Macy’s Expands to Strip Malls With Smaller Stores and Leaner Inventory

The word is that Macy’s is exiting the dying mall and making its foray into strip malls, as it views these type of physical retail opportunities to be more lucrative. However, the move isn’t just about entering a new retail landscape. The company is also planning to adopt a low-inventory approach to keep its offerings fresh.

That said, Macy’s is expanding beyond the traditional mall setting, in response to investors’ perception of department stores as outdated and unexciting. The company is targeting customers in thriving shopping centers and rapidly growing suburbs, while leaving behind declining malls. In these smaller locations, Macy’s is showcasing a curated selection of popular brands, with displays that are regularly updated to remain current and attractive to customers.

CEO Jeff Gennette revealed during a recent CNBC interview that this year will be a crucial test for the new Macy’s strategy. The company will conclude its test-and-learn phase of the off-mall stores and determine expansion plans by the end of the year.

Gennette expressed optimism during a March call about the new Macy’s off-mall stores, saying, “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. We’re very bullish on the concept, and the early learnings have been positive. The size and locations of the stores are all working.”

The New Store Concept

Macy’s has launched two smaller store formats: Bloomie’s and Market by Macy’s. These stores are about one-fifth the size of the company’s traditional Macy’s and Bloomingdale’s locations.

Bloomie’s offers shoppers a unique experience where they can browse clothing racks with a glass of wine in hand. The store even features a display of pet accessories and a water bowl for four-legged visitors. It’s not uncommon to see couples strolling through the store with a baby carriage in tow, enjoying the neighborhood atmosphere.

So far, Macy’s has launched 10 mini-versions of its namesake and Bloomingdale’s stores in strip centers and intends to open five more this fiscal year.

Macy’s off-mall stores strategy has shown promising results so far, with sales surpassing the rest of the company. During the holiday quarter, comparable sales at Market by Macy’s and Bloomie’s reportedly grew 8% and 12% respectively, for stores that had been open for over a year, including licensed departments.

In contrast, Macy’s and Bloomingdale’s experienced a decline of 3.3% and growth of only 0.6%, respectively, during the same period, including licensed departments and online sales.

Macy’s leaders have noted that the off-mall stores have attracted younger and more diverse customers, including those who are new to Macy’s. However, it remains to be seen if the strategy will be a success. Most of Macy’s 700 stores are still located in enclosed malls, and the retailer runs the risk of cannibalizing sales from its larger stores by opening strip-mall locations.

Inside Market by Macy’s

Market by Macy’s stores offer a more limited selection of products compared to their mall counterparts, with a focus on apparel, shoes, handbags and beauty items from well-known brands such as Calvin Klein, Michael Kors and Ralph Lauren, as well as Macy’s private label, including women’s clothing line INC. Additionally, the stores have a small toy section, a result of Macy’s partnership with Toys R Us. Market by Macy’s stores also host special events and showcase local businesses.

Macy’s has reportedly been using technology to make decisions on what products to stock in stores with flexible layouts and displays, leveraging heat maps, which show patterns of customer traffic in stores. This information is then used to determine what merchandise sells best and to adjust product offerings accordingly.

Market by Macy’s has adjusted its product mix, reducing its stock of home goods and kids’ clothing and increasing the selection of popular items like fragrances, dresses and men’s suits.

Placed at the center of the store are spacious fitting rooms with a cash register where a sales associate can assist shoppers in finding an item in another color, size, or brand, including merchandise that may not be available in the smaller store.

Market by Macy’s is also noted to curate their offers to reflect the wants and demands of the local community. For instance, the Atlanta store with a higher proportion of shoppers of Asian descent carries Japanese beauty brand Shiseido, while another Atlanta area store stocks more Black-owned beauty brands like Buttah Skin.

Inside Bloomie’s

According to Charles Anderson, the director of stores at Bloomingdale’s, Bloomie’s stores have been successful in shopping centers that feature popular and upscale national brands like Williams-Sonoma, Sephora and Lululemon.

At the shops, customers can find contemporary brands such as Theory, Ramy Brook, AllSaints and Bloomingdale’s own brand, Aqua. There is also a concierge desk where customers can receive services such as tailoring, personal styling or assistance with online orders and returns.

Bloomingdale’s sees Bloomie’s as an opportunity to expand its brand to regions it has not yet reached. As of late January, Bloomingdale’s had 55 locations, which include outlets and the two Bloomie’s stores. Most of its stores are situated in metropolitan regions on the coasts.

Demographics and Potential Challenges

As its customer base is predominantly middle-income, Macy’s is more susceptible to the impact of a recession and may face pressure if shoppers opt to shop at online retailers, big-box stores or discount chains like T.J. Maxx instead.

Meanwhile, the strength of the Bloomingdale’s brand may provide more growth opportunities for Bloomie’s. It has outperformed Macy’s namesake stores for eight consecutive quarters, although the retailer did not separate the same-store sales of the two brands until 2021. Bloomie’s also targets a wealthier clientele who may be less affected by an economic recession.

Macy’s Chief Stores Officer Marc Mastronardi acknowledged the significance of mall stores but said some customers find it more convenient to shop at the new off-mall locations due to shorter driving distances.

Market by Macy’s is looking to lean into discovery and convenience, making the stores easily accessible, local, and designed to simplify the shopping experience.

See also: Gucci’s New Melrose Place Store Doubles Down on Exclusivity