This is a sensible move and one that will help Macy’s cope with elevated online demand. However it has to be said that turning stores dark is also a function of the fact that too many of Macy’s stores simply do not work. They are not pulling in customers and they are not driving sales and profits. Some of this is down to the pandemic, but a lot of it is down to Macy’s atrocious retail standards, its chronic underinvestment in shops, and its inability to put together compelling assortments. After all, if stores did work properly, there would be no reason to turn them completely dark: they could and should operate as combined retail and distribution outlets.

With the massive growth in online sales and expectations that social distancing will be a concern for many consumers through the end of 2020, converting some underperforming locations to dark stores is a smart strategy for Macy’s during the holiday shopping season. Dark stores and ghost kitchens are hot topics lately as retailers are trying to find effective ways to fulfill online orders profitably. In a few years, I suspect dark stores will become much more pervasive.

Many retailers are in survival mode and so this is a reasonable approach under this circumstance. However it’s a short-term survival tactic only. Macy’s decision to convert stores into dark locations is just that, a short term tactic to try to serve customers through what will be a brutal holiday season for Macy’s. Using high priced mall real estate for dark store distribution is a losing proposition.

Converting stores in prime real estate to dark stores is like trying make lemonade out of lemons. It is an attempt at asset utilization that they had to do. But if Macy’s had an opportunity to design from the ground up, they would probably choose a smaller size and different location.

I think it’s a good short term solution given all the uncertainties around. Long term, Macy’s has to decide what it’s going to do with under-performing stores. It’s expensive real estate to act as distribution centers.

What we are seeing is traditional silos – both physical and functional – between sales activities and distribution and fulfillment operations, dissolve in the face of changing consumer purchase behavior. Instead of thinking in line-item accounting terms and functional roles, retailers and other consumer-facing companies are reworking their sales and fulfillment networks. They are transforming these to systems of higher value delivery for their customers while creatively addressing demand uncertainty in this unique retail holiday shopping season.

Let’s imagine two of Macy’s suburban stores. The one that is open to shoppers has staff standing around waiting to help customers who aren’t there and getting paid to do it. The other is a dark store with a balance of staff to meet the online demands and getting paid to contribute to success of the company.

I’d sure like to know more about the detailed math of this proposition. An open store with ongoing revenue wasn’t working out. Now a dark store with zero revenue works as a distribution center? I understand that Macy’s is expecting a surge in internet sales this holiday season that they have to service, but this sounds like an expensive solution. Still, I admire the leap they are making. It’s a bold experiment at a time when the rumors are rampant about Amazon and how they might use mall space (JCP). The look and feel of next year’s mall keeps getting harder and harder to predict.

Macy’s decision to create dark stores is a short-term fix for a long-term problem. Based on the need to reduce cash burn and try to recoup sales from a down-trending season, using the stores as fulfillment centers make sense for the next four months. The problem faced is making sure the right stock is in the few stores that are doing fulfillment. Macy’s has been notorious for keeping goods sitting on trucks in transit and not in the right locations down to the SKU level. If Macy’s can make sure there is better visibility into the supply chain and it can improve the speed to market for Q4, it could be a savior. Other retailers may follow suit if the financials support the decision. Low inventory, a need to conserve cash and significant changes in consumer demand are making this holiday especially tough for apparel and department store retailers.

We all realize that department stores are taking a hit with new aggressive competition from channels that did not exist only a few years ago. With declining sales trends, along with lower traffic counts, this is probably a great offensive move. Keep in mind that Mr. Gennette is not afraid of being aggressive as he has shown us by past years’ closing of fair performing stores.

Re-purposing of locations is something retailers need to get good at. There are so many well located sites close to population centers that can be utilized for same-day delivery and other express services that this becomes a no-brainer.

I never thought I would quote Donald Rumsfield but — “You go to war with the army you have, not the army you might want or wish to have at a later time.” Trying this in two stores with timing that’s just a month or two away seems like a pretty good plan to me.