In light of Macy’s announcement to close approximately 150 stores, retail competitors have already started to see this move as an opportunity for growth. In conversations with CNBC, executives from Target and Kohl’s expressed their optimism about capitalizing on Macy’s store closures to increase their own sales. Analysts also suggest that off-price chains like T.J. Maxx, Ross, and department store rivals such as Nordstrom could benefit from the void created by Macy’s closures. The void left by struggling department stores presents a potential market share of up to $2 billion for competitors to gain a foothold in the retail landscape.
Department stores, once anchors of shopping malls, have been losing market share to other retail formats for years. The rise of online shopping and the preference for strip malls over traditional department stores have contributed to this decline. Analysts have pointed out that off-price retailers, in particular, have posed a significant competitive threat to department stores and have emerged as winners amid their struggles. With their ability to offer similar brands and products at lower prices and within more convenient locations, off-price chains have positioned themselves as the new age department store, albeit on a smaller scale.
The broad closures by Macy’s create a significant opportunity for competitors like T.J. Maxx, Marshalls, and Home Goods, which are owned by TJX Cos. About 63% of Macy’s stores have a T.J. Maxx or Marshalls within a one-mile radius, indicating a high level of competition in close proximity to Macy’s locations. Unlike Macy’s, these off-price stores attract a similar, more affluent customer base, making them well-positioned to capitalize on the void left by the department store giant. With a larger footprint and more convenient store locations, off-price retailers like T.J. Maxx have the potential to attract a higher-end customer demographic.
Kohl’s, as the largest department store in the country with 1,174 stores, also stands to benefit from Macy’s store closures. About a third of Macy’s customers have shopped at Kohl’s in the prior 12 months, indicating a high overlap in customer base between the two retailers. Kohl’s CEO expressed confidence in the company’s ability to drive growth, particularly given the strategic locations of its stores in strip centers, which align with successful retail trends. However, like Macy’s, Kohl’s faces challenges related to declining discretionary spending and attracting younger customers.
In response to the changing retail landscape, Macy’s has been exploring new strategies to enhance its competitiveness. The company plans to open up to 30 smaller stores in strip centers and incorporate Backstage, an off-price shop, within its larger department store locations. Additionally, significant competitors like Target are also eyeing growth opportunities in the wake of Macy’s store closures. Target intends to build more than 300 new stores over the next decade, leveraging the void left by struggling department stores to expand its market presence.
Macy’s store closures have created a significant growth opportunity for retail competitors, particularly in the off-price retail sector. As the retail landscape continues to evolve, companies like Target, T.J. Maxx, and Kohl’s are strategically positioning themselves to capitalize on the void left by Macy’s and drive sales growth. With the rise of online shopping and changing consumer preferences, adaptability and innovation will be key for retailers to remain competitive in an increasingly crowded market.
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