated that it causes retailers to cannibalize their own share. An example of this is Pittsburgh. Macy’s appears to have nine stores—with one store being split between two locations in the same mall—in the Pittsburgh area with a 12 percent loss in share. There is only one Nordstrom store in the area, also located at this mall, and yet Nordstrom has 44 percent of market share in Pittsburgh.

Using LMI’s Local Scorecard, we can see that trips are down 37 percent year over year. Since trip frequency is only down 5 percent, this implies that fewer customers are going to the stores. However, basket size is up, indicating that customers are spending more when they shop in-store. Nordstrom’s customers in Pittsburgh are still buying plenty in stores, but they are actually spending less than they used to. Pittsburgh is a great example of how we might assume that more stores equals more share, but when we analyze further, we see it’s really about a decline in trips.

Optimize Return on Investment

Cincinnati has an opposite story from Pittsburgh. Macy’s has 50 percent market share, which matches the amount of physical stores they own in Cincinnati, but market share has declined nearly 8 percent year over year. While Pittsburgh’s Achilles’ heel was foot traffic, Cincinnati’s is basket size. People still shop in the stores, but they are spending 21 percent less than they used to. The scorecard shows that even stores like Nordstrom, whose market share has grown, can experience a decline in basket size. Instead of investing resources into brick and mortars that generate less revenue, retailers like Macy’s should turn to other growing and profitable channels, like e-commerce.

Focus On What’s Working

Even though our top 15 list was a good place to start, what about cities that didn’t experience a loss in share? Could a city have positive market share growth but still be a candidate for a store closure?

Enter Portland. Of the ten department stores in the Portland area, Macy’s owns seven, but their market share is only 36 percent—half the size of their store share. Using the Local Scorecard, we see that trips are increasing but basket size is slightly declining. This suggests that while Macy’s business in Portland is going well, the company might not need so many stores. Macy’s might actually see market share increase even further if they reduce their footprint and instead focus on a few of the most profitable locations in Portland.

Although we still don’t know exactly where Macy’s will close its stores, 1010data’s Local Market Intelligence tool helped us dig into key metrics, like basket size, trip frequency and market share, to identify potential areas and uncover some that don’t seem to be obvious at first glance. For more stories on the rise of e-commerce and its impact on brick and mortars, follow our blog at https://www.1010data.com/company/blog/.

Methodology

1010data utilizes a number of sources of consumer spending data representing millions of consumers to provide an accurate assessment of online and offline retail sales, market share, and more. Our data enables clients to track consumer behavior using high-quality, granular datasets that are often difficult to source, cleanse, and consolidate.

 

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