Macy's store closings include two important downtown locations in Portland and Minneapolis
Today Macy's announced their list of definite store closings, following up an announcement last fall that in 2017 they will be closing 100 stores, in response to declining sales. Thus far they have listed only 68 of the projected total of 100 stores (note that not all are full line department stores, some are specialty operations).
They've been closing stores for awhile now, as more commerce migrates online, and as shopping malls become less attractive places to shop ("Macy's woes could doom a third of America's malls," Chicago Tribune). Macy's has an interesting method for considering which stores to close, including the impact on e-commerce sales and other channels ("Here's how Macy's decides which stores to close," New York Business Journal). From the article:
... Macy's then looks at which stores are underperforming and tries to model out the cash flows going forward, including the sales it would lose from closing the store as well as merchandise that was previously purchased but will inevitably be returned, regardless of whether it's online or at another nearby store, she said.
Hoguet also noted that when a retail location closes, Macy's sees a corresponding drop in sales on macys.com and bloomingdales.com. She speculated that part of the dip in online sales could come from consumers not having a convenient way to return merchandise that doesn't fit or that they don't like.
"We then model out the cash flows going forward and compare that with the cash flows associated with closing – any proceeds if we own the store, working capital, et cetera – a nd look at the two together and decide if the value to operate is greater or less than the value to close, and we proceed," Hoguet said.
The list includes sites in Downtown Portland ("Macy's closing downtown Portland store: 'A bit of," Portland Oregonian) and Downtown Minneapolis ("Macy's sells downtown Minneapolis store, will close it in March," Minneapolis Star-Tribune), although the Portland closure was announced last November.
Both stores had been the flagship locations of regional chains (Maier & Frank and Dayton's respectively) that eventually were amalgamated into Macy's. Such large stores are fundamental anchors in multi-faceted commercial districts such as a Downtown ("The Uncertain Fate of the Downtown Department Store, Next City; "Despite subsidies, downtown department stores still disappearing," Milwaukee Journal-Sentinel).
I argue that department stores can still be a "killer app" for Downtown retail districts, but they need a lot of support and most department store chains--and there aren't that many anymore, given the consolidation within the industry over the past 15 years especially--aren't particularly interested in managing and promoting grand experiential oriented stores, unlike the big department stores in say London, Paris, or New York City ("For Macy's, a Makeover on 34th Street," New York Times), even if large center city stores are part of the company's portfolio.
In a book from the late 1980s, Living City by Roberta Gratz, she describes how a regional department store chain in Pennsylvania, Bon Ton, had a practice of buying small independent stores, usually with just a couple branches, an original town store, and at least one "suburban" store that developed in the post-war period, and had a systematic process for de-emphasizing and later closing the center city store. By contrast even today, the Reading-based Boscov's chain still focuses its resources on center city (albeit smaller cities) locations.
DAVID BREWSTER – STAR TRIBUNE. Laura Schara, fashion director looked over a lineup of clothes on models on Macy's 12th floor in preparation for the Glamorama fashion blow-out at the Downtown Minneapolis Macy's. Events like these are experiences typically not offered at suburban mall stores, except at Class A+ malls.
The closure by Macy's of downtown locations continues a multi-decade trend, but it is interesting that these stores are closing in a period where all the industry pundits say special stores and a focus on creating experiences will matter much more going forward (I still remember as a child going to the downtown Hudson's Department Store in Detroit to see Santa) along with the increased attraction of living in center cities.
-- The Evolution of Experience Retailing, Oracle
-- Shifting from consumption to experience, EY
-- Experiential Retail is the Retail Sector's Safest Bet These Days, Ten-X
New York City is one place where new high-value brand department stores are being opened ("A Department-Store Comeback in New York City," Wall Street Journal. The Manhattan Macy's store has a dedicated branch of the city's tourism information center.
It may well be that such stores will be the province only of the largest cities, like New York, Chicago, and San Francisco, with cities like Portland, Pittsburgh, and Minneapolis being too small to support large stores with active promotional and programming calendars.