As Macy’s looks to course correct after growing to over 175 million square feet of retail space and experiencing several years of falling sales, it’s reassessing its lower-performing stores and trying to reinvigorate it’s higher-performing ones. These moves speak a lot about how Macy’s views its prospects and how it’s allocating resources to rebuild its foundation for the coming decades.

Underperforming stores

The company’s plans for its underperforming stores are the most telling. Facing falling sales in many locations, Macy’s is shrinking the size of the selling floor by about 20%, cordoning off unused area and reducing staff—plans it is currently implementing at four locations. It’s calling these “neighborhood stores” (it has about 300 of them) and the goal, it says, is to save money on staffing and inventory, while still improving the shopping experience. It plans to do this by offering more self-shopping areas where shoppers don’t need help since additional inventory will be available on the floor.

The paradox, however, is that while these stores are too big, they are still profitable, even if less so than top-performing stores of the same size. The Stamford Town Center Macy’s in Stamford, Connecticut, for example, is 200,000 square feet but earns only half of the revenue of top locations of the same square footage. With this in mind, Macy’s is trying to increase profitability and increase sales per square foot by making the store smaller. As a result, it’s walling off part of the store’s first floor to shrink its footprint by 8%.

This might work, but there’s one big problem: it’s reducing staffing in these locations by up to 40%, in addition to decreasing the number of checkout stations. Getting good customer experience has always been an issue at middle- and lower-market department stores like Macy’s, and further cutting costs in these areas is a big red flag. Customer service is the one thing that seperates a store from feeling like a warehouse, and it’s something Macy’s should be working hard to improve. But cutting staff to this degree, instead of investing in them to increase their numbers and potential, will likely ensure these underperforming stores stay that way. Additionally, while making more of the floor self-service oriented might make sense, it will lead to putting even more inventory out for customers to sift through. This will likely encourage shoppers to ask staff for more help, but they’ll have fewer faces to assist them on the floor.

Since resources are finite, it would make more sense for the retailer to pull back on inventory or other investments while allocating more money to investing in its staff. Instead, it’s shrinking its staff at double the rate it’s shrinking its footprint, degrading customer service.

Performing stores  

In Macy’s stores that are performing well—350 or so locations that it calls “magnet stores”—the playbook looks a bit different. The retailer has signed deals with Sunglass Hut, LensCrafters and other companies to rent out space in their stores, which creates more reasons for shoppers to visit Macy’s and helps lower real estate costs (JCPenney is pursuing a similar strategy with Sephora, Fanatics and the InStyle Salon). Macy’s is also expanding its merchandise, hiring more staff and renovating the floor, including the addition of Starbucks coffee shops. This year, it renovated 50 of its stores for over $200 million, costing about $4 million per store on average. It plans to renovate 100 more from this pool next year.

In these stores, Macy’s is also adding 15% more staff, improving dressing rooms and building more service stations for online customers. This increase is telling because it means that the company knows that adding more staff improves the shopping experience, even as it does the opposite in its underperforming stores.

Going forward

Ironically, the company says its retail stores have landed at the current juncture because the company has been investing so heavily in ecommerce, making retail an afterthought. While Macy’s doesn’t report digital sales numbers, the company says they are growing by double-digit percentages each year. Still, it’s an interesting sign that the company is chasing ecommerce but neglecting brick-and-mortar, its main business that accounts for a majority of its sales. In reality, both should be able to co-exist and strengthen each other, versus competing. After all, that is the whole point of a multi-channel business.  

But the big lesson from these strategic changes is to never underestimate the importance of customer service, and the need to invest in it. Otherwise, people will just stay home and do all their shopping on their phones, defeating the purpose of having a store in the first place.