Will department stores experience a Christmas rebound?
Projections for the holiday season have been positive with expectations that retailers will exceed last year’s performance. While not all will advance, don’t be surprised, says former Saks CEO Steve Sadove, to find department stores among the holiday’s winners.
In an interview on CNBC’s “Power Lunch,” Mr. Sadove said, “I think the consumer is healthy. If you look at forecasts for the season, the National Retail Federation is up 3.6 percent and most of the forecasts are in the three to four percent range.”
Speaking of department stores, Mr. Sadove said he expects “a comeback” among some chains because “the fourth quarter is going to be much stronger than people anticipate.”
One of the reasons for Mr. Sadove’s optimism is the weather. He pointed to warm temps in November and December as a significant negative factor in 2015. This year, he said, the weather should be cold. “That’s going to be good for anything that is apparel- and cold-weather based. So the department stores should fare well in that environment.”
Department stores may get a boost from the weather, said Mr. Sadove, but ultimately retailers need to make “fundamental” changes. “They need to have much more exclusive product. They need to have better experiences. They’ve got to change their game.”
Mr. Sadove said that ,while many are closing stores, brick and mortar continues to play a significant role with 90 percent of sales being transacted in physical locations. “Look at Amazon now opening stores,” he said. “Warby Parker is talking about potentially opening hundreds of stores.”
The International Council of Shopping Centers (ICSC), which forecast a sales increase of 3.3 percent, expects brick and click retailers to achieve the greatest growth during the holidays.
“Throughout 2016, consumers have demonstrated a tendency to shop across both digital and physical retail,” said Tom McGee, president and CEO of ICSC. “Even shoppers who purchase online favor retailers with a physical presence and an increasing number of consumers are buying online and collecting in stores.”
- Expect a comeback for some department stores, former Saks CEO says – CNBC
- Will retailers find gold or coal in their holiday stockings? – RetailWire
DISCUSSION QUESTIONS: Do you expect department stores to fare better this holiday season than in 2015? What will it take for retailers in the channel to achieve success? Are there specific department stores that you think will outperform the channel as a whole?
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14 Comments on "Will department stores experience a Christmas rebound?"
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Global Vice President, Strategic Communications, SAP Global Retail Business Unit
I do expect a comeback — a strong one — for the department stores. The open shopping malls and regular malls can serve the same purpose but shopping the department store is easier. The sales at the department stores will also be very good this year.
Principal, Retailing In Focus LLC
I agree with Mr. Sadove’s short-term prognosis: The department store segment should have better results during 4th quarter because the 2015 comparisons are so bad. Any favorable break on the weather will drive at least modest increases in categories like outerwear, boots and sweaters — provided that stores are adequately stocked with the right goods.
But he’s also correct that a strong holiday season shouldn’t be mistaken for a comeback by the entire segment. There are systemic problems with the department store business that one good quarter won’t fix. Macy’s — between its announcement of 100 store closings and its decision to chase the off-price segment — typifies what happens when a retailer fails to focus its assortments, update its stores or achieve its customer service promise.
Founder, CEO & Author, HeadCount Corporation
Department stores have been especially challenged and I don’t think this holiday season will be different. However, one advantage department stores have is traffic. Since many department stores are anchors in malls, they get a significant amount of traffic through their stores as shoppers pass from parking lots into the mall. The key challenge for department stores is to get those pass-through shoppers to stop and ultimately buy. The potential does exist for department stores to perform well, but capturing attention at these entry/exit points will be critical.
President, Integrated Marketing Solutions
Woe to any retailer who depends upon the weather for seasonal sales. The corollary; the retailer that blames the weather for lack of sales has bigger problems.
The economy is always a factor in consumer purchase behavior. But Amazon has consistently grown sales double digits year over year, with big gains forecast again this year. E-commerce in general is forecast to grow substantially over the holiday.
The retailers that focus on the total consumer experience will be the most successful. This includes everything from the ease of shopping and purchase in-store to integrating online with omnichannel strategies like click-and-collect.
The seasonal holidays generate increased consumer interest and traffic. The retailers who can capitalize on that traffic to create customer-based relationships focused on experience will fair far better than those using traditional ads, promos and pricing to sell seasonal merchandise.
Content Marketing Manager, Surefront
Some department stores will fare better than others. What matters is what’s happening on the sales floor. I hope department stores realize the importance of a clean shopping environment this holiday season, because nobody feels the holiday spirit when they’re struggling to breathe.
I foresee Nordstrom as a top performer. Their enthusiastic staff and beautifully maintained show floor put them way ahead of other department stores, for whom customer service and cleanliness is an issue.
President and CEO, Stealing Share
How bad is the future of department stores? How about relying on weather to propel a growing holiday season. That’s akin to predicting supermarket growth because fine weather will get more people out of doors and they will be very hungry from the exertion.
Department stores NEED a complete repositioning and rebranding. Current thought in the industry has no clue how to do this.
Principal, Your Retail Authority, LLC
We all know it is time for department stores to reinvent themselves. Will they see a good holiday season? The predictions are good, but will this rebound them? No and I hope that those who do see a good season won’t let it go to their heads.
Just walk around one of your favorite department stores. Everything is exactly the same as it has been for decades. Pretty much the same brands in the same locations. This has even gotten boring for me, not to mention Millennials and Generation Zers. It is time for department stores to think experiences, cool new brands and events that bring the customer to the store. And I don’t mean sales events.
But that’s just my 2 cents.
CEO, President- American Retail Consultants
No, department stores are on a downslide in performance. This is because their model is inherently broken. We no longer need a monster brick-and-mortar store to fuel America’s need to shop for clothes. The high price, exclusive perception of department stores is one of their greatest issues, and the Internet is their greatest fear. Department stores need to change, downsize, become Internet leaders and adapt to today’s retail environment — or perish.
U.S. CEO and co-founder, Mirakl
Department stores have a great opportunity to perform better than in 2015. Ones that optimize the omnichannel experience and provide a high quality of service will fare better than others that frustrate customers. There is huge value to omnichannel experiences like Click & Collect and “buy online, return in-store” that Amazon cannot match. Some department stores even align an online Marketplace with the omnichannel experience so that customers have access to the broadest array of choice possible (eliminating lost sales due to “out of stocks”).
The stores that adopt innovative models like these will begin the trend of digital transformation for omnichannel retailers.
CFO, Weisner Steel
Though it depends somewhat on whether we’re talking about department stores as companies or as places — i.e. whether or not we’re including online sales — the department store segment has been on a decline for decades. Sometimes slow decline, sometimes rapid, but no fundamental change in the direction. And I don’t see that changing. There may be small gains overall, or at least gains at some retailers — i.e. everyone but Sears — due to the weather or relief that the election is over or simply random fluctuation, but there won’t be a “rebound”… now or ever.
Chief Amazement Officer, Shepard Presentations, LLC
The short answer is yes. All stats, facts, studies, etc. are pointing toward a good holiday season. The retailers that will succeed will offer the customer a multi-channel experience with in-store and online choices.
I think there will be a definite increase in sales this Christmas as compared to last year. With predictions being made about how the scene will change positively for retailers, they are gearing up to take on the Christmas sale! This one such article that can prepare retailers for the upcoming sale season.