Macy’s Announces Laying Off 2,350 Employees and Shutting Down 5 of Its Stores; What Led to the Decision?

Layoffs are hitting the corporate world and it is not just the IT sector that has been hit. Macy’s, the veteran department store chain recently announced its decision to lay off 2,350 employees and completely shut down five of its stores. The company cited streamlining its operations as the key cause behind the layoffs. “As we prepare to deploy a new strategy to meet the needs of an ever-changing consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company,” reads the official statement given by Macy’s spokesperson to CNN.

About Macy’s

Macy’s is one of the largest department store companies in the United States in terms of revenue. Since its inception in 1858, it has come a long way with an annual revenue of $25.3 billion in January 2023. The company is popularly known for conducting New York’s Macy’s Thanksgiving Day every year since 1924. Macy’s started with the shutting down of the stores and laying off its workforce in 2015, and since then it has laid off several thousands of its employees. The company was even offered an acquisition deal by Arkhouse Management which it rejected.

Macy’s decline and plans ahead

Macy’s has been facing tough competition in recent times both due to strong retail players and quickly emerging digital commerce. It even came with several strategies such as launching new brands and opening smaller stores but none of them seemed to work out for the company. The decline in the company’s financial health is evident from its declining stock value which dropped by 75% from its peak value in 2015. The recent layoffs are adding to the company's past decision to shut down 300 of its stores. Now the company plans to channel the funds to improve customer experience and make efficient workflows by investing in automation in the supply chain. Some of the affected roles will be outsourced to save costs.

Why US retail stores are being shut?

Companies like Macy’s which run retail store chains are facing challenges at an enormous rate which are making their survival difficult. Some of the key reasons why retail stores in the United States are being shut down are as follows:

1. Competition from e-commerce: The growth of digital commerce has led to a decline in retail shopping. Consumers prefer to shop from the comfort of their homes without the need to step out.

2. Change in consumer behavior: Consumers these days opt for convenience. They spend so much time in front of the screens that they are used to the digital experience. The brick-and-mortar stores fail to provide the glamorous digital experience being provided by online stores.

3. Increased cost: Running a retail store is much more financially intensive than a digital store. There is a huge cost involved in rent, labor, and utility bills.

4. Overexpansion: Some retail store chains expand at a rapid pace opening their physical outlets at multiple places. Overexpansion means increased costs. Stores should be opened in locations where there is demand and the competition is not fierce.

5. Covid-19 impact: Covid-19 impacted all forms of business but retail was very significantly impacted. During the Covid-19 pandemic, people restricted their movements in the physical world and started making purchases online. That led to a decline in sales in retail stores. Even after the pandemic, consumers have adapted to the digital shopping experience and retail stores are finding it hard to cover their losses.