The emergence of online retail stores like Amazon has created a great challenge to the sales and development of traditional stores. One of the most hit traditional retail company is Macy’s as can be seen from its performance in the recent past. This discussion entails an in-depth analysis of the financial status of the company, the reasons for the declining sales and most importantly the recommendations to help in reviving the company.
The internet has become one of the most vital components to billions of people around the world. It is important in both economic and social aspects of people’s lives. Online activities have been seen to influence business activities as many organizations litter search engines for recognition in the market. The most important element of the online activity is the search as it changes the balance to create empowerment to small organizations with ideas and values to share in a wider spectrum. Specifically, online activities and online presence of a business are important as they create transparency and raise the brand’s awareness presented to consumers by advertisers ( Bughin et al.,2011). Businesses should start thinking critically on how they handle their customers. The development of e-commerce has brought a big revolution to the retail industry across the world. The impact of the new network on organizational performance is immense (Rogers,2014).
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There are many essential factors which have contributed to the development of Electronic Commerce in the past two decades. These factors include M-commerce which has aided purchasing of products and financial transactions through the use of mobile phones. There is a rapid increase in the number of people who use the M-commerce platforms to do their purchases. Another aspect is the use of big data where large stores like Amazon analyze information about their customers’ details, shopping habits, and profiles. This has proven to be an important aspect of marketing as it creates specificity. Together with these, there is personalization in which there is personalized merchandizing where customers create personal accounts for the purchasing and interaction with the company. E-commerce has evolved with time since 1995 when there were two major online shopping giants, E-bay, and Amazon. At that time, online shopping was estimated to be worth $131 million in comparison to 20 years later where the value of online retail has increased to a tune of $1.55 trillion.
Even though the European development of E-commerce came in late, it has been rapidly growing. Taking a study of the e-commerce development in Europe, there is growth from lower to higher (Xiao, 2017).
The online shopping platforms have brought a number of effects on the retail market in which they have seen some traditional retail companies diminish and close. A company like Amazon is seen as one of the major competitors whose activities impact severely to other traditional retail companies. Amazon came up with strategies geared towards revolutionizing the retail industry. It started by revolutionizing the bookstores through self-publication and massive inventory. In addition, they brought customer services which other competitors could not match. Some books stores had to bend to pressure and close down. Others which remained in the game such as Barnes and Noble had to redesign their strategies. Another notable effect is on the pricing. Online business competition imposed by big online companies can have an immense influence on the retail market which may result in inflation (Cavallo,2018).
The development and activities of e-commerce have contributed tremendously to the declining sales of Macy’s company. This has been as a result of Amazon’s effect which deals in various products posing competition to traditional companies. The venturing into the apparel and other basic products such as home goods by online retailers have seen Macy’s sales drop. This drop can be linked to the failure of the company to venture into online shopping strategies at an earlier opportunity when the industry was still in its infant stages. According to Business Insider Intelligence (2017), Amazon got transformative strategies including putting investments in their online stores and improving technologies in their locations.
The first Macy’s store was opened in 1876 in which approximately seventy thousand people entered the store. There was a business overhaul in which many department stores closed down due to the shift of preferences from department stores to par louvers. Macy's was one of the hardest hit businesses with this shift as it found itself closing many of its stores. Upon acquiring May by Macy's, there was a cut in the number of employees with close to 6200 jobs. Because of the increased distrust of Macy's acquisition of May, the company came out to point that the existing overlap between the groups and department stores was confined to some states (Bauer, 2012). Due to poor sales, Macy's closed about 68 retail stores most of which were found to be poor performers.
Compared to her competitors such as Amazon, Macy's is doing poorly as seen from its performance. According to financial records for the year 2018, the net income reported as at August 4 th was $166million. From these records, Macy's earned closely 70% share which exceeded the predictions from analysts which was 51%. The revenue for the company dropped by 1.1% translated to $5.57 billion from the previous year. However, this was above the analysts’ predictions which indicated $5.55 billion. Sales gained from stores hiked up to 0.5% better than what was expected which was a decline of 0.9% ( Thomas & Reagan, 2018).
Looking at Financial reports for Amazon, the company had a net income of $1.63 billion in the first quarter which ended on 31 st March 2018 . This was an increase as compared to the previous year where the Net income was %724 million. This figures translated into shares are $1.48 and $3.27 respectively. Revenue for amazon shot 43% to reach $51billion (Wingfield, 2018).
Conclusion and Recommendations
In summary, it can be deduced that Macy's is not comparable to its competitors such as Amazon. This state of affairs has been contributed by the fact that Macy's has not been able to compete favorably on the e-commerce platform with giant online retailers such as Amazon. In addition, the departmental stores are doing poorly as consumers’ tastes towards department stores changed. The affluent population which found it interesting to shop in the department stores shifted gears to find refuge in other exciting shopping facilities. Therefore, the company sticking to its old ways of department stores has been overtaken with time which has seen e-commerce taking toll of a greater part of the population of consumers.
As a matter of recommendation, for Macy's to compete favorably with other opponents there is need to engage more in developing online strategies where it should exploit its potential. Again the company is ahead of its competitors such as Amazon in the aspect of having physical infrastructure which can supplement and work complementarily with online resources. Lastly, there is a need for the integration of the entire business structure to form an inclusive business model which can survive all the adversities poised by the ruthless competitors.
References
Bauer, M. D. (2012). Department Stores on Sale: An Antitrust Quandary. Georgia State University Law Review , 26 (2), 1.
Bughin, J., Corb, L., Manyika, J., Nottebohm, O., Chui, M., de Muller Barbat, B., & Said, R. (2011). The impact of Internet technologies: Search. High Tech Practice. McKinsey&Company .
Business Insider Intelligence (2017). Macy's restructuring to focus on digital. Business Insider. Retrieved from https://www.businessinsider.com/macys-restructuring-to-focus-on-digital-2017-1?IR=T
Cavallo, A. (2018). More amazon effects: Online competition and pricing behaviors (No. w25138). National Bureau of Economic Research.
Rogers, D. L. (2014). The network is your customer: five strategies to thrive in a digital age . Yale University Press.
Thomas, L. & Reagan, C. (2018, Aug 15). Macy’s shares tumble as department store struggles to grow sales. CNBC. Retrieved from https://www.cnbc.com/2018/08/15/macys-earnings-q2-2018.html
Wingfield, N. (2018, April 26). Amazon’s Profit Swells to $1.6 Billion, Lifted by Its Cloud Business. The New York Times. Retrieved from https://www.nytimes.com/2018/04/26/technology/amazon-prime-profit.html
Xiao, Z. (2017). THE DEVELOPMENT OF E-COMMERCE IN EUROPE.
