Macy's Spinoff Is Going To Happen - But More Transformation Is Needed to Save It
What's going on with Macy's? Ultimately trying to figure out its next steps. Here are a few thoughts.
1 - The decision to hire AlixPartners (the consulting firm that helped Saks split up) tells you the digital split/spinoff is going to happen.
It's only about the "how" at this point. In pursuit of the higher valuation, investors (and the management hired by them) will come to any conclusion they need to come out looking like heroes.
And trust me after that new IPO, that's exactly what Jeff Gennette will look like to the investor set.
The fact that the spun-off digital entity would be 4x the value of the current entity is the information most people sweep under the rug. This is not about a 20% boost. To an investor, this is transformational money.
2 - Regarding Macy's #marketplace announcement. This is not about creating a broad-based marketplace. It's only about certain categories. Remember, Macy's didn't need a marketplace to drive new selection, broadly. They just installed CommerceHub a few years back. However, CommerceHub does not help you in categories with widely fragmented supply. In particular:
* Toys * Home
Toys is a notoriously fragmented category. Most top brands do not dropship, and so supply must be found from distributors and independent marketplace resellers.
Home is one of the broadest categories out there anyway, and there will never be enough sellers.
Both of these categories should be multi-billion dollar opportunities for Macy's, so the economics make sense -- particularly with their recent Toys R Us #marketplace which they could use as the "co-brand" for this curated toys assortment. (I expect within each category it will not be so curated, it is more curated by certain category).
The thing that Macy's can't control is all the exclusive toys that Walmart and Target will secure.
What should they be doing additionally?
What's being left unsaid is how #Macy's will transform its stores. If I'm Jeff Gennette, I hold out to split out the digital unit only if I can apply some of that new investment money to transform my supply chain like Target did, as well to introduce new private label brands.
