Macy's is making a move that signals the death of department stores as we know them

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Macy's is making a move that signals the death of department stores as we know them

macy's store

Jonathan Weiss / Shutterstock.com

Macy's is shrinking some of its stores.

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  • Macy's is shrinking the size of some of its less productive stores and cutting back on staff.
  • CEO Jeff Gennette told The Wall Street Journal that he plans to cut down on merchandise so that these smaller locations require fewer employees. He also hopes that a more curated assortment will create a better shopping experience for the customer.
  • Kohl's has used a similar strategy in the past to stave off store closings.

Macy's has a drastic plan to boost sales in its less successful stores.

In an interview with The Wall Street Journal, CEO Jeff Gennette said that the department-store chain is shrinking the size of its less productive stores and cutting back on staff at these locations.

Gennette hopes that by having less merchandise to wade through, Macy's can create a cleaner shopping environment and, ultimately, a more desirable experience for the customer.

So far, the four locations being tested with this new format will cut off as much as one-fifth of the total space.

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A spokesperson for Macy's did not confirm to Business Insider how many stores would be impacted by these changes. Macy's is due to report quarterly earnings on Wednesday.

In these smaller locations, there will be more self-service options, fewer cashiers, and areas to pick up or return online purchases.

This helps to trim down on the number of employees required. At the Stamford Town Center store in Stamford, Connecticut, a test store where Macy's has pulled back on the number of cashiers it staffs, there has also been a 40% cut in the total number of employees.

Kohl's has used a similar strategy to fight back against the retail apocalypse. Rather than close stores, it has shrunk some of them in size and opened smaller locations that are about 35,000 square feet (about one-sixth the size of a typical Macy's store). However, these spaces are often not left empty, but rather filled with space for other retailers like Aldi, which Kohl's has a partnership with.

While Kohl's has largely been praised for this strategy and is now considered to be an industry anomaly, reporting same-stores sales growth in recent months while its competitors have been forced to close stores, some experts say that shrinking stores is not a solution, but merely evidence that a retailer is not resonating with customers.

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"If you've got too much space, it means your brand isn't resonating," Steve Dennis, a former Sears and Neiman Marcus executive, told The Journal. "It's not a real estate problem, it's a brand problem."

Macy's is also investing in some of its more profitable locations, launching new virtual-reality shopping technologies and rolling out shopping concepts such as "The Market" at Macy's, a pop-up store-in-store that stocks lesser-known brands. Gennette believes investment in stores is crucial after the company took its eye off brick-and-mortar to ramp up its e-commerce strategy.

Read more: Facebook is launching pop-up stores at Macy's in a move that's straight out of Amazon's playbook

"We were spending the capital and gaining market share in digital," Gennette told The Journal. "But we underinvested in brick-and-mortar. You can't just do one without the other."

This is something that Sears' former CEO Edward Lampert was accused of doing during his period of leadership, and which critics say ultimately caused the downfall of the company.

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