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Should department stores go back to the future?

January 6, 2016Written by George Anderson

Photo: RetailWire

RetailWire will celebrate the fourteenth anniversary of its launch next month and yet, prior to that date, discussions were already taking place within retail industry circles about the viability of malls and the department stores that anchor them. It's amazing how little some things have changed as similar reports persist to this day. A recent article on the Business of Fashion site reported on store renovations being made by chains including Barneys New York, Bergdorf Goodman, Neiman Marcus, Nordstrom and Saks as part of what it calls the "Great Department Store Wars of 2015." In short, the article concludes that department stores are "seeking to bring back the magic to businesses built on nostalgia." According to the piece, many department stores are making use of discounts to drive traffic. While it helps attract customers in the short run, it is not seen as a sustainable strategy. The use of designer exclusives, improved in-store customer experiences and melding the digital and physical worlds are typically given as solutions that hold the promise of greater staying power. The challenges faced by department stores can be viewed as daunting even for leaders in the space. Citi recently downgraded Nordstrom's stock from a "buy" to "neutral," according to CNBC. The decision was made despite Citi's acknowledgement that Nordstrom is a "best in class" operator. Nordstrom, along with its department store peer,s has been challenged in recent months as abnormally warmer temperatures across most the U.S. has resulted in higher on-hand inventory levels. The chain has made retail investments with a heavy tech emphasis in recent years including Bonobos, Shoes of Prey, Trunk Club and Hautelook. Last year, Nordstrom announced that it would allocate five percent of sales to capital improvements over a five-year period. Thirty-five percent of those funds were earmarked for technology.

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