What: Coresight’s estimates for the US department stores market in 2022.

Why it is important: More concentrated, less fashionable, more oriented towards cosmetics and home, and, above all: digitized (50% of sales achieved online). This might suggest also that US department stores might have to rethink their relationship to luxury brands.

Coresight estimates that the US department store market will decline in 2022, after a strong rebound during 2021 due to a revenge shopping effect (sales +26,6% vs. 2020), leading to a -9% performance in 2022 compared to 2019, and an excepted -16,1% in 2025, for a total market size of $80,2 billion. Leaders are Kohl’s, Macy’s and Nordstrom, representing a consolidated market share of 75% of total market, for an estimated $58,6 billion, -3,7% compared to 2019.

E-commerce is the core topic, as it is expected that it will represent 39,6% of overall sales and explains why Coresight mentions that this is the “next frontier” for department stores. The challenge is all about maintaining physical store sales and growing online sales at the same time. For Kohl’s, online sales represented 28,3% in 2021 and expects to achieve 40% in 2023. For Macy’s, e-commerce represented 36% in 2021, and for Nordstrom, 50%. Coresight estimates that the total e-commerce penetration for department stores shall reach 40% in 2022.

Also, Coresight expects the apparel category to become less important, and paving the way to Beauty, home and toys.

The 3 strategic themes they have identified are the following:

• Virtual selling: using virtual tools (chat, virtual consultations, livestreaming) to engage with customers and increase ecommerce sales. For instance, Nordstrom introduced a virtual chat function which allows to customize product recommendations, and launched a livestream platform, followed by Macy’s.
• Category expansion:  new categories are expanding since apparel is getting more difficult to operate (due to a mix of sociological changes, new customer demand, but also new relationship paradigm with brands). Beauty ($7,2 bn sales at Macy’s in 2020, $1.3 bn sales at Nordstrom), Home and Toys are the new categories to watch, and new initiatives have already been sparked: Kohl’s partnering with Sephora, Macy’s with Toy”R”us, and Nordstrom expanding in the pet category.
• More efficient supply chains, with a specific attention to the fulfilment process (using stores to fulfill orders, last mile, self pick-up and self returns).

An overview of the US Department stores market