What will it take to make department stores relevant again?

Discussion
Rachel Shechtman of Macy's - Photo: Shoptalk
Mar 12, 2019
Gabriela Baiter

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.

What will it take to make department stores relevant again?
Erik Nordstrom – Photo: Shoptalk

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?

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30 Comments on "What will it take to make department stores relevant again?"


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Art Suriano
BrainTrust
The future of the department store remains uncertain. First, none of the remaining chains stand out as being different or unique and that is a big problem. Second, they are no longer department stores and have not been for a long time. They are large clothing stores that also sell jewelry and houseware items along with a few other small categories. There was a time when department stores were full of every category imaginable, and customers were loyal to a brand because that’s where they shopped. Then there was the creation of the “specialty” store and everything changed along with department stores getting rid of many of their departments. If the department store has a place in the future, I no longer see them as anchor stores. I wonder if they wouldn’t be better off as a free-standing stores that make shopping fun by bringing back all the departments and, through incentives, atmosphere, technology and excitement, give customers a reason to come in, walk around and shop. I don’t see the current plans for any… Read more »
Mark Ryski
BrainTrust

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.

Min-Jee Hwang
Guest

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.

Dick Seesel
BrainTrust

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.

Charles Dimov
BrainTrust

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.

Neil Saunders
BrainTrust
It’s good to see Macy’s talking a good game, but the reality on the ground in most stores is entirely different: they are dull, uninspiring, uncared for and a mess. That’s just not going to cut it. Nordstrom is in a different place. It suffers from the structural change in the sector but, by and large, it still gets the basics right and has successfully moved into off-price and is trying new formats. In my view, for department stores to survive they need to be radical. They need to completely reinvent the shopping experience, including adding more services alongside their goods, especially in foodservice. They need to develop their own exclusive brands – and these need to be compelling. They need to partner with niche players to create unique experiences. And they need to right-size the amount of space they have, which includes developing a more flexible store format model so they can operate smaller stores in locations that don’t justify a full-line outlet. Most of all they need to invest in stores, customer service,… Read more »
Brandon Rael
BrainTrust
Nordstroms and Macy’s are certainly on the right path to reimagine what the department store of the future could be, especially with the experiential, digital first, customer-focused smaller format stores. It’s commendable that Macy’s has acquired STORY, and is leveraging the talents of Rachel Shechtman and the team, to build the smaller scale department store of the future. However, the challenge remains for Macy’s and Nordstroms to translate these experiential centers to the scale of their larger department store formats. The consensus is that bigger isn’t always better. Especially if you look at things from a costing and sales per square foot perspective. Today’s customer has neither the patience or desire to navigate large scale department stores, and the smaller scale formats have really resonated. The department store of the future or even the immediate future will be a place of media for the brand, a place to connect, learn and experience. Macy’s and Nordstroms may divide up their legacy department stores into mixed-used retail, by leasing out space for restaurants, shared office spaces and… Read more »
Bob Amster
BrainTrust

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…

David Weinand
BrainTrust

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.

Tom Dougherty
BrainTrust

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.

Jeff Sward
BrainTrust

“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.”

Mohamed Amer
BrainTrust
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
4 months 5 days ago

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.

Georganne Bender
BrainTrust

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.

Gene Detroyer
BrainTrust

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?

Bob Phibbs
BrainTrust

Department stores are still relevant – look at Target.

Balasubramanian Thiagarajan
Guest

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).

Ed Rosenbaum
BrainTrust

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.

Camille P. Schuster, PhD.
BrainTrust

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.

Ralph Jacobson
BrainTrust

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.

Paco Underhill
BrainTrust

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.

Doug Garnett
BrainTrust

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.

Ryan Mathews
BrainTrust

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.

Lee Peterson
BrainTrust

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.

Craig Sundstrom
Guest

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.

James Tenser
BrainTrust

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.

Ricardo Belmar
BrainTrust
What we define as department stores have changed dramatically in recent years. Frankly, Target and Walmart are more “department store” by traditional definitions than a Macy’s. So let’s stop talking about how department stores find relevance with consumers (it’s too late for that now) and talk about how these retail brands will reinvent themselves for the future under a new definition. My money is on taking the online marketplace and bringing it to physical space. Much like what Macy’s is doing with Market @ Macy’s and b8ta. But at a larger scale. Can you envision a future Macy’s store that includes large square footage chunks of marketplaces alongside highly curated themed “departments” much like STORY, followed by VR-based furniture shopping experiences? What about apparel, you say? Well, this is where the future remains murky — do they go with store-in-a-store concepts based on designer and private label brands? Or something completely different? I vote for something different as the brand islands are no better than a specialty store and consumers have already voted they prefer… Read more »
Steve Dennis
BrainTrust

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.

Stefan Midford
Guest
4 months 2 days ago

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.

Donella Muzik
Guest
3 months 29 days ago
I haven’t been to a department store in ages that was impressive. Even the ones that I grew up believing were high-end are are dirty, disorganized, and cavernous feeling these days. Worst of all, they are not meeting my needs for really anything that would cause me to choose shopping there vs. online. Bring me designer look-books on vertical touch screens near every collection display. Show me how different pieces work together on different body types. Help me build a capsule collection on my own, then print out a “shopping list” of items and sizes for a sales clerk to gather up for me while I sip a glass of water and rest my feet. Install flattering lighting in the dressing rooms and wherever a mirror can be found; use sound and audio to create a pleasing, vibrant atmosphere. When it’s sale time, don’t make me feel like I am shopping at a bargain basement just because you are offering your goods at a discounted price. Help me feel that I am getting a deal… Read more »
Ashray mutha
Guest
3 months 27 days ago

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.

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