Via Wolf Street

In total, 2,000 tech, admin, and management jobs to be cut and offices closed around the country. In addition, one-fifth of Macy’s stores to close. Brick & Mortar Meltdown.

By Wolf Richter for WOLF STREET.

Unable to dodge the brick-and-mortar retail melt-down, Macy’s is restructuring its business, and this time it’s different: It’s slashing about 2,000 jobs, mostly tech and administrative, 9% of its workforce. And 1,080 of those jobs are in San Francisco, where it will scuttle its entire tech center – the headquarters of, Product and Digital Revenue, and Technology – after having already closed two of its three San Francisco department stores.

The announcement this evening of the restructuring came on top of leaks that had been swirling for weeks and were confirmed on Monday, that the San Francisco tech center would be closed.

The tech center in San Francisco employs 880 full-time workers and about 200 contract workers, including executives, software engineers, and analysts. Its activities will be moved to its headquarters in New York City, and parts of it will be moved to Atlanta which “will serve as the primary technology hub for the company,” it said.

On Monday, the rumors were confirmed when Macy’s CEO Jeff Gennette informed employees that the tech center would be closing on April 1. Some of the employees could apply for jobs at the New York City and Atlanta locations. The remainder would be out of a job.

That’s a lot of people to throw into the local job market from one day to the next. But the local job market is still hot for young tech workers – and that’s a good thing for them. The people that are not so young anymore are going to have a harder time.

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Macy’s will also “optimize” its “store portfolio”: 125 stores will be closed within three years, including the 30 stores that are being closed now. This will leave the company with about 400 Macy’s stores.

Macy’s has built a thriving ecommerce business. It’s the seventh largest ecommerce retailer in the US, behind Amazon, eBay, Walmart, Apple, Home Depot, and Best Buy, according to eMarketer. In its announcement today, Macy’s put a dollar figure on its ecommerce business: “more than $6 billion per year.”

This means its brick and mortar business is now down to just $18 billion in revenues a year, and that it continues to shrivel, while its ecommerce business is growing and now accounts for about a quarter of its total sales.

This “campus consolidation” plan also includes shutting down its second headquarters in downtown Cincinnati and its offices in Lorain, Ohio. Most of the 500 people working at the downtown Cincinnati headquarters will be moved to its offices in Springdale, a suburb of Cincinnati, bringing the workforce there to 950 people. Macy’s will also close its call center in Tempe, AZ, and consolidate this activity in its Mason, Ohio, and Clearwater, Florida, facilities.

Macy’s will shuffle much of the expense of closing these centers and laying off 2,000 people into 2019. Going forward, it expects gross cost savings of around 1.5 billion by the end of 2022 –with $600 million of the gross cost savings falling into 2020.

All this might make sense for a retailer whose brick-and-mortar business continues to melt down, despite innumerable initiatives to keep it from melting down, and whose ecommerce business is thriving, but not enough to make up for the melt-down of its brick and mortar business.

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The writing is on the wall: regardless of any announced initiatives designed to revive its brick-and-mortar business – and there were more initiatives in this announcement – Macy’s brick-and-mortar presence will continue to shrivel, as fewer and fewer Americans go to department stores to buy stuff. That’s a structural change in how Americans shop, and Macy’s is trying to come to grips with it and slow down the process so that it has some extra time to bring up its ecommerce business.

But the closure of its tech center in San Francisco, and putting over 1,000 tech workers and managers out on the street from one day to the next, has its own dynamics that go beyond the brick-and-mortar meltdown but fit into a trend that has started to play out more broadly in San Francisco – where companies are seeking to get away from the high costs of doing business, particularly office leases and compensation expenses.

Companies in San Francisco that have to make money – so not startups and unicorns and food-delivery companies or companies like Uber and Lyft, which don’t have to make money – but companies like Macy’s and Schwab and others that do have to make money, they’re trying to figure out how to bail out of San Francisco.

Back in 2015, Schwab still had 2,040 employees in San Francisco. By late 2019, it was down to 1,200 as the company had shifted works to other places, particularly its new campus in Westlake, Texas. And in November, Schwab, in its announcement that it would acquire TD Ameritrade, also said it would move the new corporate headquarters out of San Francisco to Westlake. Read… After Years of Threats, Schwab Joins Exodus, to Move Headquarters from San Francisco to Texas

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