What: An opinion paper which sums up the issues department stores are facing and the potential solutions they have to look at

Why it is important:  The bottomline (efficient operations, beautiful stores, good assortment) does not compensate the most important, the purpose, which is not anymore just a marketing trick but a true tool to express to both customers and employees the point of difference between the department store company and competitors (including online) and the reason why its clientele should feel, and be, different, from the others.

Forbes reminds us that, even through the pandemic has hit hard the retail industry at large, making no exception of the department stores, the latter were already in a difficult position prior to the Covid-19 outbreak, due to 3 major issues they are trying to solve:

• A declining overall market share: in the UK, 83% of department stores space has closed down in the last 5 years, from 467 department stores to 79 today, and in the US department stores revenue as a while declined -3,7% in 2021 Q2, after a -16,7% decrease in 2020. Delta variant, issues on the supply chain and weather events might increase that projected decline within the end of the year,
• Even though this argument is not valid for all markets, department stores are also suffering from the issues of malls. Now that customers look for digital first solutions, department stores are struggling to attract DNVB brands, unless they have the possibility to switch to new models such as Neighborhood Goods or Showfields (knowing that few companies have the luxury to start everything from scratch again),
• The innovations set in place by the companies are necessary, but might not be on the needed scale given the amount of issues they have to face. While the article hails Nordstrom for their Nordstrom local initiative for instance, it also points out incoherent behaviours such as Dillard’s which bought back stock following its Q2 results.

According to the author, department stores companies should look at 3 key elements when rethinking their strategy:

• What do they stand for in a digital age when “having the best assortment” or “guaranteeing the best quality or price” is not enough. In other words, what is the purpose of these companies (this relates to the lated Doug Stephen’s book we reviewed here.
• What kind of partnership can be set up with brands, to make sure that a viable ecosystem is co-built together,
• To what extent stores should be attractions in themselves, giving customers a valid reason to come in?

Three Things Department Stores Must Solve Now To Build Sustainable Growth