NEW YORK — Macy’s, demonstrating its readiness to enter the off-price arena with its upcoming Macy’s Backstage chain, is expanding the pilot program for the format.
On Monday, the retailer said two additional Macy’s Backstage pilot locations in metro New York City will open, bringing the total to six. All six will open this fall, and the average size of the stores will be about 30,000 square feet.
The two additional locations will be in Fordham Place, at 400 East Fordham Road in the Bronx, and the Essex Green Shopping Center in West Orange, N.J.
At Essex Green, an existing Macy’s will be converted to Macy’s Backstage, the company said, confirming a WWD report on April 27 that the retailer would convert certain of its full-line, regular stores into off-price units.
The $28 billion Macy’s Inc. is a Johnny-come-lately to the off-price sector, having begun opening Bloomingdale’s outlets in 2010. Currently, 13 Bloomingdale’s outlets are operating.
The move into off-price is considered a major strategic shift for Macy’s, and one that the company long resisted because its more than 800 regular stores have been highly price promotional. As a result, little advantage to running off-price stores was seen.
That view changed as competitors like Nordstrom Rack and Saks Fifth Avenue Off-5th got aggressive about opening locations, and talked up the format as generating healthy profits. In addition, Macy’s regular full-line boxes are showing slower growth, and the retailer has significant clout with vendors and real estate owners to enable the company to rapidly and efficiently roll out off-price sites.
Last month, at the Macy’s Inc. annual shareholders meeting in Cincinnati, chairman and chief executive officer Terry J. Lundgren said additional Macy’s Backstage openings are already being planned for spring 2016, though he stressed the priority is to get the format working right first.
Asked why Macy’s changed its mind about opening outlets after watching competitors for years build up outlet chains, Lundgren said, “The fact is everywhere I turned around, Macy’s stores were being surrounded by Nordstrom Rack, Saks Fifth Avenue Off-5th or TJ Maxx. They were coming after our market share.”
Lundgren also said consumer research indicated a demand for Macy’s outlets, and that the opening of a Bloomingdale’s outlet on the Upper West Side of Manhattan this fall on 72nd Street, marks a “new location strategy” for the format “because we typically open in outlet shopping malls.”
Macy’s is believed to have scores of full-line locations with sub-par performances which could represent opportunities for converting to off-price. Still, conversions could be challenging due to lease covenants, square footage differences between department and off-price stores, and distribution issues.
The Macy’s Essex Green store will begin a final clearance sale on June 14, which is expected to conclude in late July or early August. It will close for extensive remodeling before opening as Macy’s Backstage in about one-half of the existing space.
The four previously revealed pilot locations will open at 2027 Emmons Avenue in Sheepshead Bay, Brooklyn; Queens Place in Elmhurst, Queens; Lake Success Shopping Center in New Hyde Park, N.Y., and the Melville Mall in Huntington, N.Y.
Macy’s Backstage will sell women’s, men’s and children’s apparel, shoes, fashion accessories, housewares, home textiles, intimate apparel and jewelry. Merchandise will include clearance goods from Macy’s stores, as well as special buys from fashion brands. Prices will be from 20 percent to 80 percent off of original and comparable prices for similar merchandise. Macy’s Backstage business will not be driven by promotional events and Macy’s coupons will not be accepted in the off-price locations.
Each store will have free Wi-Fi and “spacious” fitting rooms, the company said. One location will test a café. Each Macy’s Backstage is expected to hire 30 to 45 associates.
“These two new locations will enhance our opportunity to learn from the pilot stores,” Peter Sachse, Macy’s chief innovation and business development officer, said Monday. “At Essex Green, we will begin to understand the dynamics of converting an existing Macy’s store to Backstage. At Fordham Place, we will be part of an iconic urban retail center in a densely populated community. As is Macy’s practice, we will test and learn to see what resonates most with customers so we can adjust our strategies before rolling out additional locations.”