There are no easy answers when it comes to department store performance. Strong economic conditions that helped department stores deliver good results over the last year have been replaced by tariff concerns and economic headwinds. To a great extent, the initiatives that department store operators are undertaking seem to be incremental window-dressing, whereas retailers like Walmart and Target are investing in making the shopping experience better – and especially connecting online/offline. It’s paying off. Driving more traffic into department stores, like Kohl’s decision to accept Amazon returns at all locations, is a good start, but traffic alone isn’t the answer. Department stores need to focus on converting the traffic into buyers.

In some ways, each department store chain has its own story, but no one can deny that the sector itself is in trouble. People just don’t shop “by department” anymore, and if they do they tend to go to mass merchants. This is not a simple problem to solve. I was torn between selecting Nordstrom, my sentimental favorite and Macy’s, a company that is working hard at re-invention. I still think if the company can make it work, the “Story” concept within a Macy’s store should drive in new customers, depending on the “story” of the month. Nordstrom Rack should pull in the treasure hunt/aspirational shopper for Nordstrom. Kohl’s is doing a lot of experimentation, but I’m not sure it’s going to be ultimately helpful, and J.C. Penney is on a slide that ultimately has gone on for a decade (I think it started before Ron Johnson came on board.) All this is bad news for malls, whose operators will have to work hard to make them destinations in and of themselves. Department stores simply… Read more »

It’s hard to get excited about department stores when aisles are stuffed with racks of merchandise that’s being marked down. While TJX lures customers with thoughtful merchandising and tempting displays, many department stores seem to be saying “help us get this stuff out of here.” Big changes are needed.

The toughest challenges for department stores are competing with speciality retailers, both in-store and online. Retailers that do not distinguish themselves will not attract as much attention as those that specialize in a particular category. Today’s shopper can use the Internet to find retailers and their products, easily expanding the shopper’s visibility to specialty retailers. Department stores can emulate this approach by specializing in certain categories and providing a unique selection or better service in those categories.

Department stores have too long relied on the “One Day Sale” (and it’s brethren) to drive sales. And now sales are 24/7/365. Yawn. And look what I can buy while sitting on the couch. So the impetus to visit the mall is back to “storytelling” and “treasure hunt” … now defined with one word — EXPERIENCE. Macy’s is on to something with Story. Not just the specific shops themselves, but what is learned from those shops that is scalable. And not just adding more Story shops to more stores, but adding storytelling and treasure hunt execution into more departments in more stores. I often read about the death of the “boring middle.” What happens if the middle is not so boring anymore? What happens if there is a little fun, a little unpredictability injected into the scene — again? Merchants have to prevail over the cost-cutters for department stores to have a role again.

I’m not sure how to compare Kohl’s (which had a tough quarter but is financially sound and on the right strategic path) to J.C. Penney, in its usual survival mode. And it’s hard to draw conclusions about the entire segment when you add Nordstrom to the conversation.

However, there may be a shift underway from economic tailwinds to headwinds. Despite low unemployment, the unease surrounding tariffs, the stock market and the farm economy is taking a toll. Any search for value will benefit off-pricers and discounters in the months ahead.

Until and unless someone gives a damn at the C-suite department store about the customer experience and hires better, trains, and holds them accountable for the brand experience they will continue to rush to technology when the answer is standing right on their floor – hoping for direction and encouragement instead of tasks.

At a macro level, the department store business model is broken. Huge spaces, often in very expensive locations, require high sales volumes with reasonable margins to work. However, volumes have fallen off a cliff and margins are more compressed than ever.

At a micro level, the factors that have brought this about differ from retailer to retailer. However, the commonality between all of them is that they have not evolved with change in the wider retail sector, neither have they invested in their properties or propositions.

Remedying this is going to be very painful and not all retailers, and certainly not all stores, will survive. I honestly think many of the traditional players still don’t get the scale of the problem and/or are unwilling to take the necessary risks. They talk of change, but on the ground most stores are still lackluster and completely unsuited to the modern realities of retailing.

The definition of “reinvent” according to the dictionary: “Change something so much that appears to be entirely new.” it’s difficult to change entrenched systems and mindsets. This is further exacerbated by the same brands, the same floor layouts, the same corporate software-driven merchandising plans, the same lack of customer service, the same, same-old. Mindsets have to change! The evidence is crystal clear. Nordstrom is too expensive faced with so many alternative choices. Macy’s is a sea awash with merchandise overload, J.C. Penney product merchandising has no meaning, no “wow I need to buy this!” Kohl’s, great for active apparel and Amazon returns, with room left to bowl down the aisles. While this analysis seems harsh, it is. Flip the mindsets. Less is more. Curation by location, like the old days, when there was a reason to drive to the store. Retail has lost sight of merchants. Real merchants who understand the “known, unknown” of consumer sentiment. Target has figured it out for Target. Now each retailer needs to figure out their own “entirely new” or… Read more »

