Will Department Stores Be History By 2030?
The report that Barneys New York is examining strategic alternatives that could include a bankruptcy or sale is the latest indicator that department stores — even the luxury ones — just aren’t moving the needle for shoppers. Last week, UBS analysts described Nordstrom as a “no-growth retailer,” one that hasn’t been able to fight off pricing perception and a cultural shift in consumer spending. While it remains up for debate whether the analysis of Nordstrom is as grave as it sounds, it once again brings up a serious point: department stores are struggling to keep up with the rest of the industry, and they will require major changes going forward if they want to be top-of-mind for future shoppers.
The RTP editors share their opinions on the future of department stores and what they will look like over the next decade.
Adam Blair, Editor: Predicting the future is a tricky business, and I would love to be proven wrong about this, but I fear department stores — at least as we know them — will be retail relics by the turn of the next decade. Their functions as places of inspiration — where anyone and everyone could learn about the latest offerings of a vibrant consumer culture — have been largely supplanted by social media. The Targets, Walmarts, Amazons and dollar stores of the world have taken their place as the “something for everyone in the household” stores; specialty retailers, for example Bonobos for men’s clothes, are serving those seeking a more personalized shopping experience. Systemic issues, such as the high urban rents that may push Barneys into bankruptcy and the stagnant wage growth of the middle class, are unlikely to be fixed any time soon. While physical stores in general have many paths to a successful future, I think all but a few department stores will be dragged down by a toxic combination: too many brick-and-mortar locations and too few younger shoppers that remember department stores as magical places.
Glenn Taylor, Senior Editor: Store closures will continue to be a recurring theme for department stores, particularly with the changing role of malls, which simply don’t rely on the anchor store the way they used to. With that said, it’s obvious changes need to be made if these retailers want their remaining stores to matter. Partnerships with more nimble digital native brands will be the norm, although these will probably benefit the latter more than the department store. I look at the STORY concepts at Macy’s and wonder how they would have gone over for the brand if it was 2000 instead of 2018. Back then, a change like that could have been massive as far as providing experiences that simply weren’t in most stores yet. The idea is a very interesting way to shake things up for the shopper experience, and that was sorely needed even before the e-Commerce era kicked into high gear. Macy’s would have really stood out as a place where consumers knew they would see something different any time they shopped there. That may ring true today with the 36 stores implementing the STORY themes, but it doesn’t have nearly as big an impact on the company’s overall standing within the industry due to the excess of experiential options everywhere else. I like what Macy’s is doing here but it does feel like the rollout isn’t happening fast enough, especially with the knowledge that it’s more of an interest driver than a revenue driver.
Bryan Wassel, Associate Editor: I don’t think department stores will disappear completely so much as shift into other formats. As Adam mentions, big box, e-Commerce and dollar stores have taken over much of their space, but they don’t completely replicate the experience. The word “experience” may be the key here, as department stores may be able to survive by reinventing themselves in a way that other formats can’t match. Take the new multi-story Neiman Marcus store in Hudson Yards, for instance: the shop features a performance stage, three dining venues, three spas, a demo kitchen and more. While old-fashioned luxury department store like Barneys are suffering, that’s at least partially because their efforts to appeal to younger shoppers haven’t succeeded. Department stores that reinvent themselves, particularly in a way that will appeal to high-end consumers looking for a shopping experience they can’t find at Target, will survive. They won’t be nation-spanning behemoths that sponsor major parades and prop up dozens of smaller stores inside malls, but as long as they offer something special that can’t be found online or at a strip mall, there will be some survivors.