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Can Macy's Get Bigger By Getting Smaller?

ISABELLE TEARE, HOST: It's been a bad year for the retailer, Macy’s. They reported their earnings today and holiday season sales were disappointing. But it's not all doom and gloom for the iconic New York store. They have a plan to bring back shoppers. Thomas Copeland reports today on his first ever trip to Macy’s.

THOMAS COPELAND, BYLINE: Ok, so let’s take a look at the floor plan.

COPELAND: The Macy’s in Herald Square is the largest store in the US.

COPELAND: Women’s fashion stretches across 1, 2, 3, 4, 5, 6 floor...

COPELAND: Well over 2 million square feet.

COPELAND: Ok that's alot. All I’m actually after is just a nice shirt, so I think I’m going to go to the 5th floor?

COPELAND: And even when you think you’ve found the right floor, it’s easy to get lost.

COPELAND: Oh, ok so that’s lingerie so I think I’m in the wrong place, ok…

COPELAND: Shopping used to be all about the adventure. Spending hours and getting lost was part of the fun. But now people can buy online in minutes. And Macy's is under pressure. The retailer giant’s fourth quarter results were released this morning. And there’s no shortage of bad news. Net sales, gross margin, net credit card revenue - all down. I notice the problem at Herald Square. As I walk around, I see very few shoppers.

COPELAND: Can you find your way around easily?

BRIAN: We get lost sometimes and we work here.

AMANDA: Yeah we work here.

COPELAND: You work here and you get lost here?

AMANDA: I just refuse to go on the other side because I’m scared to get lost.

COPELAND: That’s Amanda and Brian. They’re off work, but they point me in the direction of some nice shirts and I head off. Shoppers today don’t want a treasure map to find new socks. Macy’s has a plan to make it easier to get around. They’ve launched a new set of smaller stores called Market by Macy’s. A fifth of normal size. And you can find them inside shopping centers. The idea is that Market by Macy’s stocks curated products and uses data to adapt each store to the local consumer. These mini Macy’s have already done well. In today’s investor call, CEO Jeff Gennette said sales in these stores are up 8% with twice as many visitors.

GENNETTE: It’s attracting a new raft of customers, it’s helping the digital business in those zip codes. We’re going to be launching new ones in 2023 and by the end of the year we are hoping for a scalable model.

COPELAND: Macy’s has shuttered 80 large locations since 2020. But they’ve actually opened eight Market by Macy’s at the same time. Some analysts are not convinced. Steve Dennis consults with retail companies and wrote about Macy’s new strategy.

DENNIS: They started 20 years late. Everybody knew traffic was moving away from the malls. And you know, they're going to need a thousand of these stores to be competitive.

COPELAND: And Dennis also questions whether the off-mall stores will really attract new customers.

DENNIS: I think what it's doing is it's just bringing for the customer that really likes Macy’s, they're just going to transfer business from the mall stores to the off the mall stores, But had they not done it, they would continue to probably lose more market share. So they're going to spend a lot of money to basically hold serve.

COPELAND: Macy’s is forecasting another drop in sales for 2023 as many retailers predict people are going to shop less. Dennis says that’s when we’ll see if Macy’s really can get bigger by getting smaller.

DENNIS: I don't think it stands any chance of working over the long term. I mean, they sort of have to do it as I mean, to me, it's a defensive strategy. It’s when the tide goes out that you know who’s been swimming naked.

COPELAND: I for one will remain fully clothed, because back at Macy’s I finally found the men’s department, picked out a basic purple t-shirt and added to Macy’s future earnings. Nine bucks at the register.

COPELAND: Thanks very much. Ok, let's see if I can find the way out. Thomas Copeland, Columbia Radio News.

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