Macy's steps up fight in warehouse wars - KMSP-TV

Source: The Wall Street Journal

Macy's is building a network of online-sales distribution centers around the country -- in the backrooms of its stores, as the chain responds to a distribution war in the retail business.

Increasingly that war is being won by online-only seller Amazon.com, which has built a highly-efficient group of warehouses within miles of most major population centers.

Amazon's success was not lost on Macy's top managers. Last summer, they decided that they would shift how they got merchandise to customers. Instead of sending goods only from online warehouses, the company would begin fulfilling goods directly from impromptu shipping centers at its locations.

"We've spent the last 153 years building warehouses," chief stores officer Peter Sachse said in an interview. "We just called them stores."

The retailer plans to convert 292 of its 800-plus stores for the task, with expanded storerooms and new technology that dynamically updates the status of every item in every store. The goal is to better manage inventory.

For instance, if stores have too much of an item, the excess can be shifted to the website, where it might be selling better and at full price. Likewise, out-of-stock items will not disappear from Macy's website if they can be found in a physical store.

Online orders will be filled by stores closest to consumers, saving time and money on shipping. Before it started shipping from stores, Macys.com removed thousands of sold-out items from its website each week, Sachse said.

When the chain carried a limited-time line from Chanel creative director Karl Lagerfeld last year, half the online inventory sold out in the first day, yet Macy's stores had to discount the collection to get it sold, he said. If Macy's had been able at the time to meet online demand with Lagerfeld items shipped from its stores, he said, sales would have been much better.

Macy's move reflects a broader strategic shift that US retailers are making to compete with online rivals. The new buzzword is "omnichannel," where internet operations are deeply integrated with physical stores. Such talk has been around since the late 1990s, but now much of the back-end technology is finally in place to help retailers manage inventories.

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