Macy’s new off-price format launches
Early previews indicate that Macy’s Backstage, the department store’s first foray into the off-price channel, will offer much more of a treasure hunt experience than the more destination-driven experience of its flagship chain.
The first three will open on Sept. 2 in the New York City region.
The Associated Press described a visit to a Queens location as a "no-frills experience" with shopping carts lined up at the front entrance, blatant signs signaling the direction to departments, and plenty of large fitting rooms.
Macy’s is promising discounts of between 20 and 80 percent off original prices as well as comparable prices for similar goods sold elsewhere. The mix includes many designer brands, greater offerings of Macy’s private labels, and brands the flagship chain doesn’t carry, such as Fila and Reebok.
"You’re going to get a little bit of a different vibe from what I would call our older sister, Macy’s,’ Vanessa LeFebvre, SVP of Backstage, told the Associated Press. "Here, we’re trying to attract new and different customers.’
Source: Macy’s email promotion
In its review of a Brooklyn store, Women’s Wear Daily said the goal is to encourage young moms to graduate from shopping Macy’s Backstage to Macy’s. Quirky signs such as "Fake it ’til you make it" highlighting faux leather jackets underscore that message.
"We are building a brand here — a sub-brand," Peter Sachse, Macy’s chief innovation and business development officer, told WWD. "The young Millennial mom is the focus."
The new concept, averaging about 30,000 square feet, will compete with off-pricers such as T. J. Maxx, Ross Stores and Burlington that have thrived post-recession. The off-price world is becoming crowded as other department-store spinoffs such as Nordstrom Rack and the Saks Fifth Avenue’s Off 5th ramp up expansion. In June, Kohl’s first off-price store, Off-Aisle by Kohl’s, debuted.
Macy’s just reported a below-plan second quarter, in part due to "very promotionally focused" consumers. In an interview with Bloomberg, Terry Lundgren, Macy’s chairman and CEO, asserted that spending on discretionary items such as apparel and accessories will eventually pick up to support the Macy’s chain. But many consumers also continue to "trade down" and Macy’s Backstage will help the company reach a customer Macy’s is missing.
"I think, frankly, I was the obstacle in the way here because I didn’t really want this business. I thought we could do enough of this ourselves," Mr. Lundgren admitted in late June at the Consumer Goods Forum global summit in New York, according to Fortune. "But the research doesn’t lie: the data said there is a customer who is going in this direction and not coming to our stores."
- Macy’s Backstage Launch – Macy’s
- Macy’s dives into discount market – Associated Press/Boston Globe
- Previewing Backstage: Macy’s First Act in Off-price – Women’s Wear Daily
- Macy’s CEO Explains Launch of Discount ‘Backstage’ Stores – Bloomberg
- Macy’s Off-Price Business to Debut with Four Stores – Macy’s
- Bartiromo: Macy’s CEO Lundgren on tight-fisted consumers – USA Today
- Macy’s CEO admits he was an obstacle to launching new discount chain – Fortune
- Macy’s Backstage seeks starring role in off-price retail – RetailWire
Discussion Questions
How effective will Macy’s Backstage be in the company’s efforts to reach the Millennial mom? What advantages can Macy’s exploit in bringing unique experiences to the off-price channel?
Poll
BrainTrust
Cathy Hotka
Principal, Cathy Hotka & Associates
Ryan Mathews
Founder, CEO, Black Monk Consulting
The lower price and treasure hunt idea should be successful with the Millennial mom. However, how does carrying brands that Macy’s does not carry help those moms move up to Macy’s? That is a disconnect. Will items from Macy’s be on deep discount at the same time they are available at Macy’s? If so, why shop at Macy’s?
Is there data that consumers shopping at the discount store of a retailer graduate to shopping at the parent store, or do the two stores attract different customers?
I live in a neighborhood that supports a Tiffany, a Jimmy Choo, a Louis Vuitton … and there is always a line to wait to check out at our T.J.Maxx. The recession trained consumers to enjoy discount shopping, and Macy’s is smart to get into the game.
Macy’s should be successful in this market. Frankly, I am surprised that they did not get in to it sooner.
I know there are regional differences but the Macy’s near my house already looks like a discounter with nearly everything “on sale” and merchandise piled high in hope it will fly. So in my mind this really isn’t a leap.
Treasure hunting is always effective — as long as somebody has remembered to bury the treasure.
To me the real question here is, can you run a non-luxury goods department store without heavy discounting?
As for Backstage, the child may one day swallow the parent.
Macy’s will hit a home run with the Millennial mom and many other shopper segments. Macy’s has the engine in place for buying/creating brands that they do and do not carry in their stores. This element of their business is perfect for Backstage. They are fulfilling an area that is in high demand and I am confident that the Macy’s process will be very distinct from the old T.J.Maxx or Rack models.
I’m having a hard time wrapping my head around this concept. As has already been pointed out, Macy’s is already a discount destination and heavily promotional. I don’t see what the lower-end Macy’s will look like besides “Target” or fast-fashion.”
