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How to Save Department Stores

25/08/2010

A friend of mine asked me earlier this week if I thought that department stores would become extinct. That thought is a distinct possibility, perhaps even a probability. Then I began to think about what could be done to save the department store. Curiously, my thinking lead me to the department store’s past.

If you go into most stores like this nowadays you can kind of see a shadow of what they once were – grand temples to consumerism, where shopping was an experience to save up for and even dress up for. Families would work up to a trip to the department store. It was exciting. They had everything. This sort of thinking was even poked at in the Brady Bunch movie “Put on your Sunday best kids! We’re going to Sears!”

That feeling is gone when you walk into a department store for the most part. The selection is really the same sort of things that you’d find manufactured in China for other stores. The difference between a trip to Macy’s and a trip to Kohls is not really that different anymore, except Macy’s has a bigger selection of pots and pans.

There is one place that still has that shimmer of the Olde Days. That place in the department store is cosmetics.( Now, I have to admit that I am a guy so I imagine all the best parts I can only imagine as better, but here goes.) Here is where Macy’s or whatever store is near you has the clear and distinct advantage. That advantage comes solely from the experience. People are fawned over by attentive and knowledgeable staff that listens and understands what you’re looking for. They spend time with you. They’ll go through the entire display of colognes with you. They’ll recommend scents based on what you like. They smile. They’ll even apply the makeup that they sell on you to show you how you will love it. Did I mention they smile?

Target’s makeup aisle is just that – an aisle. Cold, faceless gondolas of product ready for you to hunt through, hoping you’re buying the right thing and praying that what you want is in stock. If it’s not on the shelf, you’re screwed. Those associates don’t know any more if that lip gloss is in stock than if it’s raining outside. Buying cologne? You’ll have to buy the product at $35 to see if you like it – but first you’ll have to find an associate to unlock it from the case.

What does this mean for department stores and their future? It means that they have something that sets them apart from the big box stores. That thing is The Experience. Where does that come from? It comes from making a visit to the department store a destination event, not just a place to buy clothes.

A friend told me glowingly about her first visit to a Nordstrom’s. It was maybe 5 years ago. She still remembers it more than any other event that happened on her first trip to Seattle. Why? It was The Experience. She went in to browse. She came out with three bags of clothes. The reason for that was not the ‘low, LOW PRICES!!!’ it was that a member of their staff guides and assists you through the store and actually sells you things. They care, they listen, and they suggest. What do they get out of that attention and extra manpower? They sell someone who would have otherwise bought the cheapest item to get the souvenir bag.

Speaking of bags, that’s another point worth mentioning – brand cache. I remember when I was growing up and seeing the Marshall Fields bag walk past when I was in Chicago and you knew that the person carrying it was doing pretty well for themselves. Someday, I wanted to shop at Marshall Fields and be the person with the BIG Fields bag, too. It meant something to carry that bag. It meant far more than any Target bag can. It was a nice bag as well. It was double walled paper made strong and competent with a sturdy handle. The bag showed that the store cared about you even at that stage. Marshall Fields cared that your freshly purchased goods made it all the way home through the heavy, biting, rainy winds of late Fall.

Getting back to the experience aspect, what department stores need to do to survive and even thrive is to make going to their stores a destination event again. To do this, they need to make customer service paramount to the operation of the store. No more hiding behind cash registers, associates have to go out of their way to engage customers. It’s almost like making the journey to a department store into a shopping version of Disneyland where it becomes a special world of wonder unto itself.

The store has to build on that brand cache. The sale signs have to go. The two for one deals have to go, as do the cheap acrylic sweaters. Yes, you will loose the bargain hunter and the thrifty. But what difference does it make anyhow? You’re margins can’t take it anyhow. People will come to see the opulence. People will come to see the four storey tall gallery covered in gold leaf. People want to dream big, everywhere they go, they are surrounded by cheap. They want to feel special and they will buy when a sales associate actually listens and suggests. The customer wants to show off their visit afterwards and carry that branded bag with pride. It was an event. They will come back.

Department stores might be able to compete for a little while on price and maybe on location but not indefinitely and not especially when faced with battling on line retailers. The only thing they can count on is creating The Experience in person – something that no other store can do, neither brickĀ  & mortar or on line – through human interaction and actually caring about the customer.

