What: Macy's has begun opening new Backstage locations, with plans for 45 shops within Macy's stores in 10 states this year, on the way to its target of 270 nationwide.

Why is it important: What may look like a good tactical move based on current trending could be a strategic misstep.

Macy's launched Backstage in 2015, as retailers in the segment consistently took market share from department stores. Macy’s is new to off price, and it's unclear how much the effort is taking away from full-line sales. The company is also facing competition from the more mature operations at Nordstrom Rack, TJX Cos., Ross and Burlington.

Being the largest tenant in U.S. retail malls, with 6.2% of total existing square footage, what does the move mean to Macy’s brand value or long-term sustainability? Some hard facts are summarized by Ameritrade Network:

• UBS is estimating 80 000 retail units (mostly clothing and accessories), or 9% of total stores, will shut across the country by 2026,
• E-commerce sales are expected to represent 27% of total retail sales by 2026, up from 18% today,
• Among the 1000 malls existing today, only a third are likely to have long-term viability and they are the most upscale properties,
• The 300 surviving malls will be up-market, experiential, and brand driven (undifferentiated products contributing to mall-fall), essentially the place occupied by the best department stores more than a century ago.

If some points ring true, Macy’s should leave the discounting to the discounters and improve the customer experience, presentation, visual merchandising, and service instead.

Retailers’ future also depends on appealing to Millennials, Generations Z, and the soon to be talked about Gen-Alphas: this represents even more reason for Macy’s to move to higher ground. Transparency, sustainability, humanity, and social justice are their target customer’s core beliefs.

Macy's Backstage opening 45 shop-in-shops 

Related Item

• Despite uncertainties, Macy’s foresees a bright future