Economic Impact of Macy's Closures, Sephora Openings

On February 4, Macy's announced that it will lay off 2,000 employees at corporate-level positions and close 125 stores over the next three years. They will also look to open smaller store concepts in shopping center locations, which have become more popular destinations for consumers than shopping malls.

On the same day, Sephora announced it was going to open 100 stores in 2020.

Villanova's David Fiorenza, an assistant professor of economics, has provided comments on both retailers' moves:

• "Macy's closing about 125 stores with a couple thousand jobs lost is basic economics. Supply and demand has been changing for many years, as people are shopping online, visiting boutique stores, travelling to smaller stores in strip malls, and visiting the urban-style malls that are popping up in suburban towns. These town centers, like King of Prussia Town Center, offer everything a mall or city shopping district does—but with smaller stores such as Sephora or Ulta."

• "Specialty stores like Sephora and Ulta will continue to see good growth in 2020 and beyond, as this is one area of retail that cannot be replaced with online shopping. The servicing of makeup, cosmetics, hair salons and fragrances needs to be experienced in a store with a knowledgeable sales representative."

• "The cosmetics counters in the large stores that are anchors in malls, such as Nordstrom, Neiman Marcus and Bloomingdale's, continue to show strong sales. However, in other departments within these stores, the sales are flat or declining." 

• "Most of the smaller strip malls and suburban town centers do not have the competition you see at the larger malls." 

• "Since the economy has been thriving for some time now, people have more discretionary income to spend. This is another bonus for Sephora and even Ulta to expand."

• "Macy's is a great organization but some of the stores look old and tired, similar to what happened with Toys 'R' Us' shops. I can see Macy's opening smaller boutiques, like what Best Buy has done, or discount stores, like Nordstrom Rack." 

• "Landlords in these small strip centers and urban centers look for a certain type of business, and the large format of Macy's does not work at this point."