Next Stop, a Department Store
Had we not seen it firsthand, we never would have believed it. Three girls, ages 13 and 14, looking for dresses to wear to a friend’s party asked the tagalong adult to drive them to the mall where they could check out what Macy’s, J.C. Penney and Nordstrom had.
Before this request, we hadn’t suspected the girls knew the department stores as anything other than places to pass through so they could enter the mall to shop at Hollister, Abercrombie & Fitch, American Eagle and other destinations.
As it turns out, they and many others their age and older have discovered department stores as a shopping destination and specialty shops are the ones looking to find an angle to reverse the trend.
As a USA Today report points out, Federated’s chains (at least, outside of Chicago), J.C. Penney, Nordstrom and Neiman Marcus are doing a solid business. Specialty stores, including the Gap, Chico’s, Talbots and Ann Taylor, have not done as well.
This is not to say that all specialty stores are performing poorly. Clearly many such as J. Crew, Coach and the aforementioned A&F are doing quite well.
Michelle Bogan, a retail strategist at Kurt Salmon Associates, said Department stores have found a new audience by doing “a really good job focusing in on how to make their assortments more compelling.
“Specialty stores,” she said, “started to rest on their laurels, thinking people would keep coming if they just kept doing what they were doing. But if the customer has a better option, that’s where she’s going to shop.”
“The department stores are using some exciting new vendors, while also keeping the old ones, and they kept the pricing affordable and the quality good,” said Nanci Lee Mora, a former Bloomingdale’s manager. “The smaller stores have become boring, (and) their prices are too high.”
While department stores are doing well as a whole, it would be a mistake to assume the players in this channel have any more of a lock on their current position than specialty outlets did five years ago.
“Part of what’s happening is definitely cyclical. From channel to channel, you will see peaks and valleys,” said Ms. Bogan.
Peter Nordstrom, president of merchandising at his family’s chain, said it isn’t about the type of store. “Customers don’t make a big distinction … as long as you offer a compelling reason to be there. They just like shopping where they can find the things they can want.”
Discussion Questions: For stores not doing well, is it really that merchandise is out-of-step with current fashion or does the negative reputation developed at some stores such as The Gap keep customers from even venturing into stores to make up their own minds? Has the brand name on the garment become the main impediment to a sale in many cases?
Department store comp sales will look good as long as location growth remains modest. Even Gap would have decent comps if they just reduced their number of locations. For chain stores, the worst competition is self-cannibalization because the total sales rise more slowly than the capital invested and the operating costs.
Gap specifically has had major merchandising problems for years. They’ve bounced between targeting Mom or her daughter and as a result neither generation has a clear idea of what she can (or would want to) get there. More generally, it’s interesting that the fragmentation/re-integration trend (think AT&T) is happening with this generation of teens. They’ve grown up on Target and Wal-Mart for the low end and specialty on the high end and now they’re seeing the benefit of finding everything under one roof. I’m really glad to see it happen–I only wish Marshall Field’s had lived to be part of it.
“Part of what’s happening is definitely cyclical. From channel to channel, you will see peaks and valleys,” said Ms. Bogan.
I agree with Ms. Bogan. Some trends are cyclical, some are structural, (and some aren’t trends at all but mere fads).
But bad word-of-mouth is hard to overcome. You need brand champions to sustain your reputation. This argues for acute customer relationship management. Find your best customers, keep them happy and satisfied, make them your brand ambassadors.
I would like to second the author’s observations; I have 2 daughters, 14 and 19 years old . They have learned, in the mid size Western city where we live, that Penney’s has fabulous teen clothes–they buy out of an LA office and my kids love their clothes over the independents for being on-trend, durable and at an affordable price. Where we live, Nordstrom (only the highest priced lines) & Macy’s (lousy teen section) just don’t get it. However, when we visit family in LA and Chicago, we load up at the teen sections in Nordstrom’s in those cities (way different in the amount of mid price range teen apparel offered).
Macy’s still needs work; out west where they took over Robinson’s May, the teen department has suffered. In Chicago , well, as a Chicago born & bred, loyal Marshall Field’s load-up shopper when I was back visiting family, Macy’s just isn’t cutting it.
The answer is “yes.” I think we could all chart typical lifecycle curves for specialty store popularity. At what point does a store brand become so badly perceived that simply becoming trend-right with merchandise will no longer work? Without data, my guess is that it takes about two trend cycles for that to happen with the younger age groups, and maybe one or two more with the older ones.
The real question is what can be done to avoid this cycle? Department store merchandising is not a panacea. As has been noted, the long term “health” of the segment isn’t even clear. One thing department stores (and Target, which one must point out grew out of a very fine department store tradition) do right is creating good-better-best brands within their own private label. This allows for one brand to “get it wrong” without taking the entire store down with it.
If there would be one single suggestion, easily and quickly executed, it would be to develop product brands which support the store brand equity, but which allow for the opportunity for turnover and change at the product brand level.
The Department Store segment has had a good quarter. In particular, J.C. Penney’s turnaround is impressive. Probably most of the sector’s big post-Christmas was due to gift card redemptions. Buying a gift card at Macy’s is a lot safer bet as a gift than one at Ann Taylor. If the recipient doesn’t like the skirts and blouses, there’s always giftware, cosmetics, home goods, etc. etc.
But I think it is little too early to talk about a fundamental change here. The Department Store sector has settled in on a spectacular, long term decline. The remaining players are more than survivors. They are excellent merchants and improving marketers, running lean operations. And yes, they would be smart to target customer segments such as teens, career women, etc. The rest of the world does it. It works. For too long the department store segment has tried to drive demand with undifferentiated price promotion.
