Macy’s keeps going small and off-mall

Discussion
Photo: Macy’s
Jul 21, 2022

Macy’s is not anchoring itself to malls any longer.

The department store retailer said it will open four new small, off-mall stores as part of a multiyear strategy to reinvent its business in suburban “power centers” around the country.

The locations will include the Market by Macy’s smaller store format and a new concept that combines Market by Macy’s with the Macy’s Backstage off-price banner.

Macy’s opened five of its Market stores in Texas and Atlanta in 2020 and 2021. The success of both the new format and Macy’s Backstage has led to further expansion of both concepts. Macy’s plans to have eight Market stores operating by the end of 2022. Backstage, which has been added as a store-within-a-store at 300 Macy’s department stores, currently has nine standalone sites.

The first of the newly announced stores slated to open will be a Market by Macy’s in Suwannee, GA. The location will open on Aug. 20 and be the company’s third Market store in the Atlanta area. The retailer opened its first two stores last year.

Macy’s keeps going small and off-mall
Photo: Macy’s

Another Market by Macy’s is planned in the St. Louis suburb of Chesterfield. It is the very first Market store in the area and it will replace a nearby mall store that is closing.

“We’re pleased to continue to serve the St. Louis area and look forward to welcoming our customers to Market by Macy’s,” said Marc Mastronardi, Macy’s chief stores officer, in a statement.

The Chicago suburb of Evergreen Park will be the home of a new dual Market by Macy’s and Macy’s Backstage store. Customers will be able to shop Market by Macy’s on the first floor and Backstage on the second.

“We thrive on retail being a dynamic business requiring continuous analysis, reinvention and innovation. As customer preferences and buying behaviors change, we continue to evolve to deliver the experience our customers expect,” said Marc Mastronardi, Macy’s chief stores officer. “As exciting brand extensions, Market by Macy’s and Macy’s Backstage each offer unique shopping experiences — one celebrates discovery and convenience, while the other appeals to the customer who loves the thrill of the hunt for a great value.”

DISCUSSION QUESTIONS: How likely is Macy’s to close more of its mall stores and replace them with Market by Macy’s or dual Market and Backstage locations? What do you see as the right balance of mall-based and off-mall locations for Macy’s?

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"The merchandising strategy must be executed well and there is no room for error."
"Sure they are going off-mall. Who can blame them? Malls are dying."
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24 Comments on "Macy’s keeps going small and off-mall"


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Mark Ryski
BrainTrust

If Macy’s continues to see success – however they measure this – then I expect to see them continue to replace mall stores with Market by Macy’s and/or Backstage stores. It’s clear that the mall business is changing as consumers change. Moving a percentage of their store portfolio off-mall makes sense but, ultimately, changing the location and store layout alone won’t bring success. Macy’s needs to deliver a better/different store experience and that will be the key to their success – regardless of where their store is physically located.

DeAnn Campbell
BrainTrust

As retailers become more adept at balancing online and offline channels, they are seeing that smaller store formats are just as effective as large stores, and have the added benefits of cheaper rent and the ability to be located closer to their customers.

Neil Saunders
BrainTrust

Another day, another load of spin from Macy’s. They are opening a tiny handful of small stores as part of a strategy they have been trumpeting for many years. This isn’t a bad move, but it won’t make a material difference. At the same time, they have no control over most of their existing stores which are among the most shabby and badly merchandised in the whole world of retail. Perhaps if they started to sort those out, they might make some material progress on rebuilding their brand.

Dave Bruno
BrainTrust

There are so many things to like about the newer Macy’s formats – from both a customer and a business perspective – that I suspect we will continue to see more emigrations away from mall formats in the future.

Georganne Bender
BrainTrust

Macy’s still has strong branch stores located in malls so I would not expect these stores to close. The retailer also has severely neglected mall stores that either require a lot of TLC or go away because it’s not a good look for Macy’s.

Small has been the new black forever. How many years have we been talking about smaller footprints? In today’s market it makes sense to create smaller, more intimate stores, but combining Market by Macy’s and Backstage in the same location is kind of odd because they serve two different customers. This may work in a huge department store setting, but I’m not so sure it will in a smaller more confined space. This will be an interesting journey to watch.

Liza Amlani
BrainTrust

Flagships and anchor stores need to rethink their strategy and meet customers where and how they want to shop. Macy’s is on the right track with smaller format stores – the challenge will always be the assortment strategy and if it’s hyper-localized and curated for these markets.

