Will Backstage shops draw customers to Macy’s mall stores?
Macy’s, which launched Backstage in 2015 as an off-the-mall concept, is now focused on opening the stores inside Macy’s locations to bring the off-price experience to the mall.
At the end of the first quarter, the 33 Backstage locations consisted of 26 inside Macy’s stores and seven freestanding ones. The company is expecting to open an additional 19 inside Macy’s doors before the end of this year.
On the company’s first-quarter conference call, officials said the shift came after a test of Backstage in some underproductive stores. Its Last Act clearance strategy is working in a similar way.
“We see customers liking the everyday deep value opportunity being offered within our mall locations,” said CFO Karen Hoguet on call. “We are testing a few variations of our strategy this year, but we believe from our tests so far that this will both add incremental spend from existing customers and also lead to the addition of new customers, and whichever model performs best this year, will be rolled out aggressively next year.”
Jeffrey Gennette, Macy’s CEO, said Macy’s is “still in the learning stages” on off-price retailing and acknowledged the high cannibalization risk. The Backstage mix includes many categories not largely sold in the full-line stores, such as home décor, toys and baby as well as opening-price cosmetics. The “very different” mix comes from a separate buying team of largely off-price veterans.
Said Mr. Gennette, “At the end of the day, we hope we will have a viable off-price concept that is on-mall. It takes advantage of still a destination that millions of American consumers come to each and every day — they come to a Macy’s. Now they can come and there’s a viable off-price concept. We think that could be a competitive advantage for us in that most of our ferocious off-price competitors are off-mall right now.”
- Macy’s, Inc. Reports First Quarter Earnings (Press Release) – Macy’s
- Macy’s First Quarter 2017 Conference Call – Seeking Alpha
- Macy’s First Quarter 2017 Quarterly Report – Securities & Exchange Commission
- Macy’s new off-price format launches – RetailWire
- Macy’s Backstage seeks starring role in off-price retail – RetailWire
DISCUSSIONS QUESTIONS: Do you see the addition of Backstage driving new shoppers to Macy’s and encouraging core customers to come in more often? How will the Backstage concept affect Macy’s full-price operations if it proves successful inside the department store’s locations?