I have worked in the department store industry for the majority of my career. During this time, I have witnessed consolidations, closures and the disappearance of once well-known Department Store brands. Why did this happen and is the further demise of the department store signaling its end? How can the Department Store become relevant again?
While consumer taste and shopping behaviors have changed dramatically over the past 30 years, it can also be said that Department Stores have not kept up with the changing consumer.
Consumers today are as time deprived as they have ever been and with the convenience of online buying and the ease of delivery and returns, many have abandoned the Department Store that lacks service, product selection, environment and experience.
The Department Store was originally created to provide the consumer with the ability to find everything they need under one roof. It also provided experiences and environments that attracted to the consumer to continually return to the Department Store to see what was new.
As Department Store growth slowed in the 1970-1980’s due to the advent of “category killer” retailers and big box retailers such as Walmart, Department Store operators recognized that in order to survive, they would have to grow or die. Organic growth had slowed, and they recognized that consolidation of the industry was critical to its survival.
As the once regionalized department store grew nationally in the United States through consolidation, they centralized their buying, planning, marketing and operational structures under single store brands. However, in doing so, they lost touch with consumer trends and were unable to adjust to local market taste due to a lack of flexibility in their large cooperate structures that were not consumer centric.
Forward to today, the consumer has many choices of how, where and when to shop. Advanced consumer analytics and AI are also game changers allowing large e-commerce operators to aggressively grow market share. Social Media has also changed the game as influencers play an important role in generating interest in brands/products
E-Commerce has been quoted by many as a means to the end of the department store. However, while e-commerce continues to show impressive growth, according to Retail Touch Points, approximately 94% of shopping is still done in brick and mortar locations. More importantly, the savvy Department Store operators who embraced e-commerce early have become “All Channel” operators allowing their consumer to buy in store and online (E and M Commerce) with easy in-store pickups and returns.
However, this is not enough. Department stores must also become more experiential to attract and retain customers. Department stores must continually fuel consumer interest by featuring new concepts in fashion, technology, art and culture. The Department Store must also become more flexible and adapt to the needs of their customers by offering more food and beverage options, temporary work and event spaces, Health and Fitness and technology offerings. This In essence is going back to the origins of the department store. To provide everything under one roof.
David Pilnick is President, Pilnick Associates LLC
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