Customers’ Use of Physical Stores Makes Macy’s Online Split More Challenging

Advised to separate its eCommerce business from its physical stores, Macy’s is debating how best to approach the concept without alienating its online shoppers who depend on the retail shops for pickups and returns, Reuters reported on Friday (Dec. 3), citing sources familiar with the talks.

The iconic retailer has been in talks with consulting firm AlixPartners following discussions with Jana Partners, who previously advised the 163-year-old company to split its physical retail from its eCommerce operations.

See also: Jana Partners Urges Macy’s to Separate eCommerce Business as it Snags Stake in Retailer

Jana Partners advised Macy’s in October that spinning off eCommerce could be worth $14 billion as an independent operation. Macy’s market capitalization is roughly $8 billion, according to the report.

While AlixPartners consulted with Saks Fifth Avenue owner HBC that resulted in the separation of its eCommerce operations earlier this year, Macy’s situation poses more of a potential threat, since its physical presence is larger and its eCommerce shoppers frequent the retail locations for pickups and returns, the sources said.

Online sales for Macy’s are two to three times higher per capita where the retailer’s 800 stores are located.

Read more: As Macy’s Officially Revisits Dot.com Spinoff, Attention Shifts to Who Might Be Next

Saks has about 40 stores, and its online business brings in under $1 billion, compared to Macy’s more than $8 billion this year, according to data from Morningstar analysts.

As separate entities, Macy’s online business would need separate commercial agreements with the company holding the physical stores, per the report. The sources said they would have to oversee the many facets of operations — merchandise distribution, storage, promotions, marketing — to ensure Macy’s customers have an optimal experience online and in-store.

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