ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Amazon's Success and Department Stores' Decline

Updated on November 16, 2016

CNN has reported that Macy's will be closing 100 of its 650 department stores in the United States, resulting in many employees getting laid off. While it is sad to hear about people losing their jobs, I wonder if old-fashioned department stores, such as Macy's, simply have no place in a modern world with increasingly many online shopping options. Physical stores certainly have their merit - it is, for example, much easier to find the right size of clothing in a store where the customer may try on each of the sizes. Online shopping options generally make it easier for people to find what they are looking for, with reviews from other customers, search engines with powerful artificial intelligence, and so on. In addition, online options generally have much lower operating costs for staff, and customers may shop in the comfort of their home. So how should a physical store, such as Macy's, compete with online options, such as Amazon? And on the other hand, how can Amazon increase their profits to be increasingly competitive?

Part of the success of Amazon can be attributed to the heavy use of data science, which helps Amazon to accurately predict customer wants and needs, generate fees from third-party sellers, and reduce inventory costs. When potential customers search for items through Amazon, the search history is stored in Amazon’s database. Amazon knows which items the customers are interested in from past searches and may promote items that are expected to be of interest to the customer. The more customers search and shop on Amazon, the more accurate the predictions become.

As an example, a friend of mine has a dog, and he periodically buys large quantities of dog waste bags on Amazon. Thus, Amazon knows how often he would buy such items and Amazon can predict what amount they need to keep in inventory and how often new supplies are needed. Naturally, the habit of my friend only plays a small part in Amazon's inventory management predictions, but at scale, with many customers with such habits, Amazon is able to make many interesting and very valuable predictions. Amazon may also determine that my friend would likely be interested in other dog supplies and promote such items during his shopping visits - even when searching for unrelated items later.

So why can't Macy's do the same? Unless a customer registers for membership in the store, Macy's actually has no way of tracking individual customer wants and needs. Macy's can certainly look at the big picture and determine how many dog waste bags they need to keep in stock based on the total number of sales within a given period. But Macy's has no idea which customers buy dog waste bags (and who could potentially be interested in other dog supplies) so staff would likely never promote dog supplies when a particular customer is walking around non-pet departments.

Amazon also earns money whenever third-party sellers sell items on Amazon - a fee is added to all transactions. As previously stated, Amazon is able to steer customers toward items that they may be interested in by looking at previous searches and promoting related items. Even if the promoted items are not sold directly by Amazon, it is still profitable as Amazon will earn money from the added fee.

Physical stores, such as Macy's can certainly use inventory management to keep stocked items as low as possible, but physical items are always needed at hand. Customers come into physical stores and generally expect to be able to walk out with the product that they came for. It is a fair expectation, as one could simply use online shopping if the physical stores always asked you to come back later to pick up bought items or wait for shipping anyway.

Amazon only stores popular items and can keep inventory costs much lower. By using data analysis, Amazon knows which items are likely to be sold out soon. All stock may also be kept in warehouses throughout the world, with potentially cheaper location costs if placed outside urban areas. If a customer places an order for an item that is not available in the local Amazon warehouse, Amazon will request that item to be shipped from another warehouse to the local warehouse and then ship the item cheaply for the final short distance to the customer

There's no doubt that Macy's has to change their business if they want to stay competitive with online options such as Amazon. Perhaps physical stores simply have to accept even thinner margins, but I am curious if it is enough. I think department stores, such as Macy's, are too generic and will have a hard, if not impossible, task of competing with the likes of Amazon and I think that only stores which specialize in specific items (luxury items, clothing, etc.) are able to survive in the future.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)