Thursday, December 29, 2016


Retail is the start of the Amazon Effect and global supply chain revolution that will cross industries and markets. From pharma to the military.


Phantom inventory.  Article misses mark as to upgrading supply chain execution technology, creating inventory velocity, extending supply chains upstream, and stores doing omnichannel fulfillment.

Guest Voices: Retail’s Phantom Inventory Menace, or the Ghosts of Holidays Present

Miscounted goods add big costs for retailers, but stronger analytics and attention to forecasting can help plan for better holidays in the future

Product misplaced by customers and unexpected peaks in demand can also result in a false picture of stock availability of stock availability in inventory management systems. ENLARGE
Product misplaced by customers and unexpected peaks in demand can also result in a false picture of stock availability of stock availability in inventory management systems. Photo: Bloomberg News
Even with today’s sophisticated inventory management systems, retailers are woefully unaware of just how low on-shelf availability is for many of the products they carry. Our research, carried out in collaboration with a major consumer goods manufacturer, suggests the problem is significantly worse and costlier than many retailers assume.
The culprit is “phantom inventory”—goods that show up in management systems as available but in fact are hidden from view because they’ve been misplaced, often tucked away in a backroom and forgotten.
Phantom inventory is extremely costly and remains a serious hurdle to efforts by retailers to keep their stocks lean while ensuring that the right goods are available on shelves for consumers.
The impact runs from lost sales when customers can’t find what they’re looking for to higher operating costs from time wasted when employees have to respond to queries about missing items—an even bigger problem during peak shopping periods when retailers attract most of their sales.
Most measurements of known stock-out levels give a misleading impression of how a store or product is performing. For instance, our research showed that for a category of laundry detergents sold by a large retailer, lost sales were almost five times greater than previously assumed owing to unobserved stock-outs.

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Inaccurate inventory readings also have a ripple impact across supply chains, leading to problematic demand forecasts because systems may show products as in stock but unsold when in fact they haven’t made it to store shelves at all. Such faulty readings mount if the problems are repeated across many stores, triggering flawed sales reports that affect forecasts, production planning, measurement of store performance and automatic replenishment.
Many things can cause phantom inventory.
Inventory records won’t register that certain items may have been stolen, for instance. Scanning errors at the checkout counter give false readings of what product has been sold. Inventory sent to the store for a special promotion is often marooned in the backroom because store managers didn't run the promotion or stocked the products in a haphazard way.
Product misplaced by customers and unexpected peaks in demand can also result in a false picture of stock availability of stock availability in inventory management systems.
Retailers deploy various measures to prevent the problems, but the flaws persist and can eat into retailers’ profit margins.
One solution that has proved effective when implemented is to develop special analytics using machine learning technology. The analytics methods re-create the demand patterns for individual products, and incorporate the demand inventory uncertainty for each stock-keeping unit into forecasts and plans.
This method uses existing data—important because emerging solutions usually require retailers to invest in getting additional information—and quantifies lost sales. In addition, the analytics are fast, and can be scaled to enterprise-size applications.
When used in concert with existing solutions, this approach improves forecast accuracy and increases sales by dramatically reducing the number of stock-out events. Our research showed that the improvements in inventory planning alone could boost sales of that laundry detergent category by almost 5% while reducing inventory in the system.
Retailers and manufactures don't have to be victims of the phantom inventory menace. By paying special attention to retail operations and employing modern data analytics in combination with existing measures, phantom inventory can be a ghost of Christmas past.

Fredrik Eng Larsson is an assistant professor at the Stockholm Business School and can be contacted at Daniel W. Steeneck is an assistant professor at the Air Force Institute of Technology and can be contacted at James B. Rice Jr. is deputy director at the Massachusetts Institute of Technology Center for Transportation & Logistics and can be contacted


Amazon with flying warehouse patent. Whether it happens or not, Amazon continues to bring fresh air to supply chain management. That is what leaders do.

