What will it take to make department stores relevant again?
The flurry that was Shoptalk is over as 8,000 retailers and brands headed out of Las Vegas last week. While there were a lot of announcements and lightbulb moments, one thing was apparent: Department stores, as we know them, are changing.
On the main stage, veteran leaders from Macy’s and Nordstrom shared their plans to stay relevant for the next 50 years by acting smaller and becoming nimbler than ever before.
Both legacy retailers are achieving this by substantially downsizing their spaces to accommodate new formats that are more convenient for their customers.
Rachel Shechtman, Macy’s newly appointed brand experience officer, described the chain’s experiments with “living brand labs.” Drawing on her past experience at STORY, the experiential concept store, Macy’s has opened standalone 2,400-square-foot locations in as little as nine days to implement new technology and gauge customer interest in emerging brands more quickly than ever before.
Similarly, Nordstrom Local, the retailer’s inventory-free showrooms, and its newly opened men’s store in New York City are using smaller spaces to highlight services like returns, pickups and alterations.
Erik Nordstrom, President of Nordstrom, explained how highly cost-effective Nordstrom Local is because returns come back twice as fast.
Despite pioneering these newer formats, Mr. Nordstrom still thinks that the retailer is too slow. “We need to move faster; public or private it’s the same,” he said. “In retail, how do we learn quickly? How do we get a lot of tests out there and move in a very agile way to what the customer is telling us?”
The importance of “connected” stores was not ignored during the session with both retailers confirming that 50 percent of customers use a mobile device to support their journey in the store and online.
“We’re famous for our front windows, but this smartphone is our front window now,” said Ms. Ramsey, Macy’s chief digital officer. “Our app customer is our most loyal customer.” And with 50 percent of customers using a mobile device to support their journey in store and on the web at both retailers, it’s apparent that these investments are going to pay off.
DISCUSSION QUESTIONS: Do you think the changes being made by Macy’s and Nordstrom indicate a brighter future for department stores or do these retailers and others still have a way to go in establishing relevancy with consumers? What do you think department stores will look like in 10 years?
Join the Discussion!
30 Comments on "What will it take to make department stores relevant again?"
You must be logged in to post a comment.
You must be logged in to post a comment.
Chief Executive Officer, The TSi Company
Founder, CEO & Author, HeadCount Corporation
Making department stores relevant again is tantamount to changing a jet engine while the plane is flying. These are large enterprises, weighted down by legacy systems and capital constraints. Unfortunately, everything department store operators do seems like incrementalism in the big scheme of things – when disruption is what’s needed. I do believe department stores will be around in 10 years, but they will be smaller, more specialized and fewer in number.
Director of Marketing, Wiser Solutions, Inc.
Much of the conversation around department stores has focused on the customer experience, which aligns with the efforts put forth by Macy’s and Nordstrom. If department stores want to remain successful, they need to continue to create engaging, effective, and enjoyable customer experiences and focus on multi-channel, app-centric shopping.
Principal, Retailing In Focus LLC
I’ve been in two Macy’s stores in South Florida in the past week — in the Treasure Coast mall (approaching zombie status) and Palm Beach Gardens (much healthier). I saw nothing especially innovative in either store; it’s one thing to test in Herald Square but another thing entirely to roll out new ideas quickly.
Macy’s is the only “traditional” mall-based department store operating nationally. (Belk and Dillard’s are super-regionals, and Nordstrom has a unique niche.) For the category to stay relevant, Macy’s needs to move faster.
Vice President of Marketing, OrderDynamics
Most important is the fact that Macy’s and Nordstrom are working on becoming more nimble and driving change. Change is the only constant in retail that you can count on. That means testing new radical ideas, like a fast pop-up store, new app, or other experiential service. Continually adapting, learning and improving is the only way to stay relevant in retail.
First, omnichannel will take on a whole new meaning. It will be about the store that drives to my location (self-driving small stores), showrooms that come to me, high-end AR/VR locations, and back-end systems that track every detail about a customer, their buying journey and their habits.
