Macy’s Inc. on Monday confirmed to Retail Dive that Michelle Israel, senior vice president of Bloomingdale’s off-price unit, The Outlet Store, will assume added responsibilities of Macy’s Backstage and has been promoted to senior vice president, off-price with oversight of both off-price businesses.
She will report to Chief Merchandising Officer Tim Baxter at Macy’s and to Francine Klein, vice chair, Center Core, Cosmetics and Outlets at Bloomingdale’s, a spokesperson told Retail Dive.
Off-price is one of retail’s few bright spots these days (especially when it comes to apparel), so it’s not a mystery why Macy’s got into the space two years ago. But Macy's is late to the business and most of its department store rivals have well established and growing off-price operations.
Along with a correction to its massive U.S. physical store footprint (which involves shuttering at least 100 stores), the company under its new President and CEO Jeff Gennette, is aiming to foster the treasure-hunt mentality that has stoked the success of off-price retailers like T.J. Maxx. To that end, Macy’s is incorporating the nascent Backstage unit into stores (in stark contrast to Nordstrom, whose off-price Rack stores are distinct from the full-line Nordstrom stores) and revamping shoe sales to “open-sell” racks reminiscent of off-price stores.
It’s also not clear whether these efforts have legs, though Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates, said Gennette needs some space and time. “They’re a decade behind in getting into off price — a decade — they just started,” he told Retail Dive. “They’re also going about it differently, they’re going to make it part of their stores. That may work, that may not work. The new guy is very muddled, but he wouldn’t be in this job if he wasn’t talented. I say give him time.”
But GlobalData Retail managing director Neil Saunders warns that their research finds that having off-price assortments inside Macy's stores is cannibalizing full-line sales. “As much as we can see the logic for this from the perspective of trying to make space more productive, we believe the strategy will ultimately fall short,” he said in May. “It also sends confusing messages to the customer about the Macy's brand. There is no doubt that Backstage is a good concept and one that Macy's should pursue, but we believe it is better suited to stand-alone locations in units where rents are cheaper.”
That strategy is closer to the off-price success experienced by Nordstrom, whose longstanding Rack stores are found in shopping areas and cities apart from the flagship fleet, though even that retailer also experiences some sales leaks to off-price operations.