Amazon patents show flying warehouses that send delivery drones to your door

We’ve known about Amazon’s drone delivery ambitions since 2013.  But patent filings from Amazon, circulated today by CB Insights’ Zoe Leavitt, reveal more details about how the e-commerce titan could make drone deliveries work at scale, namely through “airborne fulfillment centers.” Yes, that’s a warehouse in a zeppelin.
The airborne fulfillment centers, or AFCs, would be stocked with a certain amount of inventory and positioned near a location where Amazon predicts demand for certain items will soon spike.
Drones, including temperature-controlled models ideally suited for food delivery, could be stocked at the AFCs and sent down to make a precise, safe scheduled or on-demand delivery.
An example cited in the filing was around a sporting event. If there’s a big championship game down below, Amazon AFC’s above could be loaded with snacks and souvenirs sports fans crave.
The AFCs could be flown close to a stadium to deliver audio or outdoor display advertising near the main event, as well, the filing suggested.
The patent reflects a complex network of systems to facilitate delivery by air.
Besides the airborne fulfillment centers and affiliated drones, the company has envisioned larger shuttles that could carry people, supplies and drones to the AFCs or back to the ground.
Using a larger shuttle to bring drones up to the AFC would allow Amazon to reserve their drones’ power for making deliveries only.
Of course, all these elements would be connected to inventory management systems, and other software and remote computing resources managed by people in the air or on the ground.
The filing also reveals that the shuttles and drones, as they fly deliveries around, could function in a mesh network, relaying data to each other about weather, wind speed and routing, for example, or beaming e-book content down to readers on the ground.
We reached out to Amazon to learn more about their progress on this concept, and whether or not they have an actual date for when they might launch, or even just test, their first airborne fulfillment center.
The company did not immediately reply to inquiries.

Wednesday, December 28, 2016


Big deal or not?

ZIM quits Transpacific Stabilization Agreement

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Israeli shipping line ZIM will quit the Transpacific Stabilization Agreement (TSA), a discussion agreement by the major container carriers moving cargo between Asia and the United States, from December 31. The news follows hot on the heels of ZIM making dramatic changes to its global liner services.
ZIM is the fifth carrier to leave the TSA in 2016. China Shipping and Cosco left the TSA after their merger, South Korea’s Hanjin withdrew from the group in November following its bankruptcy, and Japanese companies K Line and NYK left the agreement in August and November respectively.
ZIM did not give a reason for the drop out.
After ZIM’s exit, TSA will have nine members left including APL, CMA CGM, Evergreen, HMM, Hapag-Lloyd, MSC, Maersk, OOCL and Yang Ming.

Tuesday, December 27, 2016


Most major companies lag with change. For example, Amazon created the e-commerce immediacy effect and the customer experience. It wasn’t a major retailer. The same with the finance supply chain topics such as blockchain and IoT. 

MNCs are laggards here. They show up at seminars. But they really do not have much to tell. The firms that have much to talk about are not invited. They lack the name recognition that draws attendance. They also are not recognized in publications who have to put things in the context of big firms. All this is done because most firms are afraid of change. So they are not leaders.  They want to know what someone else is doing to give them some courage to try to change. Go , back to e-commerce/omnichannel and look at name retailers who may not survive the next two years. Stuck in the old ways, in the same old. Manufacturers will sell and ship direct to consumers to fill the void created by dying retailers. And that will create more chaos and change.

It is the same thing with the supply chain required for omnichannel. Big change is needed. Amazon is doing it. But most retailers dabble in change and continue to lose business. Brick, not click. Click and collect to get people into stores because they will buy more while refusing to recognize how many buy elsewhere to get delivery.

Or the dynamics of the new supply chain with inventory velocity, time compression, and extending the supply chain upstream. Instead—and with the out-dated GAAP, it’s the same old with inventory “optimization” and other “answers’ that never worked in the first place. More 3 card monty.
The new supply chain requires new logistics services.  But what if often is out there is renaming the same-old services. And logistics providers sticking with their business models.

The result will be new companies who step in to fill the voids created by the inactions of big name corporations. We are in an era where the only issue with change is how fast. And it is too fast for too many.  They are called laggards, not leaders. 


Weakness of much on transport cost reduction is lack of context as to performance/service, no matter if manufacturer or retailer or wholesaler.


With the immediacy of the Amazon Effect and the Customer Experience, can UPS and FedEx sustain their business model or must they change?

