Macy’s Future Hangs in the Balance as Department Stores Face Reckoning

With the rise of eCommerce having transformed the way consumers engage with brick-and-mortar retail, traditional department store chains such as Macy’s are forced to adapt or fall behind, and with billions on the table, it remains to be seen whether it will stay on the public market.

On Sunday (March 3), investment firms and Macy’s shareholders Arkhouse and Brigade Capital announced a bid to take over the company for $24/share, which amounts to a roughly $6.6 billion, according to Reuters.

Also Sunday, Macy’s confirmed that it had received the offer, stating that it would “carefully review and evaluate the latest proposal,” noting that it is “open-minded about the best path” towards creating shareholder value.

The move comes about three months after the two firms’ $5.8 billion bid was rejected and less than a week after Macy’s announced plans to close roughly 150 stores by 2027, focusing on its remaining 350 locations as part of its “A Bold New Chapter” strategy.

“We are making the necessary moves to reinvigorate relationships with our customers through improved shopping experiences, relevant assortments and compelling value,” recently appointed Macy’s CEO Tony Spring said in a statement Tuesday (Feb. 27).

Customers’ retail expectations are evolving, as they do more of their shopping digitally. The PYMNTS Intelligence study “Consumer Interest in an Everyday App” found that, of the 61% of U.S. consumers who had shopped for a non-grocery retail product in the previous month, 72% did so via connected device at least some of the time.

And much of this digital behavior picks away at brick-and-mortar occasions. For instance, the report “The Replenish Economy: A Household Supply Deep Dive,” a PYMNTS Intelligence and sticky.io collaboration, finds that 42% of consumers who have retail subscriptions shop in-store less often because of these memberships.

As such, traditional department stores, whose value proposition has historically been strongly tied to their large (and costly) brick-and-mortar locations are finding that strategies that once won big with consumers are becoming less effective.

Macy’s, for its part, is looking to grow its digital penetration, with its Bold New Chapter strategy including the goal of “modernizing the shopping environment to facilitate a convenient, easy, and frictionless customer experience across channels with continued focus on digital excellence.”

The retailer is certainly not the only department chain being challenged to make major changes in order to stay relevant. In September, JCPenney Co. announced an investment exceeding $1 billion to enhance customer experience and operations, which also included a digital component, with the chain looking to offer a more personalized eCommerce experience. Luxury department retailers, too, have come upon challenges, as premium brands have leveraged the digital shift to foster more direct relationships with their customers.

With the right omnichannel focus, the physical store can still be a strong asset. PYMNTS Intelligence’s study “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar™ Shopper and What It Means for Merchants,” commissioned by Visa Acceptance Solutions and drawing from a survey of nearly 14,000 consumers across seven countries, found that 39% of consumers around the world are now Click-and-Mortar shoppers™, engaging across digital and physical channels.

Specifically, 25% are digitally assisted in-store shoppers, using technology to improve their brick-and-mortar experience, and 14% are pickup shoppers, preferring to buy online and collect their items at the store.

As Macy’s stands at the precipice of transformation, the recent bid for takeover represents a critical juncture. Whether it remains a stalwart on the public market or embarks on another chapter under new, private ownership, Macy’s journey reflects the industry’s overall state of flux, where adaptation is becoming necessary for survival in the ever-evolving retail landscape.