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The Impact of Retailers Separating E-Commerce and Discount Outlets

As the retail landscape continues to evolve, more businesses are considering separating their e-commerce divisions from their traditional retail stores. Activist investor Engine Capital recently urged Kohl’s to consider selling its retail business or spinning off its e-commerce division, as it believes that this would yield a “far superior” market value for the company. Macy’s and Nordstrom are also exploring similar options after Saks separated its online business in 2021.

The move towards splitting up the traditional brick-and-mortar stores from online platforms reflects how the pandemic has changed consumer habits, as many people shifted to purchasing goods online during lockdowns. As such, retailers are now focusing on building up their capabilities in digital commerce. However, it remains to be seen if the separation of these two divisions will really bring about long-term success; Kohl’s CEO Michelle Gass is aware of this and acknowledges that her number one priority with board members is “to drive shareholder value”.

Kohl’s is not alone in exploring this potential split as Macy’s and Nordstrom have hired AlixPartners to evaluate whether they should divide into two businesses or continue operating as they currently do. It’s possible that separating out the discount outlets could help create greater focus on each distinct segment of the business, resulting in improved efficiency and better financial results. This could benefit both customers and shareholders alike – customers may be able to shop with greater ease at either one particular outlet or across all outlets; meanwhile, investors can gain more potential returns from any difference in performance between the two businesses.

Still, it isn’t clear if this strategy will lead to success for all retailers. Companies need to understand how customers interact with them across various channels before deciding whether dividing operations into separate entities would be beneficial in terms of customer service delivery and operational performance in general. Additionally, there may be additional costs associated with restructuring including new software systems and other overhead expenses; these costs must be taken into consideration when evaluating the potential gains from a split.

Overall, if retailers remain aware of both the risks and benefits associated with separating their e-commerce divisions from their traditional outlets, then it is possible for them to succeed through such an endeavor – whether it’s by increasing shareholder value or improving customer satisfaction levels. Nevertheless, given how much competition there is within the industry today, companies must carefully assess any potential changes before making a decision on whether a separation would improve overall performance or not.

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