Axios Pro Exclusive Content

Macy’s e-commerce unlock

Feb 6, 2024
An illustration of a money sign with a keyhole in it.

Illustration: Aïda Amer/Axios

While the most attractive prospect of a Macy's deal lies in the department store's real estate, potential suitors could unlock value in its brand and e-commerce operations, industry insiders say.

Why it matters: Macy's primary reason for rejecting a $5.8 billion takeover bid from activist investors was that the proposal lacked "compelling value."

Catch up quick: Activist investors Arkhouse Management and Brigade Capital aren't the only ones nosing around the legacy brand, with Sycamore also reportedly looking at Macy's.

By the numbers: Macy's real estate has been valued at anywhere from around $6 billion to $8 billion, $2 billion of which lies in its flagship Herald Square store in New York.

What they're saying: "The investment minds will figure out a way to carve anything up to find sources of value. To me, that's a very different question than how to run a retailer with a century-old brand," says Kearney partner Greg Portell.

  • While it's possible to run a separate e-commerce operation from a physical retail operation, "the stakes that you need to get to are the seamless customer experience," Alix Partners' Andrew Webb says.
  • Webb cites Saks, which he says was able to maintain that seamless experience after investor Hudson Bay Company split off its e-commerce business in 2021.
  • "From that perspective, it could and would be a template from a successful perspective of saying, 'We were able to engineer this,'" Webb says.

Yes, but: Not controlling both brick-and-mortar and e-commerce channels puts a retailer at a disadvantage when it comes to setting expectations, Portell argues.

  • A retailer should take a holistic view to provide a good consumer experience, he says.
  • "If that starts bifurcating into different channels, you're really missing the point," Portell says.

Zoom in: E-commerce is valuable in that it helps retailers understand customer behavior and gives them visibility into where to put their resources.

  • "E-commerce is still very much front-and-center in terms of unlocking a different customer demographic, a different customer base to both acquire that and then grow the basket," Webb says.
  • At the same time, it's harder to evaluate e-commerce performance because it's based on a different scorecard than traditional retail, which bases expectations on profit and revenue, Portell says.
  • With a digital business, you're looking at other factors, such as users or dwell time, Portell adds.

The bottom line: "They need to create that vision that reminds people of the magic of Macy's retail, and that at least gives them some ammunition to counter the chasing of rainbows that a real estate story creates," Portell says.

Go deeper