The merchandising strategy must be executed well and there is no room for error. Macy’s doesn’t have the best reputation for having the right product at the right time which triggers extensive promotion activity, devaluing the brand. Visual merchandising matters more than ever and so does having the right brand ambassadors on the floor. Building community and trust is part of the customer experience for a smaller format store.

I want to see Macy’s succeed and think they could – if they get their ducks in order.

Dave Wendland
BrainTrust

Liza, your point cannot be overestimated, “The merchandising strategy must be executed well and there is no room for error.”

Dave Bruno
BrainTrust

Good points all, Liza. Here’s a couple fun related questions for you to consider: Do you think the success at Backstage is dependent on the presence of Macy’s mall stores? I wonder how much of the Backstage assortment strategy is derived from lessons learned at the mall stores? And from a branding perspective as well – do consumers think that Backstage is full of former mall store cast-offs at a bargain?

Liza Amlani
BrainTrust

I’ve been studying the off-price industry for some time and Backstage is the cash cow that Macy’s should be leveraging in a big way.

With existing excess inventory and by partnering with their current vendor base, off-price could help Macy’s win in their large format stores, in malls or not. I’m not convinced Macy’s Backstage assortment strategy leverages lessons learned at the mall stores but I will say that there is a lot of work to be done on the shop floor.

Visual merchandising is more critical than ever and crowded racks are not the answer. Consumers still want to see product stories and shop in an environment that is inviting, even at a discount retailer.

A distinction for the consumer on full price vs. Backstage is important and I don’t think Macy’s has the strategy down yet — signage is not enough. There should be a clear separation of both concepts as it can be confusing for the shopper which will translate into loss of sales.

Jeff Sward
BrainTrust

Of course Macy’s should be opening smaller off-mall stores. But that’s a (late) simplistic response to an obvious and longstanding shift in how the customer shops. It’s still about product content and in-store experience. And let’s not minimize the importance of the One Day Sale as a primary traffic driver. Can Market succeed from that portion of the business? I don’t see how. There’s a reason Macy’s created the sub-brand Market versus just opening smaller off-mall Macy’s stores. But I think the full measure of that differentiation has yet to be seen.

Gene Detroyer
BrainTrust

Let’s imagine Macy’s closes all its “department” stores and aggressively expands the two concepts (except Herald Square). What have we got?

I think it will be a smaller, more dynamic company. Does this sound outrageous? Not if what they are reporting as success is real.

Katie Thomas
BrainTrust

We’re seeing a general trend of big brands launching multiple formats to appeal to different consumers. From Dick’s Sporting Goods to American Eagle, retailers are learning to adapt to changing consumer preferences. Macy’s is no exception.

Sometimes the simple size and selection of a full department store is daunting. A tighter merchandise assortment in a non-mall location could provide value for both the consumer and Macy’s.

Brian Cluster
BrainTrust

Macy’s appears to conduct a continuous review of the performance of all formats and is not necessarily permanently locked into mall locations. Their newer formats of Market and Backstage and various combinations provide them with the opportunities to be in smaller markets and shopping centers and maybe even strip malls. Regardless, Macy’s needs to win the heart and mind of the consumer with great experiences wherever their customers are, and being flexible with these formats will allow them to achieve this.

Brandon Rael
BrainTrust

Macy’s and other department stores are facing significant disruptions and the fact that the mall is not the central destination for shopping these days. Retailers have leveraged store fleet optimization efforts to close unprofitable locations and invest in areas with growth opportunities. Rationalizing the mall-based locations is a logical next step for Macy’s.

The market is calling for off-mall locations and smaller, more innovative formats such as the Market by Macy’s and the new format Backstage stores. With these smaller, customer experience-focused formats, Macy’s has a unique opportunity to re-imagine what the company means in 2022 and beyond for a generation that doesn’t want to deal with the hassle and stress of going to a mall-based department store. The only challenge is that the Market by Macy’s and the Backstage formats are intended for two different customer segments.

In addition to this, these locations will be a prime opportunity for Macy’s to further experiment with their assortment curation, exclusive product offerings, and other innovative merchandising initiatives.

