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Dow Jones & Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.Department stores, the one-time castles of the retail landscape, are looking at an increasingly uncertain future as the recession accelerates the difficulties they were already experiencing.
From upscale Saks Inc. to more mainstream Macy's Inc. and Dillard's Inc., department store chains are up against competitive and economic forces as well as their own inertia.
The group has experienced the biggest sales declines of just about all retail categories during the recession. Department stores' same-store sales have fallen an average 8.9% each month since 2009 began, according to Thomson Reuters. That compares with a 4.5% decline for retailers overall. And two regional department store chains -- Mervyns and Gottschalks -- have gone under during the recession.
Many department-store chains including Macy's, J.C. Penney and Saks are struggling to reinvent themselves using strategies they once shunned.
"It's no longer a one-size-fits-all environment for department stores," said Rachel Weingarten, president of Octagon Strategy, a retail marketing consultant. "It takes more than a known name and racks of clothing to bring customers in. It takes action."
Dillard's is tinkering with a number of things, including the way it uses advertising. Dillard's is also a strong believer in its own private-label offerings, which can be more profitable than name-brand merchandise.
Macy's is in the midst of a massive overhaul that hinges on a new approach to regional buying. The company, once a voracious buyer as it grew to national prominence, is now breaking things down to a local level by trying to customize offerings to area tastes.
Macy's program "is a profound change in the way we do business," spokesman James Sluzewski said in an interview. "It is very much our future and what we believe a sustainable competitive advantage because no one else is doing this."
Department stores' reversal of fortune has been under way for the last couple of years, after same-store sales growth peaked at 4.7% in 2006 and the group went on an expansion binge, producing too many stores for too few shoppers. The last two years have been a period of downsizing, of space and sales-per-square foot.
J.C. Penney, once known as a dependable place to buy Levis and other apparel staples, is now doing much more with designer names and exclusive offerings.
Saks, left with too much unsold merchandise, last year had to resort to steep discounting to clear inventory. Since then, the luxury retailer has worked to hold down inventories to avoid drastic markdowns. Even so, the company has been cutting prices on goods to bolster sales.
Representatives for the other department stores weren't immediately available for comment.
Department stores are being squeezed between mass merchandisers like Target Corp. and Wal-Mart Stores Inc. that pretty much offer the same products at lower prices, and specialty retailers whose focus on specific merchandise gives them an aura of expertise and a broader array of their chosen offerings. The online marketplace is also siphoning off sales.
"You can look at a chart and the numbers are really high and robust on the left side and very low on the right side," said Lee Peterson, executive vice president at WD Partners, a retail consulting firm. "Slowly but surely department stores either have to evolve or go away."
Department stores "are still more expensive in general," said Eva Bedell, a waitress in Bellrose, N.Y. "I'm mostly doing without, but when I have to buy, it's at discounters like Wal-Mart that are consistently low priced."
Credit: By Karen Talley
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