Meanwhile, the specialty operators have slipped. Chico’s was overdue for a correction, especially now that its target customer has a full closet and is paying for their children’s college. Across the sector, the number of 30-40 age women shoppers–prime targets for Ann Taylor and Talbots–are proportionally less than in decades past. And new management at each chain will be challenged to tune the merchandise mix to extend their reach and also retain an aging, but still stylish customer.
The recent reporting about the resurgence of the department store disguises the fact that the long-term trend continues to favor big boxes, discounters and “category killers.” The news two years ago would have reported the death of the department store in favor of specialty retailers like Chico’s and Ann Taylor. So it’s important to keep some perspective, especially given that USA Today is not exactly cutting-edge picking up on trends.
Specialty retailers have gone through cycles in the past where their comp sales have stumbled, and need to refocus on merchandise content to ensure that they continue to be relevant and responsive to what the customer is looking for. As department stores from Macy’s to Kohl’s take more aggressive steps to improve their “fast fashion,” the specialists need to be that much better.
I guess you have to clarify the definition of department stores. J.C. Penney and Kohl’s aren’t your mother’s department stores. The consolidation in traditional department stores has enabled them to achieve success in the short-term, but except for the high-end players, I agree with the theory these are in a long-term downtrend. It is all about the value proposition. Unless they fix the customer-service and convenience problems, competitors will continue to take market share.
Really, this depends on the department store and the type of shopper. Some stores are doing it well and others are still the overwhelming, cluttered, lackluster customer services beasts that they’ve always been.
Specialty retail has an edge if they create the right cocktail of merchandise, store experience and customer support. But no matter who and what the brand, in today’s Wild West of retail, it’s about keeping a finger on the pulse of the customer and responding. What works today may not work tomorrow…and what doesn’t work today may work tomorrow. Flexibility, teamwork, and cross-functional thinking with an eye on human beings is the answer…no matter what the store.
I would argue that the brand name on the garment hasn’t become an impediment, it has become somewhat irrelevant. J.C. Penney has thrived in large part because of its excellent private label and proprietary brand development and execution. Gap’s nose-dive has been precipitated by (among other factors) a myopic adherence to dictatorial classification-based marketing and merchandising…this at a time when everyone from H&M to Wal-Mart is quickly translating trends at a price and merchandising them in cohesive collections. Specialty store have also been slow to embrace larger sizes for teens; an advantage that discounters and department stores have seized.
I think one thing that seems to be lacking from the discussion here is the brand marketing that is allowing for the resurgence of the department store. That’s not the store brand; but rather, the clothing brands being offered.
Specialty stores are, for the most part, one brand. If that brand is hot, so it the store. What the department store finally has awakened to is that they have a unique opportunity to work with independent brands that are doing a good job, and bring a “best of breed” shopping experience to their shoppers alongside their private label options. Department stores were guilty of “resting on their laurels” for too long, carrying the same brand names and house brands year after year. I think you’ll see more rapid brand churn at these stores now, which will help them continue a deliberate rebuilding of their own store brands as merchants who stand for the latest and greatest (as they once did!) and not a location to find Nicole Miller.
Despite what has been said here, not all Big Box clothing is doing well. Most notably, trend apparel seems to be one of the few areas Wal-Mart can’t find the handle on. Meanwhile, Target forges ahead using the same “hot brand” strategy that the department stores are using, with the only difference being that they actively build their own brands, using the same marketing techniques that these brands would use if they existed independently. Target understands what the department stores seems to be picking up on finally: If you’re only brand is the store, you have no chance to offer segmentation and focus on a distinct demo. And if the offering fails, your store brand has failed, not a separate name that can be quickly cut from the roster and replaced with one that better captures the intended market.
Price is king, but brand is still important. The stores that continue to win in design intensive segments like apparel will continue to be those that actively develop competitively-priced brands both in-house and from outside that are marketed at least as aggressively as the store in which they are presented.
As a father who has done his share of waiting while daughters try on dresses, I can attest to one fact and that is department stores seem to have larger selections and lower prices. Having gone through a wedding and cotillion in the past year, I believe the department stores saved me over one thousand bucks on dresses. My kids still go to the boutiques for daily wear, so the department stores have quite a bit of room for growth.
I REALLY hate to say this but things are cyclical and I believe we are seeing a blip on the continued downward slide of the “department store”. Having said that, it really IS about the BASE of the store brand and the offered assortment which is ultimately MORE important. Nordstrom has cache, but its assortments MAKE it a destination. The high end players will likely continue into the future and be fine (NM, SFA), but in the middle, we are not yet finished with the on going loss of players.
However IF the department store can make itself relevant and have compelling merchandise, then even when the specialty stores wake up and resume the assault, the department store WILL be fine too. They CAN offer wider assortments and CAN try newer vendors and can be MORE than a solitary brand.
As we all know, GAP is down right now and that is bad – period. The department store has the unique possibility of retaining winning areas even when other ares suffer and they need to remember that and capitalize on that — and I believe they HAVE rediscovered this AND are capitalizing on this.
Of course there are always some who are executing better — JCPenney is doing a GREAT job as well as Kohl’s. Macy’s overall is pretty disappointing and their customer service and store presentation MUST improve or they will suffer further for this.
The department store can and should be somewhat daring and in so doing will continue find relevance that they have not experienced for a while — and I say good for them!! Have what the shopper wants or have something different that the shopper will want, pay attention to trends and what’s new — and the specialty stores will be held at bay. Combine that with improved selection and size offering as well as the best possible service and a compelling venue. There IS a place for this format.
Word of mouth can be the single most influential and cost effective marketing tool available. Department stores and specialty stores know that and need to react to what their customers are saying about them and re-focus their marketing and merchandising strategies accordingly.