Managing Director, GlobalData
Strategy & Operations Delivery Leader
Principal, Retail Technology Group
How many different departments does a store have to have to be called a department store? Will a department store have a home electronics department as a convenience to customers, or let Best Buy and online retailers eat that slice of the pie? Will there be a notions department in the future? Will department stores offer furniture? Without the departments with which some of us grew up, we may have to call these smaller stores something else. Now we need a name…
Chief Customer Officer, Incisiv
It has been a tough road for sure. Early inertia has forced most department stores to play catch up. However, I think what chains like Macy’s and Nordstrom are doing is smart and innovative. Smaller formats, showrooms, and probably most notably, marketplaces, are where the department store is going. Department stores have some prime real estate and brands still need them as a channel – I see what Macy’s is doing with their Market @ Macy’s as the likely future of department stores. Brands leverage their retail expertise and real estate (retail as a service) while department store take on less and less inventory but create environments and experiences for fresh merchandise.
President and CEO, Stealing Share
Any change represents a brighter future for department stores. I believe the future is in customization, laser measuring, and less packed shelves. An idea I wrote about several years back.
Transform the floor space with a single size in each garment and deliver the correct size to the dressing room when a customer is ready to complete shopping. This enables a civilized shopping experience.
Founding Partner, Merchandising Metrics
“Living brand labs” is a great place to start. I also think Ron Johnson’s plan for J.C Penney is a great place to start. Ron was just slightly off on his calendar and breadth of mission. He provided a template for all department stores over the course of a decade, not just J.C. Penney in a year or two. Unfortunately Macy’s put themselves on an evolutionary path to TJMaxx with Backstage. Now they have to reconcile that with current efforts. Tough. And Primark proves it possible to have great looking stores AND great value. They are not mutually exclusive. Movie title for retail in the near future = “The Agony and The Ecstasy.”
Independent Board Member, Investor and Startup Advisor
Department stores are definitely changing, just not as fast as the purchase behavior of consumers. The moves by Macy’s and Nordstrom are going in the right direction, yet they are architected within an existing design and format mindset that continues to lose relevance.
Future success and relevance will depend on the speed and extent by which the ongoing testing of new concepts stretches and changes the department store mental model and associated organizational structure. So the department store as we know it will not be the same 10 years from now. While physical format, size, and assortment is undergoing changes, the organization will be much more internally flat, nimble and highly responsive to the immediate needs of customers. There’s an ongoing collapse of time in the execution space, the winners will be those that are better able to define the right business risks and turn them into advantages that translate to new operational models.
Principal, KIZER & BENDER Speaking
Acting smaller and becoming more nimble I get, but an app is not a store window and a place that only offers services is not a store.
I was heavy into a store remodel the week of ShopTalk so I didn’t get to hear the speakers, but I do know that a department store is too big when it doesn’t have enough salespeople to help shoppers, and that when your store becomes a giant box filled with stale product and uninspired merchandising it’s time to change. I applaud the smaller, standalone things Macy’s and Nordstrom are doing to move forward, but those things are not helping customers who visit the actual department stores. What’s the plan to change the shopper experience in those physical spaces? No one seems to be talking much about that.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
What will department stores look like in 10 years? The only thing we may recognize is the banner over the store. In 10 years there will be nothing resembling the traditional department store. (To Art’s comment: …they are no longer department stores and have not been for a long time.)
My question is, why do we keep talking about this?
President/CEO, The Retail Doctor
Department stores are still relevant – look at Target.
Vice President - Industry sectors , Capgemini
Agreed. There is also Tesco which has started to refocus on their department stores albeit with store remodeling (smaller stores, lesser floor space and a more reasonable number of SKUs).
CEO, The Customer Service Rainmaker, Rainmaker Solutions
This is like losing the bet that the QE2 could change course in a split second. Department stores have become cumbersome and frankly, boring. Maybe they should take a page from Restoration Hardware (RH) to make the experience memorable. Maybe add a sitting area near a coffee bar. Have a few customer relations people walking the store offering assistance. Most importantly, train the staff — especially those working closest with the customers — about what good customer service is. Be an aid to the customer, not simply a cashier. No matter what, do something or call it a day.
President, Global Collaborations, Inc.
Being nimble, experimenting, and constantly changing are requirements for today’s marketplace. There is no one formula for success. There is no formula that will work for a long time. With experimentation that occurs often and quickly, retailers can identify changing consumer trends, different geographic preferences, technology use, and respond accordingly. Creating pop-up stores to do this is relatively easy. For success across established stores, purchasing, logistics, and marketing departments need to be nimble and adaptable to capitalize and adapt to changes.
Global Retail & CPG Sales Strategist, IBM
A much more broad perspective of this challenge is to take the high-level view that all retailers must adapt to thrive. Right? Just like much of the evolution that department stores must make, even supermarkets haven’t really changed all that much in 100 years. Ninety-nine percent of stores still have dry grocery in the center store with perishables around the perimeter.