Friday, December 23, 2016


  • millau-bridge
    K Line has filed a lawsuit against Singapore-based APL Logistics, claiming its employees had wrongly suggested the Japanese shipping line was in danger of going bankrupt.
    Filed yesterday in the Tokyo District Court, the lawsuit claims APL employees sent emails “strongly” recommending shippers terminate bookings with K Line and switch shipments to other carriers because of potential bankruptcy.
    In a statement, K Line said the misinformation had damaged both its reputation and its financial performance, as clients had indeed cancelled or suspended bookings.
    It added: “K Line has decided to file a lawsuit in order to restore its social confidence and clarify the social responsibility of a company such as APL Logistics.
    “Based on its experience and achievements accumulated over many years since the commencement of service, K Line will continue to respond to customer demand and provide reliable and high-quality services.”
    In September, following the August collapse of Hanjin, K Line issued a statement strongly denying it was also facing potential bankruptcy, blaming emails which had circulated suggesting otherwise.
    Several days later, APL Logistics issued a statement admitting that its employees had been responsible for disseminating the information, adding that they had retracted the statements.
    The firm said at the time: “APL Logistics Group states unreservedly that it is not our practice to comment on the financial position of other market participants; neither in a negative nor positive aspect.
    “The APL Logistics Group therefore does not endorse the comments made by these employees.”
    After Hanjin entered receivership on 31 August, 500,000 teu of its cargo worth an estimated $12bn was left stranded at ports and across 100 containerships, causing mass disruption to supply chains and leaving shippers concerned over the transport of their goods.

    Thursday, December 22, 2016


    Does FedEx want e-commerce orders? Sounds like a yes and no. Is their biz model clashing with online service reality? 

    FedEx: We cut ties with retailers over rates

    Dive Brief:

    • Speaking on FedEx Corp.'s quarterly earnings call Tuesday afternoon, Mike Glenn, president and CEO of FedEx Services, told analysts that in order to “strike the right balance between volume growth and yield improvement to maximize operating margins at each operating company,” the shipper has severed relationships with several retail customers that didn’t agree with its pricing and capacity requirements for the peak holiday season, according to a transcript published by Seeking Alpha.
    • Shares of FedEx fell more than 3% on Tuesday as the shipper reported Q2 adjusted earnings of $2.80 per share on revenues of $14.93 billion, missing a Thomson Reuters consensus estimate for earnings of $2.90 per share on $14.92 billion in revenue, according to CNBC. The company's full-year adjusted earnings outlook for 2017 remained unchanged at between $11.85 to $12.35 per share. 
    • Expenses hit Q2 revenue in the company’s FedEx Ground and FedEx Freight businesses and sent Q2 operating profit margin down to 7.8% from 9.1% last year. 

    Dive Insight:

    Despite the quarterly revenue hit, founder and CEO Fred Smith told analysts Tuesday that the company doesn’t attempt to maximize profits by segment, but instead makes investments to boost the whole company longer term.
    "FedEx is much more than a last-mile carrier,” Smith said. “FedEx is a global transport and logistics company that can connect almost every person and business in the world in 1 to 2 business days door-to-door and we provide unique value-added services across many industries ... Over 92% of our U.S. revenue comes from customers using both Express and Ground and 76% of that U.S. revenue is generated by customers that use Express, Ground and Freight. We, therefore, maybe investing in one segment of the portfolio at any given time to produce improved results for the corporation as a whole in the future.”
    Despite Smith’s insistence that the shipper isn’t a last-mile carrier, e-commerce loomed large in its report. “We are closing out what has been another busy peak season for FedEx, largely driven by the continued rapid growth of e-commerce,” Glenn said Tuesday. “As e-commerce grows, so does the challenge of peak [demand], with multiple days of volume levels approaching or surpassing double our average daily volume. It should be noted that this surge in demand is driven primarily by a relatively small number of customers. Less than 50 large retail and e-tail customers are responsible for the majority of peak demand, so it’s extremely important that we understand their forecast well in advance to allow us to plan resources properly.”
    FedEx’s confidence in playing hardball with retailers when it comes to rates and capacity minimums (which help the shipper’s ratios by keeping its hubs busy) is a sign that the hefty costs of e-commerce are unlikely to come down significantly any time soon.
    “[S]elling on the internet is not efficient,” Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive earlier this year. “The whole methodology of selling on the internet is completely foreign to what it’s like selling” at a store.
    That could make omnichannel services that much more attractive, especially because it assigns some of the fulfillment responsibilities — at least the last mile of delivery when it comes to in-store pickup — to the customer. Indeed, management consulting firm Bain this week published a report urging retailers to consider the financial advantages of omnichannel, which traditional accounting methods don't always properly measure.


