Rebuild Department Stores For Success In A Digital World

Major department stores are searching for a direction on how to operate in this digital environment. Their future has been questioned by experts who see both activists and even owners attempting to take them private because there seems to be less need for the emporiums of yesterday.

This blog tries to highlight some of the flaws that are undermining the success of department stores.

1. Too many chiefs. We see this too often in many of these chains. When looking at the makeup of Macy’s, one finds there are 9 chief executives; each has a nice office, a pleasant secretary, and a huge salary. In contrast, look at TJX Corp. and you see a lot of Indians (buyers) but few demand the trimmings a chief would receive.

2. Too long delivery time. It takes Amazon
Amazon
less time (mostly overnight) to delivery most merchandise than it does any department store. The only reason people buy from Amazon is because it quickly solves a personal need problem and pre-empts the need to visit a department store at all.

3. Unproductive stores. There is no need to have unproductive stores that drag down profits and distract management. Macy’s will rid itself of the weak units by the end of 2026. Why wait? Digital companies will take their place unless they take action now.

4. Pop-up shops are not optimized. One of the new efforts of department stores are pop-up designer shops. The problem is that loyal customers do not know about the “pop-up” effort since there is no publicity. I remember when Macy’s curated a new designer or a new trend with ads, displays, and fanfare.

5. Minimization is not the answer. Bloomies and Mini Macy’s will only be effective if a huge number are open for business. The few units signal success but do not have a successful bottom line. If Macy’s would open 100 mini-stores it would make an impression on shoppers, investors, and their own management. But opening that many stores in a short period would require a new staff and an acknowledgement by management that the company has changed. I don’t see most retail management teams ready to move in that direction.

6. Private labels are not the answer, either. Many stores have a private label program. While some private labels are very successful, many others lag in style, design, or acceptance. Department stores should focus on national brands whose advertising carries credibility with customers. Those private labels that survive should be of quality and represent unusual values and savings.

7. Investor Relations are not well managed. All retailers – no all companies – want to be loved. Many companies make it hard for investors or analysts to talk to someone responsible. It a company changes, there must be a spokesperson to help analysts and investors and journalists easily understand the change.

8. Customer service too often falls short. Enhancing service is a difficult assignment. Most stores have casual, inattentive service. Maybe because it’s hard to find staff or the staff has aged and has started to take customers for granted. Either way, it leaves customers unsupported. It’s the rare situation – like seen at Nordstrom – where associates are encouraged to call customers at home when they have new arrivals in shoes and other departments.

POSTSCRIPT: I am fully aware of the need to show an ever-increasing profit in the enterprise. I oppose constant sales as the answer; there are ways to promote shopper interest in merchandise without screaming sale. If sales are necessary, then let them be distinctive events.

Department stores were born as merchant families grew bolder and expanded their assortments into more classifications or departments. The future must now be in the hands of professionals who can juggle the competing priorities of consumers and investors. Retailer leaders must come up with assortments that drive top line sales and simultaneously deliver acceptable bottom line results.