Why are department stores a target for e-commerce spinoffs?

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By Retail Dive

Just when retailers thought their imperative was to combine their e-commerce and stores into one, smooth, silo-free operation, along comes Saks Fifth Avenue, attracting hundreds of millions of dollars from investors after splitting them apart.

In a series of conversations, various people familiar with the design and execution of the Saks separation declared it a success and suggested that other retailers should — and ultimately will — follow suit. That could happen quickly. Saks owner HBC has already gone on to give the same treatment to its off-price Saks Off 5th and Canadian department store Hudson’s Bay businesses. Activist investment firm Jana Partners, after floating the idea at a conference, is now reportedly pushing Macy’s to explore it seriously as well. And “financial sources” told Women’s Wear Daily that Kohl’s is next.

The motivation behind extracting the e-commerce side of a retail business is largely, if not entirely, financial, stemming from Wall Street’s deep devotion to tech-oriented companies. So far, though, it’s been applied just to department stores — if two only hypothetically — and not specialty or big-box retailers.

“The general view is that these are businesses in long-term decline,” GlobalData Managing Director Neil Saunders said by email. “As such, the focus is on how to extract value through reengineering and restructuring.”

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