    More signs of the chaos.

    Boxship owners send record 700,000 slots for scrap in 2016

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    Latest statistics from brokers Braemar ACM show that container scrapping has accelerated dramatically in recent weeks with the 700,000 container slot mark likely to have been broken before the end of the year.
    As of December 20, a total of 699,000 teu (201 ships) had been sent for scrap, smashing all records. By comparison, 187,500 slots were sold for recycling in 2015.
    Splash understands German companies have been the most keen to scrap ships, especially given their strong share of panamax boxships – a subsector that has dropped in value dramatically this year.
    Braemar ACM is reporting that in the 30 days from November 21 to December 20 32 ships equating to 102,000 teu were sold for scrap.


    Supply Chain revolution, IoT, blockchain. Are 3PLs and logistics providers lagging? Does it open up opportunities for new providers?

    Tuesday, December 20, 2016


    In a commodity price squeeze business, such as logistics, how do providers generate profits and funding for technology, new equipment, etc. for sustainability?


    Zim's "fresh approach" as independent. What is background story to going alone without cost sharing alliance?

    Zim restructures services as it faces life as an independent carrier on the transpacific

    Zim has announced a “standalone” restructuring of its transpacific service from April after the recent combined service deal on the North Atlantic with THE Alliance.
    The Israeli ocean carrier is readying itself for survival as an alliance outsider when the three new east-west groupings are in place, but with a “flexible partnership approach”, said chief executive Rafi Danieli.
    Zim, the world’s 16th largest container line, with a total cellular capacity of 306,000 teu, said that from April it will operate as an independent carrier with a new service between Asia and the US west coast.
    It will consolidate its current two strings, NP1 and NP3, offered through a co-operation with the G6, with its slot charter agreement on Cosco’s CEN loop, into the as-yet unnamed new service.
    In addition, Zim will “upgrade” its all-water ZCP loop between Asia and the US east coast, via the Panama Canal, it will offer “inland destination solutions to major locations through main (USEC) ports” and the Z7S (Seven Stars, Asia, Indian subcontinent-US east coast service via the Suez Canal) “will resume full activity”, after its winter suspension.
    Elsewhere, Zim said, its AME Asia to East Med and EMX Asia East Med and Black Sea services “will be restructured”, although it did not say when or how this would be achieved.
    Mr Danieli said: “Zim is offering a fresh approach with many advantages to our customers. As an independent and agile carrier, we have created a smart and efficient network offering stable and reliable services.
    “Zim is an important player in the trades it operates in; we maintain a flexible partnership approach with major carriers, and our new structure is a viable and beneficial alternative to the market.”
    Two weeks ago, Zim struck a deal with THE Alliance that will see the vessel-sharing group buying slots on its flagship ZCA service from April, while the Israeli carrier will co-load on THE Alliance’s AL6 service.
    However, it appears that further co-operation with the THE, Ocean and 2M alliances has so far eluded Zim, and rumours continue about its long-term future as a global player.
    They follow media reports in the autumn that Zim was “on the market” and that its bankers were “travelling around the world with a sale prospectus” that would see the carrier concentrate on providing a strategic relay service from Israeli ports to Mediterranean transhipment hubs.
    This however was strongly denied by Zim. The carrier said it had “no intention whatsoever to stop” after “providing its clients with a global liner service for several decades”.

    Monday, December 19, 2016


    Read the white paper on the Supply Chain required for Omnichannel Retail Duality success at

    Friday, December 16, 2016


    Does it seem that retailers who made Click and Collect the center of their omnichannel program are struggling the most?


    Is the 2M alliance putting shippers at risk by bringing in Hyundai--a financially weak and borderline bankrupt container line?

    Thursday, December 15, 2016


    Ports are still struggling about megaships and what their market niche and role will be in the future? Cannot please everyone anymore.


