Will adding off-price shops lift Macy’s full-price stores?

Jeff Gennette, Macy’s president, is big on store-within-a-store concepts. That’s been one of the storylines on Mr. Gennette since it was announced he would replace the company's longtime CEO, Terry Lundgren, in the first quarter of next year. Now comes word that Macy’s is setting up shops promoting its off-price Backstage concept in 45 of the chain’s full-price stores in time for Christmas. On an earnings call with analysts last week, CFO Karen Hoguet said stores adding the Backstage shops have seen improvements in productivity. Dedicated Backstage staff are in charge of merchandising the shops and buying is also done by a group separate from Macy’s. Brands sold in the shops are, in many cases, completely different than those found in the rest of the store. Macy’s is also testing new categories, including “toys, home décor and queue products,” with the Backstage concept in 13 of the 45 new shops. “In toys, we'll have high-end scooters or Big Wheels. In home décor, things like decorative figurines, 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,” said Ms. Hoguet (via Seeking Alpha). “So we're actually excited about these tests, and we'll see.” Macy’s is making this latest move at a time when the chain is struggling with declining customer traffic and revenues. Research suggests that Macy’s and other full-price stores are being hit hard by off-price alternatives. Earlier this year, research from The NPD Group found that roughly two-thirds of people who go shopping for clothes head to off-price outlets. Purchases made by these consumers represent 75 percent of all the clothing purchased across retail. Shopping visits to off-price stores increased four percent year-over-year in April, with approximately half of all visits resulting in a purchase.

• Macy's (M) Q3 2016 Results (Earnings Call Transcript) – Seeking Alpha
• Macy’s to Test Backstage Concept in 45 Stores in Q4 – Sourcing Journal
• Macy’s expanding Backstage concept – Cincinnati Business Courier
• What does it take to compete in an off-price world? – RetailWire
• What will happen to Macy’s after CEO Terry Lundgren steps down? – RetailWire