Backstage shops star inside Macy’s

Discussion
Photo: Macy's
Apr 13, 2018
George Anderson

Doubters have questioned the strategic branding value of Macy’s placing its Backstage off-price shops in its full-price department stores. Even so, the chain is pushing on with the concept, planning to add 100 more Backstage shops inside of Macy’s to the 55 it already has in operation.

Backstage, which initially began as a standalone concept, was intended as Macy’s off-price response to a wide variety of discounters, including Marshall’s, Nordstrom Rack, Ross Stores and T.J. Maxx.

While some see a branding conflict between Backstage and Macy’s full-line stores, the retailer is adding the shops for a simple reason — they drive sales. Bailey Thomas, a spokesperson for the retailer, told Newsday that the shops increase overall sales by seven percent inside Macy’s stores.

The chain sees the Backstage concept as a way to drive more frequent visits to its full-price stores.

“Backstage’s focus on value and newness guarantees that with each visit, shoppers will find an amazingly-priced assortment of recognizable brands and trends,” Michelle Israel, senior vice president of off price for Macy’s told the Asbury Park Press. “Frequent deliveries ensure there is always a new reason to come in and shop.”

Macy’s CEO Jeff Gennette sees the success of Backstage as one of the indicators that the retailer is on the rebound. The company posted a same-store sales gain of 1.4 percent during the fourth quarter, the first quarterly gain for the business in three years.

The addition of Backstage shops inside of Macy’s is part of the chain’s plan to increase capital spending by $150 million, even though it has shuttered 125 locations in recent years.

DISCUSSION QUESTIONS: Are you a fan or a critic of Macy’s opening Backstage shops inside its department stores? Does the apparent success of Backstage inside Macy’s make it more or less likely that the concept will succeed in standalone stores?

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"There’s no question that Backstage is providing a much needed traffic and revenue bump to Macy’s, but the long-term implications are very uncertain."

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24 Comments on "Backstage shops star inside Macy’s"


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Mark Ryski
BrainTrust

Macy’s is hooked on the financial lift that Backstage provides – even at the risk of cannibalizing their full-line offerings. Shoppers love discounts, so I would hesitate to call Backstage a wild success – anyone can give product away. That said, there’s no question that Backstage is providing a much needed traffic and revenue bump to Macy’s, but the long-term implications are very uncertain. Given the struggle Macy’s (and department stores) have had it’s not surprising that management is running with the strategy that has delivered a glimmer of success.

Art Suriano
BrainTrust
Macy’s continues to have a real identity problem. I no longer know who they are and who they strive to be as a department store. This move is another way of sending the public the wrong message. I get it that it’s all about sales and any time there is a discount opportunity, i.e., outlets or in this case a store outlet inside of a full price-store, it is going to bring sales. However, the damage long term is that more people will shop in the Backstage department than the rest of the store. Macy’s will then make the Backstage department larger and eventually convert some of their smaller stores to Backstage stores. So how does this help build the brand? When Macy’s finally becomes a full discount chain competing with all the other off-price chains, the trend will have changed as new full-price retailers will emerge. Then Macy’s will be kicking themselves because they lost the lead in that business and they will no longer be able to go back to being the great… Read more »
Lee Peterson
BrainTrust

Have any of you seen or been in one of these? Are they supposed to be a competitive swat at dollar stores? Trashing an already denigrated brand is not the way to go IMO. Hey skipper! Reverse course! Not only am I not a fan, but i just don’t get it at all. Nordstrom Rack? Ok. Backstage? Huh?

Nikki Baird
BrainTrust

I have, but my impression of it was, it’s fancy branding of what would normally just be their clearance section. I sort of wonder if branding it like that gives them an opportunity to discount at a shallower rate — kind of the outlet mall effect, where people perceive a great deal because you told them it was great deal, when it really wasn’t that great. But the section I saw (and maybe they hadn’t gotten around to sprucing it up any in this particular store) looked just as trashed and trashy as any clearance section out there. Definitely not something I would’ve said “enhanced” the Macy’s brand by any stretch.

Chris Petersen, PhD.
BrainTrust

In the age of omnichannel, there is an important question of whether retailers can drive traffic to department stores. There is an even more critical question of conversion — if customers come looking for off-price value, can Macy’s convert higher-end sales from department store lines? Same-store sales volume gains mean little if there is not a corresponding increase in gross margin profitability.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Macy’s Backstage is a wonderful concept that is showing high value to the chain and to consumers. Consumers know what is behind the curtain as overstock and slow-moving items are discounted. While it could work in stand-alone stores, Macy’s is rightly benefiting from more traffic when Backstage offers more shopping options on location.

Brandon Rael
BrainTrust

Merging both full-price and off-price concepts within the same space may drive some additional overall traffic, however, what may result from this move is more confusion about what the real Macy’s brand messaging is. Macy’s has aspired to move to an experience-first, omnichannel, digital, customer-focused model with the introduction of a more curated experience, introducing pop-ups and more creativity within their stores.

