Macy's adding Backstage off-price pop-ups to 45 full-line stores

Dive Brief:

Macy’s Inc. is bolstering its Backstage off-price unit, testing Backstage pop-up shops in about 45 of its stores, Chief Financial Officer Karen M. Hoguet recently told analysts.
The pop-ups, which will be located alongside the department store retailer’s Last Act clearance sections, are being added as Macy’s continues with its plans to close 100 full-line stores by early next year.
Macy's is also adding new merchandise categories to 13 of the Backstage shops, including toys, home decor and pet accessories — “the kinds of things that we don't sell in a typical Macy's that we think the Backstage buyers are better equipped to buy, and we'll see how it sells in the stores,” Hoguet said, according to Seeking Alpha's transcript.

Dive Insight:

The consistent success of off-price leaders like TJX Cos. (which reported another robust quarter just this week) are leading many retailers to start or expand their own outlet channels. They include department stores like Nordstrom — whose Nordstrom Rack has operated since the 1970s — and discount department retailer Kohl’s, which last year launched an off-price pilot. Macy’s started its Backstage off-price effort last year as well, and Gap has expanded its fleet of outlet stores amid a rash of store closings.

An NPD Group study released earlier this year found that two-thirds of U.S. shoppers frequent off-price retailers. “Consumers are clearly looking for better deals and they know if they shop at an off-price retailer they will get them,” NPD Group’s chief industry analyst Marshal Cohen said at the time. “Apparel shoppers are finding just what they want at off-price retailers at the right time and at the right price, and that isn’t always the case with department stores.”

But not all off-price stores are alike, experts have told Retail Dive. TJX's Marshall’s and TJ Maxx stores foster a treasure hunt-like atmosphere with an impressive number of high-end goods at low prices, thanks to their strong merchandising chops and special relationships with many brands. And Nordstrom Rack, perhaps thanks to its longevity, also outshines many in the space, according to Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext.

Kohan says that Rack is “absolutely by far the best at outlet” with stores that are easy to navigate, full of desirable merchandise as well as the top-notch customer service that Nordstrom's flagships are known for. “As far as the outlet, [most] can't figure it out, but Nordstrom Rack kills it,” she said.

Still, off-price stores can present problems, including irritating consumers with lower-quality merchandise tagged with prices never found at any retail store. Retailers with flagship stores also risk losing sales to their off-price channels.

But Hoguet told analysts last week that the Macy's Backstage unit is going well, that Backstage buyers are busy and that the unit is “improving the productivity of most of the base stores, which is a good thing. So that's where we've decided to put our focus, at least for now.”

Hoguet also noted that both Backstage and Last Act are “coupon ineligible,” so that shoppers pay the ticket price rather than piling on discounts as many Macy’s customers do in full-line stores.