Macy’s Inc., spending big to strengthen its supply chain, will open a 1.4-million-square-foot fulfillment center in China Grove, N.C., in 2024, at a cost of $584 million.The fulfillment center will be Macy’s Inc.’s largest. When fully operational, the center will account for nearly 30 percent of Macy’s Inc.’s digital supply chain capacity, serve both the Macy’s and Bloomingdale’s divisions and customers nationwide, and employ nearly 2,800 workers.
“This state-of-the-art facility is a significant milestone for Macy’s Inc. as we invest in strengthening our omnichannel ecosystem. It will support growth of our business as a leading omnichannel retailer,” Dennis Mullahy, Macy’s Inc. chief supply chain officer, said in a statement Thursday.
For retailers, modernizing the supply chain for speed and efficiency is important to support their ongoing digital growth and meet customer demand for speedy deliveries, and help offset macro issues such as the pandemic, port bottlenecks and labor shortages impeding the movement of goods.
Macy’s has a new, three-year, $3 billion cap-ex budget that’s pumped up from recent prior budgets. It’s largely devoted to growing the digital business by launching a marketplace next August, which will get the retailer into additional categories and stock keeping units from what is on the website currently.
Still, a large chunk of the cap-ex budget has been earmarked for the fulfillment improvement both “upstream and downstream” as well as personalization efforts. The beefed up cap-ex budget marks a return to its historical levels, after sinking to around $600 million in the last few years.
Macy’s indicated that the China Grove facility will be equipped with new automation technology “to increase capacity and productivity to help drive profitable digital sales growth including advanced goods-to-person and pocket sorter system that will help modernize the retailer’s supply chain by moving merchandise with greater speed and accuracy.”
North Carolina Gov. Roy Cooper said the fulfillment center is an “economic win” for the state, which has a “robust transportation network, a skilled workforce and great quality of life.”
Considering the nation’s tight labor force, Macy’s could face challenges filling all of the positions at the center. However, the company said it offers career opportunities, competitive pay, a bilingual work environment, merchandise discounts, flexible scheduling and access to a new debt-free education program for part-time and full-time colleagues.
For the project, Macy’s is working with the Silverman Group, an owner, developer and manager of real estate with a focus on commercial properties.
The China Grove center is just the latest in Macy’s efforts to modernize its supply chain operations. As previously revealed, Macy’s plans to expand operations from its current Houston distribution center into a new facility in Tomball, Texas. The nearly 1-million-square-foot distribution facility, located at 14000 Boudreaux Road, will be established in a new industrial development alongside Lovett Industrial and Clarion Partners. This facility will be completed in mid-2023 and will continue to support stores in the region as well as provide online fulfillment during peak season for furniture, bedding and toys, and could support other categories if needed.
Additionally, Macy’s recently invested in automated technology in the existing Portland, Tenn., and Martinsburg, W.Va., distribution centers to increase speed and capacity for digital sales growth.
In the fourth quarter, Macy’s Inc.’s digital sales increased 12 percent versus the fourth quarter of 2020 and increased 36 percent versus the fourth quarter of 2019. Digital penetration was 39 percent of net sales, a 5 percentage point decline from the fourth quarter of 2020, but a 9-percentage point improvement over the fourth quarter of 2019.
As reported, Macy’s in February said it decided not to spin off its digital business, after a review of its operations. Macy’s had been under pressure from activist shareholder Jana Partners, to create separate dot-com and brick-and-mortar store businesses. The review was undertaken by the board along with management and AlixPartners, a leading retail consultancy that worked on Hudson’s Bay Co.’s separation of its dot-com and brick-and-mortar operations at the Saks Fifth Avenue, Hudson’s Bay and Saks Off 5th division.