While the Macy’s Backstage concepts shops are building momentum, positioning them within the Macy’s full-price department stores may detract from the full-price, more premium retail traffic, as the targeted customer will only be seeking discounted merchandise. There may or may not be an overlap, as the bargain-seeking consumer may not be motivated to buy any impulse driven full price products.

Neil Saunders
BrainTrust

The purpose of Backstage is twofold. First, it is a format which gives Macy’s access to the popular off-price part of the market. Second, it provides Macy’s with a channel to clear down excess and unsold inventory. Both of these things make it a worthy venture.

As a stand-alone concept, I am a fan. However, I remain more skeptical about adding Backstage to full-line stores.

From our customer data, we see evidence that such a move pulls customers away from the full price offering at stores and ends up cannibalizing sales. It also sends confusing messages to the customer about the Macy’s brand.

True, it may generate short-term sales, but it could ultimately damage the health of larger stores in the long-term. What’s more, I am skeptical of the numbers being bandied about. I expect they have been measured over the robust period in the run-up to the holidays when trade in all segments of the market was on the up.

Ryan Mathews
BrainTrust
Critic doesn’t begin to describe it. Department stores are in free fall and, ironically, one of the best and one that’s — well, far from best — are speeding the decline in exactly the same way. Nordstrom may be the best department store chain out there but they are killing their flagship brand through a radical expansion of Nordstrom Rack units which work as a kind of “anti-brand” format, not as the “starter store” the chain intended. By the same token Macy’s, which is totally lost when it comes to brand identity, is building exactly the wrong branding, merchandising and customer development model through Backstage. Lee is right, the stores are a total mess. While Rack will slowly erode Nordstrom’s brand over time, Backstage is rapidly attacking whatever is left of Macy’s brand appeal. The difference? In the worst case Rack might be able to stand on its own as a chain, absent the parent brand, while Backstage wouldn’t last long as an independent. Macy’s may be enjoying an infusion of sales through Backstage, but… Read more »
Dick Seesel
BrainTrust

It’s hard to argue with the sales lift that Backstage has brought to the first group of stores, but I have my doubts about the long-term strategic impact. From the local Macy’s store with a Backstage installation, I see a messy collection of “stuff” that doesn’t even meet the housekeeping standards of my local Marshall’s — not to mention the standards of the rest of the Macy’s store. And the off-price space is getting very crowded, at the risk of oversaturation.

It would be worth knowing more before passing judgment: Is the sales increase driving any kind of gains in Macy’s “upstairs” departments? And what kind of product is selling in Backstage? Again, from my observation, the “upstairs” brands at Macy’s have no interest in selling their labels inside Backstage, so the brands I shopped could just as easily be found at a Kohl’s or J.C. Penney store.

Ed Dunn
Guest
3 months 7 days ago

A sale is a sale. A cannibalized sale is still greater than a lost sale to a competitor. GameStop sells used games alongside new games and Best Buy sells refurbished electronics and appliances next to new items. If retailers believe they have to maintain an image offering only shiny and new products, they may be out of touch with the discount bargain-hunter consumerism going on for the past 15 years.

Cathy Hotka
BrainTrust

Execution, execution, execution. Off-price stores like TJX aren’t slapdash; they’re meticulously merchandised with ever-changing assortments. One TJX IT leader told me that the company will remove items from assortments if they get too popular, because the element of surprise is lost. Does Macy’s have the right people to make this happen?

Ricardo Belmar
BrainTrust
I have mixed feelings about this approach. Yes Macy’s is seeing a sales uplift in stores that have Backstage shops vs. stores that do not, but is this sustainable long term? It’s possible that the numbers are misleading. I would argue that the real test is to look at that sales uplift by department within the store. If the uplift is exclusively coming from the Backstage shop versus the mainline departments, then the only thing proven is that Backstage has a customer base that likes the concept. The problem with that is that every shopper likes to find a great discount! Macy’s need to find new, interesting, experiential ways to drive that motivated foot traffic from the Backstage shop into the rest of the store. We see pockets of this with examples like the VR furniture application Macy’s is deploying to their furniture gallery stores. We see this when they add b8ta shops within their mainline stores. Macy’s needs more of these types of tactics to move those shoppers from Backstage into other departments. The… Read more »
Camille P. Schuster, PhD.
BrainTrust

The only way it makes sense is if the merchandise in the Backstage area keeps changing AND if Macy’s continues with other innovations. If the merchandise continues to change so that there are new finds on every visit to the store, then consumers will come back. However, one tactic does not spell long-term success. Focus needs to be on the experience of consumers who patronize a particular store — what is interesting to them? What will keep them coming back?

Bob Phibbs
BrainTrust

As I wrote in this recent post, Macy’s Off-Price Retail Cannot Be The Way Forward, Customer Service Must Be, orphaned clothes, man-handled, stretched and laid out on ’60s chrome fixtures in underused and underlit parts of their stores are their way forward.

