So much for the vaunted theory that e-commerce is best served by the clicks-and-mortar strategy — Federated Department Stores Inc. is abandoning its Bloomingdales.com e-commerce effort and scaling back substantially at Macys.com.
About 100 jobs are being lost and Cincinnati, Ohio-based Federated said it would take a one-time charge of $50 million to $60 million in the fiscal fourth quarter.
“What Federated is looking at is a merchandising issue,” Gartner G2 Research Director Geri Spieler told InternetNews.com. “There is a population that just doesn’t use the Internet for shopping. Second, the online channel is usually a money loser, not a money maker.”
Spieler said that if most clicks and bricks retailers revealed the break-out of revenue from their online stores, “it would show as a losing proposition.”
“In truth, brick and mortar retail business was dragged reluctantly into the online world, Spieler said. “With the economy down, it’s a way for them to now justify, without embarrassment, a scaling back.”
Federated said that effective Feb. 1, Bloomingdales.comBloomingdales.com will transition from an online e-commerce site to primarily a marketing site that supports the Bloomingdale’s store brand.
Online services of the bloomingdales.com bridal registry will be maintained in a partnership with WeddingChannel.com and the site will continue to offer electronic order forms for purchasing from the Bloomingdale’s By Mail catalog.
Macys.com will be scaled back, eliminating such ready-to-wear categories as petites, larger sizes, career and swimwear, while expanding selections in successful online categories such as bridal, home, gifts and jewelry. Federated said the Macy’s catalog operation, which primarily has served as a marketing vehicle for macys.com, will cease operations entirely.
“In the current economic climate, it is important that we use our available resources in the most productive way possible,” said Jeffrey Sherman, chairman of Federated Direct, the company’s direct-to-customer division headquartered in New York City.
Sherman said the decision will reduce the expected loss from these businesses, as well as the amount of capital expenditures required, “keeping them on track to break even in 2003 as was originally anticipated.”
“I think it’s a smart move,” Jeff Stinson, retail analyst with Midwest Research, told Reuters. “These are businesses that weren’t making money and weren’t large revenue drivers for the company.”
