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Macy’s, a longstanding fixture of the shopping mall, is expanding a standalone store strategy in a way that could change how customers think of the retail chain.

In Q4 of 2021, Macy’s witnessed a surprising degree of success from its Market by Macy’s stores, its new smaller-format unit. The retailer piloted the concept in five suburban “power centers” in Texas and Atlanta over the past two years, according to The Wall Street Journal.

Now the retailer has announced plans to open 10 new off-mall locations in the coming year, including new Market by Macy’s stores, standalone off-price concept Macy’s Backstage locations, Bloomie’s and Bloomingdale’s outlet stores.

Macy’s discovered that the small-format concepts — which are around one-fifth the size of a traditional mall store — are easier to staff and stock. Meanwhile, the chain has closed about half of the 125 underperforming mall locations it announced were marked for closure in February, 2020. Some off-mall locations will be opening in areas where mall stores were closed.

In an online discussion last week, some of the experts on the RetailWire BrainTrust saw a big potential benefit to smaller, off-mall locations for Macy’s.

“Finally, reinvention,” wrote Lucille DeHart, principal at MKT Marketing Services. “I like this idea. Retailers need to follow the consumer and they are not going to the mall as often and not looking for 50,000 square foot stores to spend the day. Mini department stores could be a way forward. More inventive merchandising, easier to stock and staff — that’s definitely worth testing and rolling out.”

“As mall culture morphs into social shopping via digital, there is less and less ROI in a mall presence,” wrote Melissa Minkow, director of retail strategy at CI&T. “This is a smart move that a lot of retailers are making. Further, traditional department store floor plans with large square footage aren’t really conducive to how people shop today either. I’m glad they’re pursuing smaller formats, especially given how hard it’s been to find help in their traditional layouts where their staffing numbers don’t support the size of the space.”

Last summer, Macy’s was touting the success of its digitally-focused turnaround strategy after a successful second quarter earnings report, according to CNBC. The report came after vaccines against COVID-19 became widely available but before the Delta variant of the novel coronavirus led to the reinstatement of some social distancing requirements and slowed foot traffic. This led to speculation that Macy’s was in part riding a pandemic lull-driven tailwind from pent-up demand.

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Last fall, however, Macy’s reported a successful third quarter, again beating analyst estimates, according to a separate CNBC article. The chain said that it added 4.4 million new shoppers that quarter.

Macy’s is not the only mall-based retailer that has recently gotten serious about its off-mall presence.

On a conference call in April, Foot Locker

FL
discussed plans to continue accelerating its shift to off-mall locations, Seeking Alpha reported. The chain plans to expand its off-mall Power Store and community store footprint to 300 stores in the next three years.

But for Macy’s, even some who were fans of the shrinking store size saw going off mall as potentially putting Macy’s in the wrong location, location, location.

“Macy’s has a long path ahead,” wrote Doug Garnett, president of Protonik on RetailWire. “Smaller makes sense given that their old purpose (being a ‘department store’) is no longer meaningful to customers as we don’t need all those departments in one place. With a shrinking meaning for customers, shrinking stores can help them be more meaningful. But off the mall? I’m skeptical about moving away from the mall. Macy’s has always benefited from the foot traffic. If this were to succeed, they’d need to define a modern reason to exist which will draw people to their stores. So far, Macy’s hasn’t shown they can do this.”

Others on RetailWire’s BrainTrust agreed that delineating a non-mall draw would be the prime challenge facing an off-mall Macy’s.

“I’m not sure I see Macy’s as a destination location, no matter how large or small a store is or where it is located,” wrote Ryan Mathews, CEO of Black Monk Consulting. “A good deal depends on the format these smaller units take. Moving away from malls is probably a good idea at this point, but the issue is: what do these new stores offer shoppers the larger units don’t? I’m not saying that Macy’s is doomed, just that they need a more compelling consumer-centric value proposition that is clear and differentiated.”

And Neil Saunders, managing director of GlobalData, pointed out that many elements of Macy’s still need work, regardless of store size.

“The smaller store concept has potential,” wrote Mr. Saunders, “But it is not the solution to all ills and if Macy’s ends up treating those stores like it does its larger shops it will be back to square one. And from what I have seen, the smaller stores are OK, but they’re more of a better version of mediocre than a reinvention and revolution.”

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