Economic News

Macy’s Expanding Discount Store Concept

Recent years have not been too kind to Macy’s. Over the past several months, the chain has shuttered dozens of locations as department stores become increasingly outdated centers of commerce. However it seems that Macy’s has hit upon a model that’s helping them to correct course and is now set to expand it.

As Business Insider reports, Macy’s plans to triple the number of stores utilizing its Backstage concept. Akin to discount stores like TJ Maxx or Nordstrom Rack, Backstage offers deeply discounted items customers can snag for up to 80% off. However, unlike the aforementioned rival chains, Backstage is not a separate store but a part of existing Macy’s locations (although the concept was initially tested as a standalone store once upon a time). Currently 45 Macy’s stores include a Backstage section but that figure will increase to 145 this year.

Macy’s CEO Jeff Gennette says the expansion of the store’s Backstage section will also include some of the chain’s more prominent locations. On a call with analysts, he said, “We feel good about the model we have landed on for Backstage, and in 2018, we’re planning to expand by another 100 stores, including locations in some of our premium malls.” One big reason Macy’s feels they found a winner in Backstage is that last quarter the company saw its first positive same-store sales trend in three years with a 1.3% increase.

The introduction of Backstage isn’t the only way in which Macy’s has altered its business model to stay afloat. While the store once included a full-service shoe section, it has since switched to a self-service model that many other department stores have adopted. Macy’s CFO Karen Hoguet explained that, although customer service was once at the heart of the department store business, today’s shoppers have different priorities, saying “Lots just say, ‘Leave me alone — let me get the shoe I want and move on.'”

It’s too early to tell whether Macy’s play with Backstage will be enough to keep the chain above water for a while longer or whether it may just be rearranging deck chairs at this point. Anecdotally, salespeople at Macy’s and other chain’s have reported that customers have been making use of the “pick up in-store option” available on retailer’s websites, which is also helping to drive sales. Perhaps between these efforts and other evolutionary steps, department stores won’t be extinct as quickly as some suspect.

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