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Will Small, Off-Mall Locations Turn Macy’s Fortunes Around?
Macy’s is pushing forward with new store formats as it seeks to turn around its fortunes following a disappointing quarter. The department store retailer reported an 8.2% comparable sales decline for Q2 2023, but President and CEO-Elect Tom Spring noted on a call with investors that its alternate formats, such as Market by Macy’s and Bloomie’s, saw positive comparable sales growth during the same period.
The retailer is now planning to open four additional small-format stores across the country, including the first in the Northeast and West, with locations slated for Boston, Las Vegas, San Diego, and Highland, Indiana. The new stores will have the smaller, curated selection of a Market by Macy’s location but will bear the standard Macy’s banner. The stores will host local events, create pop-up shops for local businesses, and offer access to all the services expected of a full-size store, such as the At Your Service desk, which offers assistance with bill payments, returns, exchanges, and other tasks.
Macy’s first launched its small-format stores in 2020, and it has opened eight to date. The Market by Macy’s locations are found in off-mall shopping centers and have footprints between 30,000 and 50,000 square feet. They are designed with modern shopping habits in mind, with features like larger fitting rooms with lounge areas and full-length mirrors to enable “selfie moments” as well as “styling carts” with on-trend product selections that help shoppers explore the latest looks.
The new shop launches are part of Macy’s Polaris strategy, which was announced in 2020 and seeks to modernize the venerable retailer through five initiatives, including optimizing the store portfolio. The smaller, off-mall locations are based on the original Market @ Macy’s concept, a store-in-a-store pop-up that featured new and emerging brands. Participating brands gained insight into how shoppers interact with their products in the store.
The smaller-format Macy’s and Bloomingdale’s similar off-mall concept Bloomie’s have since become the wave of the future for Macy’s. Modern shoppers aren’t interested in department stores when they can find an even bigger selection on Amazon, so smaller, more intimate experiences are proving more appealing — and Macy’s is embracing this transformation wholeheartedly.
“The hope is that we’re going to have a model that we’re going to be able to scale more aggressively in 2024 and beyond,” said CEO Jeff Gennette in a March 2023 interview with CNBC. “We’re very bullish on the concept. We’re very bullish on the early learnings. The size, the locations are all working.”
While Macy’s has yet to release specific details about its small-format stores, the retailer’s faith in these concepts is a sign that they are working. Macy’s may be struggling, but rival department store Sears has dwindled to a dozen stores. The enormous mall anchor may be a relic of the past, and Macy’s looks ready to embrace the future.
Discussion Questions
DISCUSSION QUESTIONS: Will the smaller-format stores be enough to return Macy’s as a whole to growth? Do full-size Macy’s stores still have a place in the retailer’s portfolio, or should it focus on growing its footprint of smaller offerings?
Poll
Loading …BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Ken Morris
Managing Partner Cambridge Retail Advisors
In a word: no. Macy’s currently has 8 smaller format stores. The additions in the Northeast this fall will bring the total to 12. This is a drop in the ocean compared to the 489 full-sized department stores that Macy’s operates. Those stores represent the backbone of the business and most of them are sub-par in terms of standards – suffering from a chronic lack of investment in terms of the shop fit and staffing. Until Macy’s resolves the problems in its core business it will remain on the back foot.
The smaller stores look and feel better, mainly because they are newer. However, they are far from revolutionary; they’re a smaller, and slight better version of mediocre. The question also needs to be asked as to why, if this new format is so successful as Macy’s claims, the rollout is so slow. It has taken Macy’s three years to get to 12 stores. In that same time TJX has opened 231 new stores across the US.
Neil, my sentiments exactly. Macy’s smaller stores are a nice addition but they are nothing new.
I wish Macy’s would give its branch stores some love. Many of them are barely shoppable. How can the company continue to boast about what’s new while ignoring what’s important.
Agreed! Take care of what you’ve got before doing other things!
I AGREE COMPLETELY!!!!! Ignoring what already exists does not make it better.
Smaller stores are not a panacea and this alone won’t deliver the growth Macy’s management desires. But they need to do something. Macy’s and department stores in general, have been struggling since well before the pandemic, and the environment hasn’t gotten easier. And while I like to think that there’s still a place for full-size Macy’s stores, the fact is consumers will decide if Macy’s offering is resonating. Glimmers of good results from the new, smaller stores are encouraging for Macy’s, but it’s hardly a slam-dunk strategy for future success.
Macy’s is heading in the right direction with their smaller store concept. Malls are emptying out, town centers are springing up everywhere, and long-tail shopping has moved online. So, my bet is on the smaller footprint locations. They are easier to build in urban and suburban locations and easier to site than the larger store and more in line with what their customers want. This requires some changes to pull off and it appears they have tested it to a level they are confident it will succeed. They really need a win, and I also think their best bet is to hire the most experienced, retail-savvy people they can to staff these new locations. Providing a unique and positive in-store experience will be key to word of mouth and lifetime value. Macy’s will want to get the omnichannel tech and processes as close to perfect as possible, with realtime inventory providing the golden ticket.
