Ask @RetailPhil: Can Macy’s Turn Things Around with their ‘Backstage’ Concept?

 

Macy’s has some work to do. Earlier this year, Macy’s reported its worst quarter of earnings since 2009, with overall sales dropping 5.6 percent from last year. Along with many other retail giants, Macy’s is facing quite a few challenges in a world where consumers choose to shop online or in smaller boutiques rather than in department stores.

So what’s a department store to do? Close up shop and disappear into obscurity? That’s one way to handle it; Sears is already making its slow and steady exit from the market. However, Macy’s is hoping to put a damper on failing sales by dropping their prices, offering deep discounts in order to drive consumers back into their stores. Rather than follow in Sears’ footsteps, Macy’s has launched Backstage in an effort to change their business model and, hopefully, continue to drive sales.

At first glance, the basic proposition for the model looks like a formula for disaster. Backstage is a store-within-a-store concept. It carries the same assortment as the rest of the Macy’s store, but at discount prices. What could selling off-price merchandise do to boost Macy’s overall sales numbers? There are three things Macy’s might be trying to accomplish:

Drive foot traffic and increase shopping basket value

Macy’s could be using Backstage to drive foot traffic to stores by using deep discounts to lure new consumers in. To leverage this properly, Macy’s will need to change their displays to entice these consumers to buy full price items they may not have been intending to buy while on their hunt for discounted goods. Positioning Backstage as an end-destination for shoppers would allow Macy’s to get consumers, both existing and new, to up the amount in their shopping basket while making their way through the store to the Backstage shop.

Try something new

Saks Fifth Avenue has been very successful with their off-price concept, Saks Off 5th, and Nordstrom’s has a similar format called Nordstrom Rack. Both of these chains have separate stores for their discount to further differentiate between their discounted brands and products from their full price assortment. Backstage may be Macy’s way of testing their shopper’s appetite for a similar format down the road. If this is their intent, there are other questions at play: if the discount concept works, will Backstage steal business away from Macy’s? How will Macy’s move forward if Backstage is a success?

See what works

Is Macy’s simply testing the waters to see if they can operate as a discount store rather than a department store?  By running Backstage within its own stores, with the same product being full price in one area of the store and discounted in another, it allows Macy’s to test to see if they have the wrong business model altogether. If that is the case, will brands that currently work with Macy’s want to continue their relationship with them if they become a discounter? Will Macy’s be forced to change their assortment?

One of the most interesting things about retail is the ability to change and adapt to what your consumer needs. Macy’s isn’t going away without a fight, so it’ll be interesting to see how successful Backstage is going forward.

RetailPhil

RetailPhil

As the Retail Industry Manager at Hubba, Phil is responsible for uncovering both emerging trends and insights that may impact businesses engaged in commerce. With 20 years of experience under his belt, Phil helps brands and retailers adapt to the the new realities of retail and the next generation of commerce. Phil is a frequent speaker at industry events in Canada and the US, across multiple verticals, and is a featured writer in trade publications such Retail TouchPoints, Pet Product News, BikeBiz, and more.
RetailPhil

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