Macy’s Cost Structure
Macy Inc. (M) has a cost structure that can best be viewed using SWOT analysis, which is a way of evaluating the strengths, weaknesses, opportunities, and threats to the corporation. Macy’s strengths include customer loyalty, a recognizable store name, use of technology, a substantial supply chain, its comprehensive size, and the locations of its stores. In total, these strengths enable Macy Inc. to provide a unique service that offers a characteristic their competitors do not have: merchandise tailored to the customer by store and climate zone. Macy’s main weakness is its cost structure: costs are high compared to their competitors due to a complete operational transformation that includes localizing merchandise by store with precise size, fit, style, and color preferences. Macy’s is taking advantage of opportunities by offering new services with their Magic Selling strategy which includes live chat to enlighten customers and enable shopper satisfaction with ease of purchase. Threats to Macy’s include volatile currencies, a bad economy, international competition, intense competition, and volatile costs; all of which can negatively affect Macy’s growth and profit. Since competing companies such as Dillard’s and J.C. Penny Corporation sell similar merchandise, competing for customers is a high priority.
Macy’s has fixed costs of store rent, salaries and wages, administrative expenses, security, insurance, and depreciation; these costs will be incurred even if Macy’s does not sell any merchandise. Fixed costs can change over the long run with the changes in technology, sale of equipment, or even the decision to undertake a new advertising campaign.
Variable costs are directly related to sales and would include sales commissions, delivery charges, shipping charges, wages of temporary or part-time employees, bonuses to employees, costs of goods