Hi! Thanks for the very interesting question.
Since the objective of your question is to have an understanding of
the underlying forces at work in the department store industry, I will
focus my answer towards this goal. I will provide small snippets from
the articles whenever possible but I highly suggest that you read them
in their entirety so as to get a better grasp of the concepts. The
insights provided here will also be grouped in different categories
for a smoother discussion flow.
I would also like to thank my fellow researcher Laare-ga for providing
assistance during the course of this research.
1. Overview and Dynamics of Traditional Department Stores
a. General Description:
“Department, clothing, and accessory stores are located in all regions
of the country. Department stores generally carry apparel; home
furnishings, such as furniture, floor coverings, curtains, draperies,
linens, and major household appliances; and housewares, such as table
and kitchen appliances, dishes, and utensils. Different types of
merchandise normally are arranged in separate sections or departments,
under a single management. Department stores commonly provide their
own charge accounts, deliver merchandise, and have 50 or more
employees.”
“Department, Clothing, and Accessory Stores”
http://www.bls.gov/oco/cg/cgs022.htm
b. History:
“As the population urbanized in the latter half of the nineteenth
century and the first half of the twentieth, forward-thinking general
stores morphed into department stores. Like their predecessors,
department stores carried a broad range of merchandise, but organized
it into separate departments (hence the name).”
“Department stores found that notions and other household items sat on
the shelves because consumers could purchase them elsewhere at a lower
price.”
“In other words, discount department stores focused primarily on
price, while more traditional department stores focused primarily on
fashion. The strategy worked well. By the boom years of the mid-1990s,
most department stores had returned to profitability, and most
discount department stores set sales records.”
“Similarly, department stores have tried to distinguish themselves as
fashion retailers.”
“Inconspicuous Consumption: Lessons for Web Design from Mall and
Retail Design”
http://www.boxesandarrows.com/archives/inconspicuous_consumption_lessons_for_web_design_from_mall_and_retail_design.php
c. The Present Landscape:
“But for a growing number of consumers, department stores aren’t
romantic or convenient anymore. They are time-consuming and
difficult—difficult to get to, difficult to navigate, difficult to get
help in and difficult to get out of. And, for all that inconvenience,
they typically charge higher prices than Target or
Wal-Mart—discounters that are increasingly challenging them in
selection and convenience—or even Kohl’s.”
“The industry’s past reliance on consolidation, however, has
contributed to many of its current woes. The mergers transformed a
legion of regional merchants, all focused on their specific customers,
into a handful of nearly identical national department-store chains
focused on pleasing shareholders.”
“Department stores, which now account for 10.9% of the nation’s retail
sales, still have some distinct advantages over their discount- and
specialty-store rivals. Most notably, they offer designer brands, such
as Polo and Tommy Hilfiger, found almost nowhere else”
“Are Department Stores Dying?”
http://www.wsjclassroomedition.com/archive/02may/COVR_department.htm
d. Strategy Mix of Traditional Department Stores:
Our next link provides a very good overview of the dynamics that goes
behind the strategies of the different types of retailers like
department stores, discount stores, etc. I will post here some of the
critical observations for department stores but it would be helpful to
your strategy to assess the different aspects of your competitors
which is neatly presented in this article.
Location/Target Market: “Business district, shopping center or
isolated store/ Weak focus on customer market segments”
Assortment of Products / Price: “Extensive width & depth; average to
good quality/ Average to above average prices”
Customer Service: “Ranges from medium to high levels of sales help,
credit, delivery etc.”
