Article

The changing face of the department store

The venerable retail institution rolls with the times.

August 3, 2008

For the first two-thirds of the 20th century, the department store was the heart of retail. At Frederick and Nelson in Seattle, shoppers could see a fashion show before taking to the aisles. In Chicago, Marshall Fields kept shoppers in the store longer by enticing them into its Walnut Room restaurant.

Today most department stores don't provide customer experiences like that and many of the stores no longer exist.

The growth of suburbia hurt these downtown stores, which had traditionally seen their customers arrive by public transportation, said Jan Whitaker, author of "Service and Style: How the American Department Store Fashioned the Middle Class."

"In the last quarter of the 20th century, many downtown stores closed, leaving city centers forlorn and many people feeling they had lost local institutions, which defined their city's character," said Whitaker. "The feeling has only grown stronger with further consolidations and takeovers."

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Merchandise Mix

Mass market discount retailers like Wal-Mart, Target and Costco have become the shopping destination of choice for most shoppers, said George Whalin, president and chief executive of Retail Management Consultants in Carlsbad, California. "For many years, Sears was the largest retailer in the country. The National Retail Federation now lists Sears Holdings, which includes K-Mart, as the 8th largest retailer, based on sales volume."

In 2007 Sears Holdings had sales of $50,703,000, compared to Wal-Mart's $378,799,000.

The retail merchandise mix has changed dramatically over the past two decades according to Whalin. Most department stores have narrowed their mix substantially by eliminating consumer electronics, appliances and in some cases even furniture - to their detriment, he believes.

"If they are to serve the consumer better, department stores need to offer more products and services," said Whalin. "And go back to being a true department store."

Whalin defines a department store as a store with a broad variety of departments, including a florist, furniture, jewelry, apparel, etc. Even though Wal-Mart has multiple departments, it's not considered to be a department store. Macy's is a better example because they have apparel, jewelry, cosmetics and in some stores, furniture.

Kelly Tackett, a senior consultant for Retail Forward in Columbus, Ohio, argues that the changes in the merchandise mix of soft goods over the past twenty years has been for the better and now customers aren't seeing the same brands in every store.

"Two decades ago, it was largely national brands and all the stores had a similar mix. Customers would see Ralph Lauren, Liz Claiborne, Tommy Hilfiger, etc., in all the stores," says Tackett. "Now it's shifted to a mix of private, exclusive and national brands because retailers are trying to differentiate themselves from one another. Department stores don't want their merchandise to be interchangeable with their competitors."

According to Tackett, department stores are evolving, partially by partnering with other brands to lure the customer back into the stores. J.C. Penney has partnered with Sephora, for example, and Macy's is bringing the Lush brand of skincare into its stores.