Similar to Nordstrom, Saks' off-price stores already outnumber those of its full-line shops. As of Aug. 1, Hudson's Bay operated 38 Saks stores, compared to 85 Off 5th locations; Nordstrom as of that date had 118 traditional shops and 178 Rack stores. And in a recent SEC filing, Neiman Marcus said it operated 41 full-line Neiman's stores as of Aug. 1, two shy of its Last Call nameplate.
In addition to these department stores, which have already planted their stake in the off-price sector, Kohl's over the summer launched Off-Aisle by Kohl's in Cherry Hill, New Jersey. Macy's this fall entered the off-price arena with five Backstage stores, and another opening soon.
A spokeswoman for Kohl's did not immediately respond to a request for comment as to how its store is performing, or whether there are plans to further build out the concept.
A spokeswoman for Macy's said the company has received positive customer feedback, but it is still in a testing and learning phase. Earlier this year, Macy's also said that it plans to grow the outlet footprint for its higher-price Bloomingdale's brand.
Although space is getting tight, it's easy to understand why retailers are drawn to off-price stores. With the exception of a brief hiccup in the first quarter, same-store sales at Nordstrom's Rack division have outpaced those at its full-price stores for nearly three years.
And at Saks, comparable sales increased just 0.1 percent in the most recent quarter, compared to growth of 12.7 percent at Off 5th.
Craig Johnson, president of Customer Growth Partners, said that although Macy's and Lord & Taylor are "late to the dance," it's better late than never. Whereas department stores have been losing share over the past few years, off-price names have been gobbling up a half point in share each year in the apparel category — a trend he doesn't see slowing down.
"People still like to have the designer brands but nobody wants to pay retail," Johnson said. "Only a sap pays retail."
Johnson said the key for retailers is to ensure they are not selling the same product in both their full-line and discount stores, to avoid cannibalizing their sales. Friedman sounded a similar note, saying the off-price strategy is still a good lever to pull for growth.
"The space is definitely crowded, no question about it," Friedman said. "[But] it makes sense if you're having some ... issues in your main store and you need an alternative."