    Is it too late for many retailers to correct their e-commerce strategy and supply chain mistakes?


    There is much discussion on data analytics and supply chain management. Also on various technologies and SCM.  The shortcoming is many do not convert data into actionable supply chain management.

    Wednesday, December 14, 2016


    It sounds like Neiman Marcus has supply chain issues--

    Neiman Marcus loss widens as core customers turn away

    Dive Brief:

    • Neiman Marcus Group said Tuesday that fiscal first quarter total revenues fell 7.4% to $1.08 billion from $1.16 billion in the year-ago period amid dwindling traffic, including declines among the upscale department store chain's core customers.
    • Neiman Marcus' same-store sales fell 8% during the quarter, and net losses widened to $23.5 million, compared to Q1 2016 net losses of $10.5 million. The conversion of the company’s legacy merchandising and inventory systems into a single new tech-based system dragged down business in the quarter to the tune of $30 million to $35 million and hit same-store sales by 270 basis points, CEO Karen Katz said on a conference call.
    • Greater price transparency thanks to the internet, the strong dollar, falling profits in the oil and gas sector (affecting the Dallas-based company’s many Texas stores) and new consumer expectations for immediate availability of fashion were also challenges in the quarter, Katz added.

    Dive Insight:

    It sounds like Neiman Marcus’s first quarter was an expensive one — something the company can ill afford. As it struggles with debt, its options seem to be narrowing, especially as even wealthier shoppers turn away.
    There’s not much Neiman Marcus can do about the strong dollar or Texas oil barons' somewhat thinner wallets. But it is working to address two core challenges: 1) The fact that many consumers, including many wealthy customers, are shopping according to price and 2) The fact that many shoppers want to see new fashions in stores immediately upon viewing them on the runway or in fashion magazines.
    “The customer has changed the way they shop in several fundamental ways,” Katz said Tuesday. “One is driven by price transparency and the other is what we call ‘buy now, wear now.’ Besides being a treasure trove of merchandise, the internet gives customers greater access to information about price and promotion. They continue to shop for the best deal and the lowest price with less regard for loyalty, channel or brand.”
    Consumers no longer have patience for stores to dictate what they get to buy and when, Katz added. “[Shoppers] want to buy something and wear it immediately, rather than waiting for the trends and latest fashion to hit the stores months later or when the weather turns,” she said. “Customers now are less likely to buy a winter coat in summer or sandals in the dead of winter.”
    To address these challenges, Neiman Marcus is working to introduce more exclusive product in stores and online and is “working with our vendors to think differently about when they are shipping goods as well as which types of goods are being shipped at different points during the season," Katz said. "More progress will be evident in the seasons ahead.” 
    But Neiman Marcus is badly hobbled by debt and may find it difficult to turn things around, according to Neil Saunders, CEO of retail research agency and consulting firm Conlumino.
    “In our view, such a debt burden is completely unsustainable for a company of Neiman Marcus’ scale,” Saunders said in a note emailed to Retail Dive. “Indeed, even if all interest was frozen and the entirety of operating profit was to be directed to the purpose of paying down the debt, it would take well over 40 years to remove it from the balance sheet. Such a position underlines the fragile nature of the company’s finances, something that hits home when the $72 million quarterly interest payments are appreciated. This acts as a major barrier to the company being sold and makes an IPO far less attractive. It also guarantees that without a significant rise in sales, the company will remain loss making.”
    The current retail landscape is not a good setting for a department store that caters to the highly affluent or even the somewhat affluent, Saunders said. Plus, luxury brands that for decades enjoyed a mutually beneficial relationship with department stores are increasingly shunning them in favor of other channels, deleting yet one more reason to visit a tony department store.
    “Generating that increase in sales will be extremely challenging given that there are host of pressures acting as a brake on retail growth,” Saunders said. “Weaker traffic in malls and weaker tourist spending are foremost among these, and both are likely to persist well into next year. The rise of direct selling by luxury brands is also a negative trend for Neiman Marcus and, longer term, has the potential to undermine its reason for existence as a destination for high-end product.”
    Affluent but not super-affluent consumers, while not quite Neiman Marcus’ (or sibling Bergdorf Goodman’s) core customer, are also falling off in sufficient numbers to hurt results. That they're less willing to pay top dollar at an exclusive department store bodes ill for the future, according to Saunders.
    “Against this trend Neiman Marcus has become a rather expensive niche player; in our view if it does not remedy this it will become an increasingly irrelevant player as well,” he said. “Neiman Marcus invests a lot in its stores, in customer service, and in its omnichannel offer. However, these things amount to very little if consumers are not willing to bear the prices charged, or can find the product elsewhere. In short the company now needs to rebuild its relevance.”