It’s beyond high time to both reinvent what a department store actually could be in our digital age, and what services and experiential retail stores will attract people to shopping malls. The fundamental challenge department stores are facing is that their legacy shopping model of the large sales floor, with everything under one roof, and being the dominant force attracting consumers to the mall has lost its luster. The easy answer to this is to blame online shopping and of course Amazon’s disruptive impact on the retail industry. Yet customers still want to shop in a physical store, just not old fashioned department stores. Experiential retail has become the latest industry trend, as its all-encompassing business model connects the physical, digital, creative, and art worlds. The retail space remains extremely relevant, as the 2019 U.S. Census Bureau statistics show that 90 percent of all purchases are still made in the store. There are no easy answers to the challenges that department stores are facing. We will experience continued right-sizing strategies, as unprofitable store closures will… Read more »

Department stores operate under the old “middle man” model — they buy a curated selection of goods from certain vendors, the customer buys from them, the vendor and the store make money if the goods are bought. However, those days are gone. Why should I go to you to buy something from a department store when I can buy directly from say, Ralph Lauren’s site? Because they have great sales people? Because they have a great store environment? Because they’re cheaper? For years the answer has been the last one, which has now run out of gas. All manufacturers are realizing that going DTC or through a marketplace is the way to go and that the middle man is no longer needed. Especially a store. Hence the downfall of the department store. Private label is a savior, but when you start 20 years too late it’s a hard catch up game for sure. Nordstrom has always had great service, so they may (operative term) be the exception. Twenty years from now, the department store in… Read more »

The challenges for department stores continue to mount. First and foremost is the challenge of selling commodity products — products that are available at their competitors’ stores and also sold by the manufacturers’ branded stores (in some cases). Add to that the availability of many of these items available online, including Amazon’s marketplace. The competition has never been greater.

The best way to survive is to differentiate your brand through experiences. I suggest following the models of successful European department stores such as Galeries Lafayette, Harrods, Selfridges, etc. They have done a fabulous job of making shopping a truly remarkable experience. Consumers love the theater of shopping and this is your opportunity to make your store the theatre.

This is about relevance — pure and simple relevance to the shopper. Department stores have lost their identity in the minds of consumers and while many are focusing on key elements of experiential retail, they have yet to find what makes them relevant to shoppers. This, coupled with a late start in investing in the hidden infrastructure that allows for streamlining operations and building those great in-store experiences at scale, these brands are now suffering from that lag. Other brands, like Target, Walmart, Best Buy, etc. have been investing in both what we see on the store floor and what we don’t at a regular pace for years and that is now paying off for them. Each of these brands has a slightly different story to tell and in Macy’s case, it’s quite literally a STORY to tell! We’ve not yet seen the longer-term results of Macy’s introducing STORY to their stores, but I hold out hope that they will find the right mix between STORY, b8ta, Market @ Macy’s, and Backstage that will bring… Read more »

The issue is merchandising and shopping experience. The basic department store model is being attacked from discounters and general merchandise. To win, I think department stores need to go back to being a destination for shopping and social gathering. There is always a segment of shoppers who wants to spend time in the store to get the branded experience, and do their first purchase there, then repeat purchase on the web. Department stores also need exclusive merchandise packaging or non-exclusive products from the brands. There isn’t a magic bullet, but it is a way to go.

There is so much potential for technology to help. Augmenting staff knowledge, providing endless aisle, augmented reality to see product in your own home … the list goes on.

There is a huge opportunity to focus on ‘retail-tainment’ to provide experience and advice that cannot be attained elsewhere — to provide an environment where problems can be solved (we have to remember that disruptions disrupt by solving a pain in the customer experience).
In the Middle East, store locations are turning themselves into experience and entertainment centres.

Also in the UK, John Lewis are doing some interesting things — a hotel room where you can stay over night where everything is for sale; a huge focus on entertainment and re-training for store associates as if they are hosts in the store in Oxford. These are however big, expensive endeavours — and that is the risk — needing to get buy-in for investment.

Department stores will continue to follow the trend of SKU rationalization that a lot of retail/apparel has been witnessing. Think Warby Parker: 3 price points, limited assortment. Think Rothy’s: 4 styles, many different prints. Think Brooklinen: limited colors and preset bundles. Except for the first, the other two are direct to consumer and etailers. In a way, this is why they’ve seen success. They focus and do one thing really well.

The old school department store provided shoppers with the ability to browse in the store at leisure. Younger, more tech-savvy shoppers prefer to do this online and less in-store.

The moderate department store sector is the poster child for what I frequently refer to as the boring middle. It’s been true for a while that good enough is not good enough and department stores need to work on all elements of my 8 Essentials of Remarkable Retail. But the two they generally need to focus on are “Harmonized” and “Memorable.” With regard to Harmonized (my upgrade to “omnichannel”) — the notion that the customer is the channel and the goal of any retailer is to eliminate the discordant notes in the shopping journey and amplify the wow across the full range of touch-points. Here most department stores are still stuck in channel-centric thinking and have a long way to go in breaking down their various silos. Though it’s important to note that Nordstrom (and to a somewhat lesser degree Neiman Marcus) excel on this dimension and have generally delivered pretty solid results. They big issue for them is their format is very mature. With regard to Memorable, the department store remains mired in a… Read more »