Agree with your perspective, Ken, and your point on hiring experienced, retail-savvy people to work in the new The Market @ Macy’s stores is important. The balance between supporting the customer through in-person and mobile assistance will be key.
Macy’s struggles continue. Smaller stores will not solve the bigger problem of how to attract the attention of younger shoppers and how to be more relevant in a time when shopping generalists like department stores, have become passe.
Ultimately, the consumer will be the ultimate judge of these new Macy’s formats. The results noted in the store are encouraging, and a refined store experience integrated with their digital offering could serve to make this venerable brand a more compelling shopping experience for their target consumer.
The small format has merit but Macy’s is late to the party (see: Target and Kohl’s among others) and overly cautious in its rollout.
If Macy’s can’t fix the assortment and store experience issues in its mall anchors, this won’t solve its overall problems.
When The Market @ Macy’s launched in 2018, it was a future focused partnership with former tech retailer b8ta, which shut down its US brick-and-mortar presence in February of 2022. Very ambitious, as most retail + tech partnerships are, and very few succeed. Taking what worked and capitalizing on it is key. So, I see the latest version of The Market @ Macy’s cautiously rolling out a smaller format store that has good potential.
The Market @ Macy’s brings a mobile driven, time conscious and exploratory shopping experience to the off market shopper, who is looking for style at a good price. Pop Up’s with local talent are a value add, and choosing the cities of Boston, San Diego, Las Vegas and Highland, Indiana is very strategic. Brick-and-mortar is changing and The Market @ Macy’s is inline with the trends. I like what I see here.
If you can’t get a localized or compelling assortment with the right sizes into a full sized store………
No. The smaller, off-mall footprint has to be accompanied by an updated and evolved brand promise that restores Macy’s as a leading merchant.
Small stores are a good idea, allows you to get more local and off-mall — however, Macy’s bigger problems come from merchandise, as outlined in their reports on markdowns. Always good at new ideas, but without sound fundamentals, as well as being very late on the small stores, not sure this is going to help.
This brings into question what the Macy’s brand is. When customers are used to a large store and now they walk into a store that’s about 1/5 the size, will they still find what they are looking for? I’ve heard a lot of complaints from shoppers about the smaller Targets and not being able to find what they are looking for.
These stores beg the question, what is a Macy’s?
Good catch. You’re asking the question I think most would be hard pressed to answer. 40-50 years ago many could state what a Macy’s was, what it should be, and how it might be compelling in comparison to the competition. Today?
While there are a slim number of the smaller format stores, at least they are trying something new to adapt to more current shopping habits and locally engage with shoppers. The core business (the other nearly 500 stores), however, needs to be dealt with or these new smaller format stores won’t have a shot. Certainly can’t pull the full organization back to relevance.
Macy’s has 8 small stores, growing to 12 soon. These are few compared to 489 full-size stores, which need improvement for sustained success.
However, Macy’s smaller format stores cater to modern shopping habits, offering curated selections, local events, and services like full-size stores. These formats have shown positive comparable sales growth and are part of Macy’s Polaris strategy to modernize.
The company plans to open more smaller format stores nationwide, embracing the trend toward smaller, intimate shopping experiences. Macy’s pivots to smaller-format stores, prioritizing growth through curated selections, local events, and services, questioning the role of full-size stores.
Retailers have BOGO, macy*s seems to be the beneficiary of RetailWire‘s TASGO policy: Talk About a topic Six times, Get One more discussion on it for free.
Just as I’ve said the many other times – I haven’t changed my mind – no, pulling a few departments out of macy*s (and making them stand alone) isn’t going to help much…or at all. Curated sounds great – perhaps – until you realize it’s at odds with the purpose of a department store: offering something for everyone (or almost everyone). If macy*s can’t make a go of its ~100 million s.f. of full-line space, then the game is up.
To answer a question about larger or smaller Macy’s stores, whether it’s a good strategy, I first want to know exactly what Macy’s is, what it wants to become? How is it different or better than alternatives? What products or services make the brand compelling? And can we as leadership buy, merchandise at an excellent level to deliver on our promises?
From here its clearer to have a strategic debate at corporate about larger or small stores.
Must applaud Macy’s concerted efforts to pull their stores into modern relevance in the 21st century. This is not easy to do. While these smaller format stores are a good indicator of future success, they will need these 12 stores to grow faster than the rest of the chain is declining in order to turn the ship.
Given the moderate rate of smaller format openings, Macy’s will need to supplement this initiative with other modern tactics to see real change in trajectory.
Perhaps a place to start is how to make full size stores feel more intimate, more accessible and deliver an inspiring experience; both in-store and online. The new format stores cannot carry the full responsibility for change.