    Many retailers think it's about store experience, not e-commerce and the Customer Experience. And their sales show it.


    Many retailers lack the Supply Chains to deliver the E-commerce  Customer Experience.

    Tuesday, December 13, 2016


    Amazon sees UPS/FedEx as "slow" delivery for the Customer Experience. They have their business models and even handoff to USPS. Faster may mean new providers.

    Monday, December 12, 2016


    Firms should measure the performance of their Supply Chains, not just the performance of its logistics elements.


    Supply Chain Management is about pulling product through the supply chain.  E-commerce of omnichannel is the ultimate pull and requires the new supply chain.

    Friday, December 9, 2016


    Supply Chain requirements are quickly changing and evolving. Too fast for laggards who are being left behind. Retailers and Manufacturers.

    Wednesday, December 7, 2016


    In a time of rapid change and uncertainty, 3PLs and logistics providers should develop a strategy. Too much is happening to just react.

    Tuesday, December 6, 2016


    A story on Yang Ming is long overdue.

    Yang Ming targeted for consolidation

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    Taiwanese politicians yesterday debated the future of the island’s second largest containerline, Yang Ming Marine Transport Corp, with calls for it to merge with other lines or possibly state-run Taiwan International Port Corp (TIPC).
    With the dramatic consolidation seen across the container shipping sector this year, Yang Ming, which has lost $407m in the first three quarters, finds itself in a precarious position. Now the world’s ninth largest containerline with a fleet of 565,766 slots according to Alphaliner, Yang Ming needs to make some hard decisions about its future. To be a genuine global liner company in today’s altered container shipping reality a company needs to have at least twice the capacity Yang Ming controls. A merger with fellow Taiwanese line Evergreen is not simple for two reasons: first, the state controls 33% of Yang Ming and secondly, the two lines are heading into different alliances next April – Yang Ming into THE Alliance while Evergreen has signed up to the Ocean Alliance.
    Politicians yesterday urged the Ministry of Transportation and Communications to merge Yang Ming with TIPC, the body that runs all the island’s ports.
    Opposition politicians attacked the government’s plans announced last month to provide struggling Evergreen and Yang Ming with $1.9bn in emergency aid.
    As it stands, among mid-tiered carriers left standing at the end of 2016’s mammoth round of consolidation attention is very much focused on Yang Ming, Hong Kong’s OOCL, South Korea’s Hyundai Merchant Marine (HMM) and Israel’s ZIM.
    ZIM, Splash understands, has employed Citi to find a buyer for its global network whereby it will then focus on just the intra-Mediterranean trades.
    In South Korea, the Korean government has vowed to back HMM as the nation’s flag carrier in the wake of the shock bankruptcy of Hanjin Shipping at the end of August.
    Meanwhile, OOCL remains tightlipped on acquisition rumours with both Cosco and Evergreen linked to the Tung family controlled line. The line’s share price has jumped HK$3 to HK$34 since the start of the month as speculation about its future sparks investor interest.

