Dive Brief:
- Macy’s is using space within 35 of its stores to function as mini distribution centers as the retailer positions its e-commerce network to handle an expected influx of shipments ahead of the holidays.
- Around 1 million square feet of store space has been converted to be used for fulfillment services, CFO Adrian Mitchell said on an earnings call Thursday. The move gives Macy’s distribution network a presence closer to customers, allowing the retailer to better service demand.
- The mini distribution centers are semi-automated and expected to save shipping costs, speed deliveries and reduce the need for split shipments. “They are relatively low-cost complements to our existing fulfillment network,” said Mitchell.
Dive Insight:
Macy’s is adding distribution space not only to prepare itself for the busy holiday season, but to also create more space at other facilities for new products down the line.
Chief Supply Chain Officer Dennis Mullahy told sister publication Supply Chain Dive last month that leveraging stores for distribution gives Macy’s breathing room during peak season and will “make more capacity and space available for fulfillment upstream.”
The retailer has maintained strict inventory discipline, and it is now in a position to buy even more if demand calls for it.
“Effectively managing inventory gives us the flexibility and liquidity to [respond to] what consumers are buying at every customer touch point,” said Mitchell.
Macy’s reported Q3 inventory levels were 12% lower than 2019, though 4% higher than last year. While The Gap and other retailers have chosen to pack and hold certain excess inventory to sell at a later date, Macy’s is working to clear its glut now to avoid getting stuck with off-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,” said Mitchell.
Macy’s has invested heavily in automation and data analytics as part of its supply chain transformation plan announced in early 2020. The plan, dubbed Polaris, involves a laser-like focus on monitoring consumer demand to inform decisions around procurement and operations.
“The investments we have made in data and analytics from demand forecasting to inventory allocation to pricing signs have laid the foundation for continued inventory control now and well into the future,” said Mitchell.
Kate Magill contributed to this story.