Challenges Faced: “More price-conscious are attracted to Discount
Retailers· Food Retailers have started scrambled merchandising·
Specialty Stores in Shopping Malls”
“Comparison of Retail Forms”
http://www.projectshub.com/projects/110011/110011e.htm
------------------------
2. Problems of Traditional Department Stores
Our next articles enumerate the following basic problems and
weaknesses of traditional department stores.
a. Lack of vision
b. Lack of fashion
c. Finding it hard to compete with the low prices of discount stores
d. Customer Service
“Attention Gen-X shoppers!”
http://216.239.41.104/search?q=cache:9WQCyVf5JT8F:www.daytondailynews.com/business/content/business/daily/0525deptstores.html+%22traditional+department+stores%22&hl=en&start=4&ie=UTF-8
e. “Beemer said the stores stumbled in price and service, in failing
to freshen their charge-card businesses, relying on black-and-white
ads when competitors counter with color, and abandoning merchandise
categories when competition crops up.”
f. “Brouwer said the stores have lost their fashion edge and, in many
cases, exclusive brands, leaving them ‘buried in a promotional cycle’
difficult to escape.”
g. “She said shoppers want bright stores that are uncluttered, easy to
shop with compelling merchandise and exciting environment created
either by bold fashion or energetic store environment.”
“Department stores aim to reverse stall”
http://www.azcentral.com/shopping/0422retail.html
h. Traditional department stores are losing their prominence as
anchors in malls.
“For more than 30 years, the mall industry has depended on department
stores. They have been the most valued partners in developing new
centers and are the tenants with the biggest stores that pay the most
rent and, traditionally, have drawn the most traffic. But the
department store business continues to struggle, having lost half its
share of the retail industry to discounters and specialty stores over
the past two decades.”
“The Future of the Department Store”
http://shoppingcenterworld.com/ar/retail_future_department_store/
i. Markdown Problems
Definition of Markdowns – “A voluntary reduction in the selling price
of an item. There are three types of markdowns: markdowns below cost,
markdowns to zero, and retail markdowns.”
http://www.tpub.com/ss2/52.htm (Definitions for the different types of
markdowns are also available in this link)
“Wal-Mart is a top stop for people looking for low-end goods such as
$5 T-shirts, Klinefelter says. Its markdowns likely would impact
traditional department stores.”
“That explains some of the trouble at Kohl's and other department
stores. Since clothes are a big part of the business there, they
therefore face bigger markdown exposure.”
“Avoiding markdowns is crucial, as department stores and other
retailers try to wean consumers from buying only when they throw a
sale.”
“Major Retailers' Inventory Woes Mean Steep Markdowns Coming”
http://216.239.51.104/search?q=cache:R25dVCyFwW4J:www.investors.com/editorial/general.asp+traditional+%22department+stores%22+analysis&hl=en&ie=UTF-8
---------------------
3. Consumer Statistics: The following statistics gives credence to the
insights mentioned in number #2 and shows that the numbers are not
really in favor of traditional department stores right now.
Chain Storage Age Poll – Only 28% of those surveyed says that they
will do their shopping at department stores
http://www.chainstoreage.com/pollvault/arc_poll.htm?id=230
“Only 40% said they would be going to a mall, 21% said clothing
stores, and only 13% said traditional department stores like Macy's
and Bloomingdale's would be primary shopping venues”
“Survey Suggests Santa Will Deliver Extra Cheer to Discount Retailers”
http://216.239.41.104/search?q=cache:4rT2I-E0EB8J:www.madisondm.com/pdf/holidayshopping.pdf+%22traditional+department+stores%22+changes&hl=en&ie=UTF-8
In the latest “How America Shops” survey, a notable decrease in
shopping for fashion accessories (-14 pts) was pointed out. Fashion
accessories are one of the most popular products for department
stores.
“’Leading indicator’ categories represent product groups that are
predictive of future shopping behavior, including everyday staples
like food and clothing and non-essentials like fragrances and fine
jewelry. Of the 12 categories by measured by How America Shops™, seven
posted declines: cosmetics (-5 ppts), fragrances (-3 ppts), computers
(-2 ppts), fashion accessories (-14 ppts), fine jewelry (-16 ppts),
watches (-23 ppts) and home decorating products (-2 ppts).”
