Focus on digital channel
Department stores are facing huge competition from online retailers such as Amazon (AMZN), which are eating away at their market share. Macy’s (M) and its department store peers continue to focus on the enhancement of their online channels to address changing consumer behavior. In Macy’s 4Q16 conference call, former CEO Terry J. Lundgren stated that the company’s online sales continue to grow by double digits.
Digital IQ index
The Digital IQ Index by benchmarking firm L2 ranks department stores based on their digital capabilities. Upscale department store Nordstrom (JWN) topped the 2016 index with a score of 152. Macy’s brands Macy’s and Bloomingdale’s ranked second and sixth, respectively, and Kohl’s (KSS) and JCPenney (JCP) placed third and fourth.
Macy’s has been offering several facilities to attract online shoppers. These include faster shipping, a buy-online-pickup-in-store service, and same-day delivery. The company continues to invest in enhancing its digital infrastructure, including capacity-building on its sites and apps. Macy’s has also been focusing on bettering the online consumer shopping experience by developing sites’ and apps’ natural language search, speeding up page loading, and improving the order process.
However, department stores’ continued investments towards the improvement of their online infrastructure are putting pressure on their margins. We’ll discuss Macy’s profitability in the next part of this series.