David Naumann
BrainTrust

Based on the growing trend of online shopping, the need for large format physical stores is becoming less important. Smaller format stores that focus on the core products with limited size/color assortments can be used as a showroom and fitting room for customers that want to try before they buy. With limited inventory, consumers can supplement their orders from online inventories. The trend to move to smaller format stores will continue for Macy’s and many other retail brands.

Gary Sankary
BrainTrust

Macy’s continues to try to reinvent themselves with new formats, new partners, and new marketing. On the one hand, recognizing their dependence on the mall as a liability is a good call. On the other, they still need to address the brand and what Macy’s means to customers, especially younger demographics, today. Until they address that issue, they will continue to have the same challenges to their business.

Gene Detroyer
BrainTrust

Gary, I think the younger demographics see Macy’s as your father’s Oldsmobile. These two initiatives bring an entirely new meaning to that Macy’s brand. This is their future — they should focus on it.

Dick Seesel
BrainTrust

Macy’s and Kohl’s are rushing to develop small-format stores with more location flexibility and lower operating costs. But they have a long way to go before catching up to Target, which has been in the forefront for several years. While it’s good to see Macy’s acknowledge that its mall-anchor model of the past 60 years is less relevant, the company continues to be saddled with plenty of tired stores across the country. Another challenge in small format stores: Assortment discipline has never exactly been part of the “magic of Macy’s.”

Liz Crawford
BrainTrust

Sure they are going off-mall. Who can blame them? Malls are dying. Macy’s is setting themselves up for success by differentiating themselves as a separate destination. Good for them and fingers crossed.

Brian Kelly
Guest
28 days 2 hours ago

Macy’s, whether big or small, still has the problem of an irrelevant brand. Reducing the selling space and adding an outlet store seems like brand torture. You don’t like our big store, so we’ll give you a smaller version and we’ll throw in an outlet store. Just in case.

Kohl’s is doing the same thing. Others will follow. Smaller stores reduce inventory and payroll costs.

Ultimately, what does the brand stand for?

Mohamed Amer, PhD
BrainTrust

Going small and off-mall is fine and good, but can these actions move the needle for Macy’s? The company has been transforming for at least a decade, but these moves cannot change the downward spiral of the department stores’ share of retailing. The growth via acquisition and rebranding days of Terry Lundgren were cast against that same shrinking share as if there were a defensible moat in super-sizing the department store. In 2022, the runway for Jeff Gennette is much shorter than he realizes. While merchandising execution is crucial, the current business model significantly limits the company’s optionality and future growth.

Craig Sundstrom
Guest

Ah yes, it’s summer, so re-runs of popular shows; in this case the Macy’s show (and specifically the episode where they debate store format).

Macy’s is 100% likely to close more stores — they’ve already announced multi-year plans to do just that, so I’m not sure if George means beyond that or not. The real question is when, if ever, it will it stop (or slow significantly).

And they’re likely to open other formats. My problem is the use of the term “replace.” Is closing 3 or 4 100-200,000 gsf stores and opening a store the fraction of that size “replacement”? I would call it shrinking.

storewanderer
Guest
27 days 21 hours ago

Close mall stores doing millions in sales a year and replace with these that are lucky to do $1 million a year in sales. Sounds like a great plan for a dying company in a dying industry.

I think they should do the opposite and focus on getting customers back to the large stores. Many customers give up on stores that don’t have what they want and a limited assortment small format store won’t please many customers.

Sears has tried various small format stores too.

Anil Patel
BrainTrust

A continuous and comprehensive evaluation of strategies is required to keep up with highly dynamic retail trends. Smaller format stores can lay out a way to provide a more personalized customer experience. A focused product assortment and increased convenience of shopping from stores lead to more confident buyers and ultimately higher sales. Achieving this will require a fact-based analysis with an intention to pin down the exact proportions for mall-based and off-mall locations. Speaking of Macy’s, they should retain the mall-based stores where the footfall is evidently high.

However, the “dual offering” concept doesn’t look that appealing. Mixing contrasting offerings, Market by Macy’s and Macy’s Backstage off-price store can create confusion among buyers. It’s a human tendency — the customers who prefer shopping for exclusive products won’t visit a place featuring markdowns. The decision to combine these two may prove overkill for Macy’s.

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Braintrust
"The merchandising strategy must be executed well and there is no room for error."
"Sure they are going off-mall. Who can blame them? Malls are dying."
"A tighter merchandise assortment in a non-mall location could provide value for both the consumer and Macy’s."

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