I understand why they are doing it, but I’m not convinced this is the right approach. I can’t conceptualize the “aspirational Macy’s shopper” in my head.
These young moms grew up with stores like Forever 21 and Charlotte Rouse. I think it’s wise for Macy’s to explore this avenue. I’m not sure it will work, but it makes sense that it would.
My kids grew up going to Macy’s. This is still where they go when looking for slim and tall clothing that fits nicely. But for the most part, they are shopping at less expensive clothing stores or online. Macy’s already has a great online presence. They executed that very well. I’m sure they’ll do the same with their Backstage concept.
Ryan. What he said.
The goal of attracting younger and lower-income Millennial shoppers to the Macy’s brand via a “treasure hunt” focused sub-brand is a solid strategy. Looks to be working nicely for Nordstrom/Nordstrom Rack, with Nordstrom even willing to lower the credit score bar to qualify for the Nordstrom credit card (and data-giving loyalty program), etc.
Get young shoppers in the door off-price/down market and grow the main-line brand with them as they grow economically. Makes sense and speaks directly to that “What is your Millennial strategy?” question facing retail today.
The goal of attracting younger and lower-disposable income Millennial shoppers to the Macy’s brand, via “treasure hunt” focused “sub-brand,” is a solid strategy. Looks to be working nicely for Nordstrom/Nordstrom Rack…with Nordstrom even willing to lower the credit score bar to qualify for the Nordstrom credit card (and data-giving Loyalty Program), etc.
Get young shoppers “in the door” off-price/down market, and grow the main-line brand with them as they grow economically. Makes sense and speaks directly to that “What is your Millennial strategy?” question facing retail today.
I am just not feeling this one. Macy’s is not a high price retailer to begin with. I have always loved Macy’s because I can run in and always find something at the price point I want to spend.
They are not known for high-end designer labels, so I certainly don’t think of them for that. I would hit Saks or Neiman Marcus for those labels.
My thought here is that this brand needs to be a brand unto itself with no ties to Macy’s other than being owned by them. Let it be fun, quirky—a treasure hunt, but make it very different than the competition.
But that’s just my 2 cents….
I see this concept structured so that the Millennial mom exploits her own unique shopping experiences at Macy’s Backstage through Twitter and Instagram, making her the “star” of the shopping experience and sharing the journey with others.
This is completely on target with a few key traits of Millennials, mainly their egocentricism, fondness for sharing brand affinity through social media and thriftness. The fact that Macy’s is relying on everday discounts to bring in customers, instead of promotional events, underscores this rationale.
Another insight here is research that indicates Millennials influence the purchasing decisions of, on average, four family members or friends.
Macy’s has the potential here to have the target customer, the Millennial mom, bring in not only other shoppers of her generation, but also cross-generational shoppers influenced by her social messaging.
This is a smart concept and the key is to build brand affinity.
Maybe Macy’s research indicates that the “Millennial Mom” is more likely to shop at Backstage than at its traditional stores—but if so, they have a different problem that they need to address. Simply hoping that the “Backstage” customer will eventually shift her loyalties to a full-line Macy’s store ignores the reality that fast fashion and off-price stores are changing shopping habits on a long-term basis. How does Macy’s make its hundreds of mall anchor stores more appealing and relevant to the fastest growing (and eventually biggest spending) segment of the population?
A bridge to nowhere? The idea (of a Macy’s “outlet”) may or may not make sense (who’d ever have thought I’d be 100% in agreement with Mr. Lundgren?), but I think management is making a mistake if they see it as a stepping stone to the parent store … an idea firmly rooted in the nicely ordered world of the last century.
Millennial moms? Not sure why they are a unique target for an outlet store.
A Macy’s Outlet store? Seems that Bloomies is doing fine and Macy’s is not.
So this is an alternative to mall based, high/low department store retail and will attempt to take share from TJX companies where women of all ages and life stages currently shop.
Opening them in NYC is the best case scenario. How powerful is the brand away from the Parade? Now that is the question!
Or as we like to say, “retail ain’t for sissies!”
Boy, talk about late to the game. Most of the brands Macy’s carries already have their own off-price houses and wait a minute…isn’t Macy’s already the place where everything’s on sale?
Short term and with their excellent P.R. machine firing on all cylinders, it’ll be all good news. Long term, I wouldn’t bet on it.
It’ll be interesting to see if this strategy works out for Macy’s. Currently they run several promotions. If the goal is to attract Millennial mothers and eventually convert them to Macy’s shoppers, I’m not sure if they’ll be able to accomplish this. If anything, I think that the shoppers that generally just go to Macy’s during their one day sales might become Macy’s Backstage shoppers instead. Why would shoppers want to pay more when they have an opportunity to pay less?
Macy’s needs to strengthen its core shopping experience so that the two stores can have very distinct experiences.