Online shopping: Threat or opportunity for Macy’s and peers?

Sirisha Bhogaraju - Author

Feb. 9 2015, Updated 3:06 p.m. ET

Online shopping

Online shopping has grown significantly over the past few years. It has impacted the top line of department stores such as Macy’s Inc. (M), J.C. Penney Company, Inc. (JCP), Sears Holdings Corp. (SHLD), Kohl’s Corporation (KSS), and other brick-and-mortar retailers.

These companies are expanding their online businesses aggressively to fight competition from online retailers such as Amazon.com, Inc. (AMZN). As of January 30, 2015, the Consumer Discretionary Select Sector SPDR Fund (XLY) had 6.26% holdings in multiline retail companies such as Macy’s and 10.7% in Internet and catalog retail companies.

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Rising US online business

According to the U.S. Census Bureau, online sales accounted for 6.6% of total retail sales in the third quarter of 2014. This is a small percentage, but it has been increasing over the past few years. Third quarter US online sales increased by 16.2% on a year-over-year basis to $78.1 billion.

Macy’s omnichannel strategy

Macy’s has embraced the fact that online shopping is crucial to its growth. Through its omnichannel strategy, the company has blended its traditional brick-and-mortar business with a digital channel to provide customers the choice of shopping online, in stores, or via mobile apps.

Macy’s omnichannel strategy encompasses various initiatives to boost sales. The strategy includes same-day delivery of products purchased online and the buy-online-pick-up-in store option that allows customers to avoid shipping charges and collect orders from stores at their convenience. This also helps Macy’s increase store traffic.

Macy’s has also introduced many apps to boost sales. For instance, Macy’s Image Search is an app through which customers can search for a product on Macy’s website by submitting a photograph of the product. The visual search will direct the customer to similar items on the website where it can be purchased. The online channel also provides the company a medium to reach consumers outside the United States.


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