All retailers must face the realization that hoping “if you build it, they will come” is a mantra that disappeared years ago.
CEO of Envirosell Inc., Speaker, NY Times Best-Selling Author
Selfridge’s, Bon Marche, Ginza 6 – all good examples of off-shore department stores that have focused on shopping tourism and the off-shore buyer. Store tours. Informed greeters. Global merchandising. Menus in a range of languages. Clear and easy to use personal shopping services. Deals with local hotels – shop and merchandise delivered to your hotel room. Online services that connect to your hotel. Clear policies on tax free shopping.
I’m not hopeful for the broad “department store” model. And although Nordstrom is technically categorized as a department store, in my customer mind they are a large high end clothing store — that’s a separate thing.
So why not department stores? Over the past 20 years consumers have voted with their money for one of two alternatives to department stores: Specialty stores (most off-mall) like Old Navy or Melvyn’s Or Kohl’s or Bed, Bath & Beyond or cooking stores — OR they’ve shifted to low-touch bulk discount like Costco for vacuums, appliances, and more.
That means the department store has no key place in customer lives. Is Macy’s, like Nordstrom, a big clothing store? If so, then they need to radically dash after that model.
Truth is, I do believe the “department store” is dead — but these retailers can find life if they accept that idea and sort out a place they can fit in customers’ shopping lives.
Founder, CEO, Black Monk Consulting
First, of all, it’s a long slog to relevancy. Secondly, these new formats are department stores in name only. I have supreme respect for Rachel Shechtman. She might get my vote for the most creative mind in retailing today, but even her vision can’t save oversized Macy’s units anchoring dying malls. So, will the future of these companies be in smaller, standalone stores? Maybe, after all, it is entirely possible. But will those huge, empty, cavernous mall units be restored to their former role and glory? I’m not taking that bet.
EVP Thought Leadership, Marketing, WD Partners
We just did a study on this and the answer for D stores and retail spaces in general was a complete re-think. Consumers wanted to see grocery stores, food halls, fitness centers, co-work spaces, health centers, beauty mega stores (you know, relevant retail) vs apparel, apparel, apparel. It was pretty clear; the space needs a clean slate and needs to understand that Story alone, is about 1% of the solve.
CFO, Weisner Steel
I would point out that Nordstrom has never considered itself a “department store” and I don’t think the distinction is trivial. Smaller and more focused can be seen as the difference between a department store and a (large) specialty store, and so in both their attitude and the nature of their operations, I think Nordstrom is a lot further along the transformation path than Macy’s.
As for what department stores will look like a decade out: smaller in size and fewer in number.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Department stores face a stark choice — adopt a wholly new paradigm or fade away. The vast real estate holdings that once constituted the basis of their power have evolved into another kind of “anchor stores” — the kind that puts a drag on maneuverability.
Excess square footage is just a symptom of the larger problem, of course. Shopper behaviors and expectations have changed profoundly in the digital era. The journey downtown or even to the regional mall has been displaced by a tap on the app. Large physical assortments are unwieldy compared with digital’s long tail.
Against that backdrop, recent innovations from Macy’s and Nordstrom may be viewed as admirable — even heroic. There is still a role for upscale showcase emporiums in major markets. There is a crucial role for merchandising creativity and enhanced experience in all stores. But the era of the mid-market, multi-level mall department store is drawing to a close, I think.
Retail Transformation Thought Leader, Advisor, & Strategist
President, Sageberry Consulting/Senior Forbes Contributor
There are three big issues with the reinvention of moderate department stores. The first is that there has been a long-trend secular decline in the sector. It’s easy to blame Amazon, but the decline has been more than two decades in the making. At this point, it’s primarily a market share game.
Second, as I’ve been saying for years, the middle continues to collapse and too many of these retailers think that a slight better version of mediocre is a long-term strategy.
Third, massive investment is likely required to not only turn their existing real estate into something remarkable, but to invest in alternative formats (like Nordstrom with Local). It’s a long, tough journey that few will survive.
President & Founder
Smaller and local stores have proven to be more successful, especially when located in mixed-used environments. And customers love having access to exclusive, new, even time-limited experiences. It is hard to do in giant places. Nordstrom and Macy’s are definitely setting the tone by scaling spaces down and accelerating their constant re-invention.
Great article! I was also reading about similar stuff and came across a case study of Lenskart, from an e-commerce store to more than 700 physical stores.