What: Macy’s expanded itself into the largest department store in the US, but this transformation turned into its demise.

Why it is important: Macy’s needs to go back to the basics, focusing on the offer and the store experience in order to survive the coming years. The retailer will need to take a close look at its portfolio and cut out the activities that are distracting the business to be able to focus on the pieces that can survive.

In 1994, Macy’s had a mission to compete in new locations where other department stores had roots and successfully replaced many local department stores.

But after achieving 853 stores in 45 states, Macy’s started to backpedal by focusing on a local offer and reducing store count. The CEO at the time, Terry Lundgren, basically bought up multiple brands (Federated…) of stores, branded them as Macy’s, then closed them.

The rise of Amazon and e-commerce also hurt Macy’s and led to another closure of 225 stores. Amazon’s rise has forced retailers like Macy’s to dedicate resources to selling online, resulting to a fewer need for physical stores.

Then came the rise of the discount chain Target, created by department store owner Dayton-Hudson. In 2006 Macy’s ran more than 850 department stores and a website resulting in USD 27 billion in sales. In parallel, Target ran around 1500 stores and a website resulting in USD 59.5 billion. Macy’s did not recognize that it was expanding a business model that was no longer as relevant as other formats such as discount chains (Target, Walmart, Costco).

While Macy’s argues that their biggest enemy is the internet, but their stores are old and tired and the malls they are in are dying. The merchandise they are selling is ordinary and overpriced.

 How Macy’s set out to conquer the department store business — and lost