Andrew Burnstine – Retail Matters

That’s a lot of change and challenge and all at once. The stores and the actual businesses are not going to disappear tomorrow. Macy’s, Nordstrom, Dillard’s and the largely off-mall Kohl’s, collectively drove nearly $63 billion in sales last year, marking a decline of $3.2 billion, or 4.8 percent, from 2022.

But with a steady pace of store closures and sales declines set against a backdrop of changing shopping habits, department stores have work to do to cement their place in the future.

A generation ago, customers needed department stores to do their one-stop shopping. Brands vied for floor space and subsequent access to consumers. And mall owners offered up sweet deals so the big stores would anchor their properties.

Now, customers can click their way to anything. Brands funnel shoppers to their own stores. And malls have opened their hearts and floor plans to other concepts, from Whole Foods to gyms.

More than that, department stores lost their connections — with consumers and with parts of the fashion ecosystem they once supported.

“They used to incubate all the new designers,” said Michael Brown, partner and Americas Retail Leader at the Kearney consulting firm. “Tommy Hilfiger, Ralph Lauren, Donna Karan, all of them started in the department stores and then they moved out and opened up their own stores. They need to return to those roots. There are numerous new brands being incubated online. And when brands are incubated online, they’re only going to be able to grow to a certain level. They can’t get the exposure that they need.

“Right now, a lot of department stores are still thinking the path to success is their private brands,” Brown said. “Consumers don’t aspire to wear a private brand. They want the hottest brand, the new designer brand, the up-and-coming brand. And none of the department store brands are really morphing into that.”

To potentially kickstart growth, department stores need to shrink and focus their businesses, Brown said, with a “tiered” system that includes big flashy stores in the fashion meccas and then tech-savvy omnichannel touchpoints in other markets.

Growing smaller — even if that means creating a more potent proposition for today’s consumers — isn’t going to be easy.

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