Behind The Curtain With Macy’s Backstage

While Macy’s “sky-is-falling” headlines seem to abound of late, it would be understandable if the mood within the massive department store chain was a bit fraught with tension these days. Holiday sales missed their targets, long-time executives are leaving, stores are closing, payrolls are shrinking, the CEO is taking a pay cut and activist investors are piling on the board looking to pry the real estate holdings away from the core commerce business in the name of preserving shareholder value. The hits just keep on coming.

When PYMNTS talked to some of the crew working to fully execute Macy’s Backstage, the mega-chain’s new effort at attracting the discount-hunting consumers that increasingly are dominating retail shopping, the mood in-house was more focused than frightened.

What we heard from employees speaking on background was that while there are plenty of concerns, real worry is in short supply and the major questions in house are about how to update offerings for the audience. But with 160 years in the marketplace, Macy’s has been doing that for a while.

Macy’s has been around for a long time. Since its founding in 1858, the United States has been through one Civil War, two World Wars and seen the invention of the telephone, radio, television, light bulb, automobile, airplane, computer, Internet and smartphone (to name just a few notables).

It is, therefore, quite accurate to say that the world Macy’s Inc. operates in today is not even remotely similar to the one in which R.H. Macy opened a “small, fancy dry goods store on the corner of 14th Street and 6th Avenue in New York City.” It is also accurate to say that being a bit resilient is in the founding DNA of Macy’s, especially considering that Macy’s was R.H. Macy’s most successful venture — he started several that failed abjectly before hitting it big in 1858.

In this market, competitors include TJX, which only focuses on off-price clothing, and numerous other mid-to-high-end department stores that have been earlier to market with their own outlet offerings.

Most notable in this category is Nordstrom Rack, which has been around for almost 10 years and is now up to about 100 locations. There are also Saks OFF 5TH — the no-frills Saks discount chain — and Neiman Marcus Group’s Last Call.

But, Macy’s Backstage is working hard to stand out, particularly in its chain-exclusive offerings.

“We are offering e.l.f. cosmetics, Haute Hippie and Splendid on top of things that you can find in Macy’s across the United States because we are both trying to attract millennials and new customers to the store and introduce them to the bigger Macy’s family,” a Backstage director noted.

And, in trying to strike this balance, Macy’s is somewhat different. Most brands’ retail outlets mostly function as pure outlets. Over 90 percent of the goods on the shelves are marked-down offerings from the main store. Nordstrom is the exception: 80 percent of the goods are exclusive to Rack stores, whereas only 20 percent come from traditional Nordstroms. That approach, however, has drawn both praise from those that like the diversity and complaints from customers that dislike how disparate the shopping experiences are.

The vision for Macy’s is to offer a “both/and,” and a central challenge Backstage faces is offering an experience that is both recognizably Macy’s and unique unto itself.

“It is a very delicate balance and already a place where we are looking to make changes. In our earliest rollouts last fall, we were getting feedback about navigability … and we’ve made changes to reflect an easier through path for customers.”

The question now for Backstage — and only time will answer it as more of the locations get up and running — is if Macy’s has it in it to be in the discount goods business, since many analysts have their doubts given Macy’s large and known-to-be-slow structure. Plus, even if Macy’s gets good at discount sales, the reality is it is still late to the gate.

Which is no small challenge, given the prominent push of headwinds that this year has blown in with so far.

But small shifts — and customers taking to the discounted Macy’s option — can make big differences to the general course. Macy’s had no data it was willing to share about what the winds of customer action have been telling it about Backstage so far, though internal reports have been “promising.”

What that promise is remains to be seen. We’ll keep you posted.