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The Amazon e-commerce effect: Macy's restructures, closes stores

Macy's previously announced plans to close around 100 stores last August in order to focus spending on its highest-growth-potential locations and new digital tech.
Written by Natalie Gagliordi, Contributor
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Department store giant Macy's announced Wednesday plans to close 68 of its 880 stores and restructure its store operations to help cope with shrinking in-store sales and shifts in consumer behavior. The changes are expected to eliminate more than 10,000 jobs.

Going forward, Macy's will work to align its in-store and online shopping experiences by allocating more funds -- approximately $550 million -- to its digital businesses and ongoing stores.

In a statement, Macy's outgoing CEO Terry Lundgren said the company expanded its technology teams in 2016 and has since made progress in its online business, with double-digit gains at both macys.com and bloomingdales.com.

"Our omnichannel strategies continue to evolve based on the changes in our customers' shopping behaviors, including a focus on buy online, pickup in store and mobile-enabled shopping," Lundgren said. "In addition, we have invested in and enlarged our customer data and analytics team, which will help drive our new marketing strategies for 2017. "

Lundgren is stepping down as CEO in the first quarter of 2017 and will be replaced by Macy's President Jeff Gennette.

Macy's previously announced plans to close around 100 stores last August in order to focus spending on its highest-growth-potential locations and new digital tech. At the time, the retailer said it wanted to find ways to capitalize on its remaining real estate assets to bolster its e-commerce business. This latest move seems to be a continuation of that effort.

Like other department store chains with deep brick-and-mortar roots, Macy's has felt the sting of the so-called Amazon Effect and struggled to evolve as an e-commerce player. Amazon is eating up sales of apparel, home goods and other staple items of the traditional department store. And brands like Macy's have the sales drops to prove that customers are shopping elsewhere.

Macy's revealed today that its comparable sales declined by 2.7 percent tin the months of November and December 2016 combined, compared to the same period last year. As an added kick in the gut, Macy's shares have tumbled following news of the layoffs and store closures.

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