Department stores find their way into a new era

(Image credit: Macy’s)

From Macy’s and Kohl’s to Nordstrom and Saks Fifth Avenue, department stores have long been a mainstay of retail. For decades, shoppers went to their local department stores whenever they needed just about anything – a suit for a job interview, dress shoes for an upcoming wedding, a new bedding set, luggage for holidays, etc.

But today, department stores are facing accounts. After two years of transitioning to true omnichannel retail at breakneck speed and a pandemic that has forever changed the way people shop, it’s time for department stores to evolve or risk disappearing from the course. of purchase.

So what does this evolution look like? So far, the answer differs depending on which retailer you ask.

Macy’s: Off-mall, Backstage, customization and remaining unit

Examining some of Macy’s recent moves makes it clear that the retailer has a lot to say about how its business has evolved as a department store retailer. Macy’s has big changes on the agenda, starting with the structure of its stores themselves.

The company has made non-mall locations an important part of its store strategy, both within its Macy’s business and its Bloomingdale’s business. So far, the retailer operates three off-mall Market by Macy’s stores and one Bloomie’s store, with plans to open more. Both banners offer a collection of merchandise tailored to local tastes in a significantly smaller format than Macy’s or Bloomingdale’s stores.

“The data seems to show that these off-mall locations that are very convenient to live, shop and work are actually quite relevant and an important part of how we think about our strategy,” said the CFO of Macy, Adrian Mitchell, last month. , as reported by Women’s Wear Daily. “We believe that Market by Macy’s, serving our Macy’s brand, and our Bloomie’s small format store serving our Bloomingdale’s brand, are essential to growing our store network and essential to growing our omnichannel business. “

Its out-of-mall strategy isn’t the only change Macy’s has in store for its physical locations. The company is on track to open 37 new, discounted Backstage departments in stores between April and June, including its flagship stores in New York and Chicago. The goal of the departments is to attract new shoppers to Macy’s with the department’s discounted merchandise, and then eventually get those shoppers to buy in other parts of the stores.

The way Macy’s thinks about its evolution goes beyond physical stores. The retailer is also making major changes to its e-commerce business and associate roles. Macy’s is preparing to roll out an improved website that personalizes the shopping experience based on consumers’ purchase history and loyalty status. And to reinforce the company’s commitment to personalization, Macy’s will also train select employees to become personal stylists as part of its new “Own Your Style” program.

Macy’s initiatives appear to be bearing fruit: the retailer increased the number of new customers by 26% last year. But there’s one thing the retailer has made clear in its evolution: it’s not planning to spin off its e-commerce business.

Kohl’s: Courting Shoppers, Partnering with Sephora and Investing in Small Format

So far, resisting the pressure to separate from its e-commerce arm has also been the way for Kohl’s. But that hasn’t stopped potential buyers from bidding for the department store chain. Bidders include Hudson’s Bay, a consortium backed by Authentic Brands and Leonard Green & Partners, and The Vitamin Shoppe parent Franchise Group. The most recent offer valued Kohl’s at around $9 billion.

Kohl’s has focused its strategy on other aspects of its business, including a partnership with specialty beauty retailer Sephora. This year, Kohl’s will open 400 additional Sephora stores in-store, in addition to the 200 stores already open. The retailer’s goal is to open more than 850 Sephora stores by next year and see them exceed $2 billion in annual sales.

Kohl’s is also trying its hand at small-format stores. The company is testing a 35,000 square foot concept in Seattle, with plans to expand to more than 100 small-format locations in the coming years.

Saks Fifth Avenue: moving forward as a split company

Unlike Macy’s and Kohl’s, the owner of Saks Fifth Avenue, Hudson’s Bay, chose to separate the luxury department store’s e-commerce arm from its physical retail business. It’s been about a year since the move, and so far it seems to be working.

“It’s a new focus and it’s a new way of running the business and the customer is actually the biggest winner,” Saks Fifth Avenue CEO Marc Metrick told CNBC. “Instead of spending capital investing in your physical factories, you spend on marketing, investing in the future of your customers. And it’s a much better way to grow the business in the long run.

Hudson’s Bay also made the decision to spin off the online retail arm of its namesake stores into a separate company a few months later.

About Renee Williams

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