Death Of The Department Store: If you take a trip to your local mall, you’ll quickly notice a pattern of less people and more “sale” tags. The department store has not been in good shape for a very long time. Big name chains like Macy’s, JCPenney and Sears have collectively closed thousands of retail locations in recent years. Even many of the remaining locations closely resemble ghost town. Investors have responded by selling off their stocks, with North American Department Stores valuation peers dropping to all-time lows.
Investors quickly put the blame on the likes of Amazon, but the blame in this case is not properly allocated. Yes, Amazon has a very large share of the blame, but it would be unfair to Amazon if we don’t list out the other players that had contributed to the demise of the department store. Department stores are struggling because they are also being assaulted by other players like Marshalls and HomeGoods. These off-price retailers have given consumers a different experience from that of the online world. It’s probably important to point out that both Marshalls and HomeGoods don’t do any e-commerce. If you don’t know what we are talking about when we say “different experience,” then you probably haven’t shopped at any of these stores.
Retailers like Marshalls and HomeGoods offer a treasure hunt-like atmosphere for their shoppers. Kind of like thrift stores, except everything is brand new. Another experience offered by these retailers is what Bloomberg calls “the guided experience!” This is where customers are guided on how to use the product that is being sold to them (something you can’t really get from Amazon). Beauty brands are the first to execute this “guided experience” by providing hands on training for product use on the spot. Sephora and Ulta are just some of the beauty brands performing this tactic, but other brands will quickly learn and follow!
Lastly, there is another major factor that is playing against department stores. Due to the rise in retail bankruptcies, brands are reluctant to send their products towards department stores as they fear that these stores would default on the product. Brands like Ralph Lauren and Michael Kors are named in the video above, but other brands have also been doing the same thing. By sending less products (or maybe none at all) to department stores, brand’s are hurting the store’s credibility. This in turn hurts the retail store’s image in front of investors and in front of customers.