Over the past few months, there have been several signs that the business of selling name-brand goods at a discount might be harder than it looks.
After opening six pilot locations for its Backstage offshoot in the fall, Macy's will open just one more of these shops in 2016. Kohl's, which introduced its first discount Off/Aisle location in June, will likewise cut the ribbon on just two more of these stores this year. And Nordstrom, long considered a front-runner among department stores in this space, reported negative same-store sales at its Rack brand three of the last four quarters.
Nordstrom's results, paired with tepid rollout plans at the two other retailers, come as off-price natives TJX and Ross continue to extend their lead in the space.
"They're all [the department stores] going up against two very formidable competitors," said Craig Johnson, president of Customer Growth Partners.
The sheer size of TJX and Ross makes their economies of scale difficult to replicate. At the end of its fiscal fourth quarter, Ross operated roughly 1,400 U.S. stores between its namesake and dd's Discounts brands. TJX, which owns TJ Maxx, Marshalls and HomeGoods, had nearly 2,700 domestic locations at that time. Macy's, by comparison, had fewer than 900 stores.