Macy's is morphing into a discount store.
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Macy's just confirmed the end of department stores as we know them (M)
Macy's is copying TJ Maxx and Nordstrom Rack.
Macy's is copying TJ Maxx.
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The department store chain is rolling out self-service systems in its shoe departments nationwide, meaning customers will serve themselves instead of finding a salesperson to retrieve shoes.
The rollout will be completed by August, the company said on Thursday.
This model copies successful off-price retailers like TJ Maxx and Nordstrom Rack.
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Customer service was once what set Macy's apart from those retailers. But now many customers don't want that level of service when they're shopping, according to Karen Hoguet, Macy's chief financial officer.
"Lots just say, 'Leave me alone. Let me get the shoe I want and move on,'" Hoguet said at a conference in March.
Macy's started testing the self-service option in select stores earlier this year. Hoguet said Thursday that those shoe departments saw double-digit sales growth, which was "well above the shoe sales trends for the rest of the stores."
Macy's is also copying discount stores by adding more off-price and clearance sections to its stores.
The retailer's off-price concept, Backstage, is similar to Nordstrom Rack. It sells Macy's brands at steeply discounted prices of up to 80% off. Macy's has also been rolling out a clearance department in stores called Last Act. The clearance section compiles discounted items from racks around the store and puts them in one place.
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At least one of the two concepts will end up in all Macy's stores, the company said.
"Whatever model performs best this year will be rolled out aggressively next year," Hoguet said.
Macy's CEO Jeff Gennette said the company was going after the two-thirds of Macy's customers and more than 70% of millennials who shop at off-price stores monthly.
A couple of years ago, Macy's opened several standalone Backstage stores, and last year it started rolling them out within Macy's locations.
There are now Backstage sections in 26 Macy's stores, and the company plans to add them to another 19 stores this year.
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Analysts have said Backstage could cannibalize sales from Macy's full-price brands. But Macy's executives on Thursday said that wasn't the case, according to the company's internal data.
"We are encouraged by the performance of these combined-store sales, where total sales being lifted compared to the control group," Hoguet said.
Macy's is hoping that launching its off-price concept at mall locations will give the chain a leg up over competitors.
"Most of our ferocious off-price competitors are off mall [locations] right now," Gennette said.
Macy's is realizing the traditional department-store model is crumbling and that it needs to become more like a discount store to stay competitive.
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The department store's sales fell 7.5%, to $5.3 billion, in the most recent quarter, and same-store sales, or sales at stores open at least a year, fell 5.2%.
"We don't have our head in the sand, as for the significant challenges we face in trying to get the business growing again," Gennette said. "These challenges are secular and not cyclical."
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