    Monday, December 5, 2016


    How Macy's and Sears may invite other retailers to take their spaces

    So do ailing department stores that sit empty due to new competition and the rise of digital shopping.
    Last month, Macy's Inc. announced it was forming a strategic alliance with Brookfield Asset Management to increase the value of its real estate portfolio. That portfolio is getting trimmed as falling traffic means fewer bricks-and- mortar stores.
    Macy's - like Sears - is suddenly taking on more the role of landlord than department store. Both are looking to profit by inviting other retailers - and even new-concept department stores - into their old spaces.
    "It's part of a long-term shift as the department store struggles to be more relevant," said Eric Rothman, portfolio manager at CenterSquare Investment Management in Plymouth Meeting. "They need to close stores in unprofitable locations, and a big part of their value is the real estate. They can sell, re-lease, or reinvigorate these properties to free up capital" with the aid of real estate firms.
    Soon after Christmas, the parent of Macy's and Bloomingdale's is expected to identify the 100 Macy's stores that will close in early 2017 - on top of 38 that closed earlier this year - including the Macy's in the venerable Suburban Square center in Ardmore.
    The Macy's stores at Plymouth Meeting and Moorestown Malls were identified earlier this year by top brokers as being on the endangered list after they were tapped by mall owner Pennsylvania Real Estate Investment Trust (PREIT) to begin the search for replacement tenants.
    A PREIT spokeswoman said last week that the situation remains fluid, and that one of the two Macy's could remain open.
    Macy's knows that much of its inventory sits on prime real estate and that it has to better manage its remaining stores.
    Enter Brookfield, which has experience in managing assets in retail, office, multifamily, industrial, and hospitality.
    Under the partnership, Brookfield has exclusive rights for up to 24 months to create a "predevelopment plan" for each of about 50 Macy's stores. The retailer can add stores and land to the deal.
    "Partnering with Brookfield "is the best way to unlock the potential of those assets," said Terry J. Lundgren, Macy's Inc. chairman and CEO.
    Jeff Green, who consults retailers on long-term strategy, said: "Macy's has begun to realize that, like Sears, the value of their company is in their owned real estate." So Macy's needs to "unlock" some value "by either subleasing portions of their store, or, more likely, selling the box and dirt it sits on to real estate investors."
    This raises two key questions, Green said: Is Macy's still a retail company? And what will be the ultimate size and use of its "box"?
    He said executives could shrink traditional Macy's selling spaces, or chunk them off and open its off-price Backstage format somewhere in the four-wall box. At the Macy's store at Oxford Valley Mall in Langhorne, Backstage now sits in the rear of the store's upper level.
    Sears, another faded mall anchor, has also been in paring mode for the last few years. In July 2015, it created New York-based Seritage Growth Properties, an independent real estate investment trust (REIT) to better manage its remaining assets.
    Seritage's growth strategy is based on taking space away from Sears. The trust bailed out Sears Holdings by buying 266 Sears and Kmart stores for $2.7 billion. Seritage gets 78 percent of its rent from Sears Holdings, which occupies all but 11 of the stores.
    Sears pays Seritage rent of $4.31 per square foot on average, which is far below market rate.
    Seritage aims to capture higher rates by slicing up Sears anchor stores into smaller spaces and re-leasing them.
    Third-party tenants within malls pay an average of $11.23 per square foot, and newly signed third-party tenants pay $18.95.
    Seritage has the right to "recapture," at no cost, up to 50 percent of the space now occupied by Sears in 224 properties. And it can recapture all of the space at 21 locations for a termination fee.
    The former Sears at King of Prussia is now a Primark and Dick's Sporting Goods, while the Sears Auto Center will reopen soon as the sports-bar chain Yard House and Outback Steakhouse restaurants.
    Mall owners like PREIT and developers call this "repurposing" the space.
    Forming the REIT "is consistent with our plans to focus on our best stores, reward our best members, and pursue our best categories," said Sears Holdings spokesman Howard Riefs.
    Playing a big role in Macy's transition is PREIT, which has been "replacing many Sears department stores throughout its portfolio with popular retailers across various segments," PREIT CEO Joseph Coradino said.
    He cited Viewmont Mall, north of Scranton, where an old Sears will soon be replaced by a Dick's Sporting Goods/Field & Stream combo store that's under construction.
    In 2012, Coradino said, PREIT malls had 27 Sears stores, and today, the firm has 11. He said that he expects PREIT to get back up to five Macy's stores from throughout its portfolio among the 100 anticipated to close nationally, and that demand for their spaces was "robust."
    "Certainly, there's the possibility of new-to-market department stores," he said. "There's off-price retailers - of the luxury as well as more traditional variety - popular, big-box, and large-format stores, grocers, as well as lifestyle, dining, and entertainment offerings."
    The sky's the limit, but what these stores won't be is a Macy's or Sears.