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Macys Backstage

Macy’s closures signal fundamental change for department stores

Macy’s recently announced their plan to close 40 stores in the beginning of this year, including their location in Moscow’s Palouse Mall.

An underreported aspect of this announcement is the chain’s plan to turn a number of its existing stores into discount stores – “Macy’s Backstage”. Discount-outlet stores like TJ Maxx and Nordstrom Rack have been beating department stores handily in nearly every measure that matters to retailers, and department stores have been eyeing them with envy.

JC Penney famously (and disastrously) tried to stop tried-and-true department store coupon practices, which savvy customers could use to cut hefty prices in half, in favor of ‘honest pricing’ and ‘everyday values’. Starting a separate discount outlet like Macy’s Backstage allows department stores to communicate the value of its goods more clearly (with the original retail prices still on the tag!), but once consumers get used to big discounts it’s hard to get them to go back.

Only time will tell if this bold move succeeds, or backfires as it did with JC Penney. Either way it signals a dramatic change in the department store retailing world.