Macy’s Converts 1M SF Into Mini Distribution Centers As It Gears Up For Holiday E-Commerce Battle

Macy’s is implementing semi-automated mini distribution centers to reduce shipping costs and split shipments as the retailer positions itself to handle an influx of online holiday shoppers.

Macy’s Chief Financial Officer Adrian Mitchell announced the conversion of almost 1M SF throughout 35 of its stores to mini distribution centers during an earnings call Nov. 17.

“They are relatively low-cost complements to our existing fulfillment network,” Mitchell said.

The centers should help get inventory closer to customers, increasing the speed of delivery and mitigating shipping costs, according to CEO Jeff Gennette.

“It's about 1M SF of supply chain we didn't have last year,” Gennette said. “So all that kind of modernized supply chain applies to whatever comes our way with digital business in the fourth quarter.”

E-commerce’s popularity hit an all-time high during the first year of the coronavirus pandemic. The Census Bureau’s Annual Retail Trade Survey showed e-commerce sales increased 43% from 2019 to 2020, rising from $571.2B to $815.4B. Meanwhile, clothing and accessory store sales dropped more than 25% from 2019 to 2020.

Things have been looking up for Macy’s since then as it practices better inventory management, Yahoo Finance reported. Macy’s Q3 inventory levels were 12% lower than in 2019, though 4% higher than last year, Retail Dive reported.

“Effectively managing inventory gives us the flexibility and liquidity to what consumers are buying at every customer touch point,” Mitchell said.

As part of that effort, Macy’s will not be holding on to certain excess inventory to sell at a later date, hoping to avoid being saddled with out-of-season products.

“We’re planning to get into the next year in a clean inventory position because the packaway is just not a favorable thing for us as a fashion retailer,” Mitchell said.

Macy’s also plans to announce fewer than 10 store closures in January, Mitchell said on the earnings call, consistent with its decision last year to delay the closure of the full-line store base. Macy’s announced in February 2020 that it planned to shutter 125 stores within three years, but is re-evaluating whether to close an additional 50 that had been planned to go dark by 2023.