Macy’s feels shoppers have changed …

Karen Hoguet, chief financial officer of Macy’s, when talking about shoppers in their stores was quoted as having said at an investor conference last year, “Lots just say, ‘Leave me alone — let me get the shoe I want and move on.’”

Well of COURSE they said that!

When all an employee can parrot is, “can I help you find something?” Or, “looking for anything special?” — what do you expect shoppers to say?

Shoppers used to make a special trip to discover items presented with care and thought along with employees who not only liked working there but were trained in how to engage them.

And shoppers haven’t changed. But let’s be honest, Macy’s stores have …

Jennifer McDermott
BrainTrust

This is quite a significant roll out following a small trial. So it must’ve work well. But while I have no doubt that Backstage drives sales for Macy’s, I’d be concerned that shoppers having the choice between discount and full-priced products within just steps of one another will drive down average transaction value over time.

Georganne Bender
BrainTrust

The problem I see with Macy’s Backstage store-within-a-store concept is its implementation of that store-with-in-a-store concept. The Backstage areas I have visited are plunked in the middle of other departments and, other than signage, there is nothing else that identifies or segregates it from the rest of the store. Uninitiated consumers may not even realize what they are looking at because it’s confusing to see carefully-merchandised new and full-priced items displayed across the aisle from “Last Chance!” product that’s stacked on tables. Backstage needs its own look so that stands out, otherwise it’s just another big clearance sale.

Peter Luff
BrainTrust

I am of a fan of Backstage store-in-store, for the reason that it seems to be working. It gets more customers into the space and there will be inevitable bleed between the “off-price” goods and full price goods. The overlap should create surprises for each customer type.

As for setting up standalone Backstage stores, I wonder how that supports the Macy’s brand and does not just become another discount store in a crowded market. I am sure if they do this they will have researched heavily to support the business case.

Daniel Goldin
Guest

The Macy’s backstage store-within-a-store concept is just a return to the budget basement of just about every storied department store that catered to mid-market shoppers. Even larger carriage trade stores had them. While I can’t say whether or not it is a long-term solution, many retail geniuses of the past did not feel like it cannibalized sales of their other merchandise.

Christopher P. Ramey
BrainTrust

Brand be damned! Sell whatever and however is necessary to stay in business.

If taking floor space from Macy’s and giving it to Backstage is their idea of good strategy then they’ve fallen farther than I imagined. It is another unintended consequence of teaching your clients that one should never buy anything unless it is on sale.

I predict that Backstage will creep to be the dominant brand inside many of the stores formerly known as Macy’s.

Craig Sundstrom
Guest

Like a lot of people, I believe, I’m a critic of Macy’s not having any consistent image. Upscale stores in heritage markets like California mixed with (I’ve heard) run-down dumps in stores brought in from the May Company. And this is reflected in strategies and promotions being widely touted, until you get to the fine print that virtually says “NOT coming to your store.”

But whether this merely adds to the confusion, or rather makes them more of a “full-line” seller — in price if not in merchandise — is hard to tell from the outside.

Adrian Weidmann
BrainTrust

Did anyone else think of the phrase, “…you can’t make a silk purse out of a sow’s ear”? It used to be called a clearance section! We use our language to embellish or mask the truth. Simply branding a clearance section doesn’t change the obvious. I’m certain George Carlin would be able to create a bit around what is happening in retail today. I guess we’re all guilty of it.

Mike Osorio
BrainTrust
I think the interesting part of this strategy is that it allows Macy’s to evolve the offer in one physical plant, vs. in two as others such as Nordstrom and Saks 5th Avenue have done. As Macy’s locations which have Backstage evolve in both the sources of revenue and profit contribution (Backstage square footage vs other categories), Macy’s could ultimately decide to convert a particular location to fully Backstage back to fully Macy’s, or shutter the location. In most locations, the heritage Macy’s department store is now too large and Macy’s must find a way to make that real estate productive. They have been trying subleases, e.g. Sunglass Hut, pop up spaces, and now Backstage. I think we will continue to see more locations shutter that can’t reach the necessary profit contribution hurdles, as well as others which will convert to fully Backstage locations (likely subleasing or giving back excess space). Like others on this thread, I personally don’t like the mixed branding message but I do think the longer term strategy of ensuring location… Read more »
William Passodelis
Guest
3 months 4 days ago

Really sorry here, off topic. However, in 2005, the May Company stores that were converted in 2006 to Macy’s, those to MY personal knowledge — including MANY throughout the chain (L S Ayers, Kaufmanns, Hechts, Strabridges, Famous Barr) — were in good to beautiful condition. Macy’s challenges and difficulties in ability to do upkeep, has left them as the “dumps” we now find. (That is simply not fair to May Company Department Stores)

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"There’s no question that Backstage is providing a much needed traffic and revenue bump to Macy’s, but the long-term implications are very uncertain."

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