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3 Comments leave one →
  1. 25/08/2010 03:17

    The strategy you are suggesting is known as the wheel of retailing in academic circles. It has been observed that many retailers start as discount stores and then gradually add services to increase customer satisfaction and thus sales and profits. By moving from discount to full service, the retail inevitably creates a void in the market for bargain seekers and thus an opportunity for a discount oriented store.

    Although this strategy may work in the mid-term, I think is does not provide a source of competitive advantage and thus above market profits.

    Retailers may do better by understanding its target market and its core capabilties and build its operations and brand about its uniqueness. Nordstrom’s is well known for its customer service and has build policies and systems to continually build on them. Further they heavily promote this aspect of retailing that has allowed them to equate the Nordstrom’s brand with personalize service. Conversly, Wal-Mart targets a different customer and thus built systems to continually give them what they want: low prices. They have effectively marketed their brand to communicate this uniqueness. Target has set itself apart by offering higher fashion at a reasonable price. Clearly a differiated strategy leveraging there ability to spot market trends.

    The less successful of the group haven’t effective identified, communicated or implemented their uniqueness in the marketplace.

    • 25/08/2010 15:12

      Well stated, but my point being that Department stores are best suited for a higher customer service offering thus differentiating themselves from discount stores or mid-level sellers. Whatever they need to do to differentiate themselves from other department stores is another issue and should be looked at case by case. The view that I am offering dovetails to what you have mentioned where said stores would do better if they would diverge from the wheel of retailing that you had mentioned and continue to offer services and goods at a higher level rather than compete solely on price, where the department store will inevitably fail. Once the department stores take themselves out of the pricing game and fixate on other methods of gaining customers, they will have a better opportunity to remain successful.

  2. 30/06/2011 13:08

    Eric, you’re correct. STAND FOR SOMETHING. Problem is, today’s department store by and large does not stand for anything. Anything positive, that is! They tend to be old edifices in old neighborhoods with copy-cat merchandising strategies. Stuck with less than prime real estate with which they they do not know what to do.

    In the ‘old days’ one found things at department stores they didn’t find elsewhere, in an environment not found elsewhere, as you point out. Want buttons? They had an entire area dedicated to them. Want toys? They had toys you’d never seen before, presented in exciting ways. Want apparel? They offered the best and lots of it. Want gourmet cheeses/snacks/foods? They had the most sumptuous. Want Frangos? Could’t buy them elsewhere. Want service? They had that, too. Lots of it.

    I’ve long thought if I were the CEO of a department store I’d have search committees roaming far and wide to discover product not found elsewhere. Looking for product collections, where each item is greatly enhanced by display/merchandising with each other. Looking for Made in the USA products to make a statement people appreciate at some deep level, though too often price can drive the purchase decision. Net, looking for ways to make the department store truly different. Difference is paramount. The only reason to go to the old neighborhood. But the difference has to be strategic. What we might simply call ‘positive difference’… in ways suggested here.

    Today big box retailers are squeezing out the small manufacturers from amongst whom the kind of products needed to refit the department store could be found. Whereas manufacturers used to drive the sales process, selling who they wanted, not selling who they wanted, now the retailer is driving. They do this primarily by limiting product selection and ripping off manufacturers by turning their product into private label made directly for them in China. Why not make extra margin?

    And the little guy goes where after this? Not only does he loose his big box business but the small independent store to whom he sold in the past isn’t around anymore, either. Can’t compete with the big box retailers.

    This dismal picture leaves opportunity.

    For the little manufacturer still has the creative product. Still has the innovation. Still represents variety. And this is the key, so long as on the key chain there is also the key of true merchandising excellence.

    Enter the department store. Make a difference. Be different. Identify your charter as to be bigger, better than all others. Buy the right product but then merchandise it right, too. Do to electronics and appliances what ABT Electronics and Best Buy are doing today. Do to outdoors what Bass Pro Shops and Cabela’s is doing today. Do to apparel what Gap is doing today. Do to food what Whole Foods is doing today. Offer disparate categories such as these. And present them in fabulous ways. With knowledgable sales people who can deftly walk consumers though them. Don’t compete on price. You can’t.

    If there were a single venue housing all this? Who wouldn’t want to check it out?

    And lastly, be sure you resolve issues like parking (going to be hard in downtown areas) and product delivery. And is there a way to also add virtual marketing via Skype whereby a customer can be literally walked through these fabulous venues to see options, demonstrations and make selections without leaving the comfort of home or business? An ‘up’ on ‘just’ internet shopping.

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