“Consumers continue to shop most often for food at supermarkets (87%,
virtually unchanged from 2000). Department stores maintain their
most-shopped status for clothing (43%), although ten percentage points
lower than 2000; conversely, department store shopping most often for
fashion accessories (38%) is up six percentage points. Mass
merchandisers rank second-most-shopped for apparel (18%) and
accessories (22%), but first for home décor (34%); however, they have
dropped significantly since 2000 as the preferred outlet for most
beauty care categories.”
“How America Shops 2002”
http://retailindustry.about.com/library/bl/02q2/bl_wsl040102.htm
“This past holiday season, shoppers told us (again) that department
stores are no longer on the top of their shopping list. In the January
30 How America Shops® PULSE, shoppers, especially those under age 35
and those with incomes over $100,000, told us that they shopped less
in department stores compared to 2002.”
“Department Stores - Now What Else?”
http://retailindustry.about.com/library/uc/03/uc_wls6.htm
Statistics for women shoppers at department stores are declining as
well.
1998 - 79%
2000 – 72%
2002 – 72%
According to statistics the most important factors for American
shoppers are the following:
Convenience
1998 – 61%
2002 – 61%
Pricing
1998 – 58%
2002 – 41%
Selection
1998- 65%
2002 –33%
“Convenience Is Key”
http://retailindustry.about.com/library/uc/02/uc_wls1.htm
------------------------
4. Possible Solutions
a. Online Shopping Efforts
One of the most possible solutions to traditional department stores is
to reenergize and make popular online shopping destinations. Online
shopping is continuing its drive to become the future of shopping
among consumers
“Online shopping sales in the first quarter of 2003 continued to grow
at a respectable rate despite the war in Iraq and a sluggish economy.
The first quarter of 2003 produced sales of $12.84 billion -- a 27%
increase over the same period in 2002 when $10 billion was spent”
“The top categories in terms of sales volume were computer hardware
($3.43 billion), electronics ($2.16 billion) and entertainment ($1.88
billion). The strongest growth in Q1 came from health & beauty (61%),
entertainment (58%) and computer hardware (41%) categories.”
“Consumers Continue to Buy Online”
http://retailindustry.about.com/cs/stats_b2cecommerce/a/bl_br040103.htm
b. Attracting the Younger Generation
“Specialty stores targeting teens and preteens saw significant
increases in April retail sales, unlike many traditional department
stores. Abercrombie & Fitch Co., reported a 14.4 percent increase over
April 2002; Pacific Sunwear of California Inc. reported a 26.1 percent
increase; and The Gap Inc. said its sales increased 24.7 percent. In
contrast, no department store chain with stores at local malls showed
an increase in April sales from the previous year.”
“Attention Gen-X shoppers!”
http://216.239.41.104/search?q=cache:9WQCyVf5JT8F:www.daytondailynews.com/business/content/business/daily/0525deptstores.html+%22traditional+department+stores%22&hl=en&start=4&ie=UTF-8
c. Attack the price problem.
“Lately, more focus has been placed on providing "value merchandise,"
at affordable prices. Michelle Bohbot, a well-known fashion designer,
has a contract with J.C. Penney to provide an exclusive line of
clothes. Though Bohbot’s jeans sell for $200 in some of her high-end
boutiques, prices for her "Bisou, Bisou" brand (which is French for
"Kiss, Kiss") are considerably less.”
“Attention Gen-X shoppers!”
http://216.239.41.104/search?q=cache:9WQCyVf5JT8F:www.daytondailynews.com/business/content/business/daily/0525deptstores.html+%22traditional+department+stores%22&hl=en&start=4&ie=UTF-8
d. Convergence
http://www.ey.com/global/download.nsf/US/Convergence_2002/$file/Retail%20Store%20Convergence%202002.pdf
e. Use Technology
“Saks last year tested central cash registers in 100 stores, and the
experiment worked so well that it is replicating it across all of its
243 traditional department stores. A similar strategy is under way at
a 73-store chain called Bon-Ton.”
“Are Department Stores Dying?”
http://www.wsjclassroomedition.com/archive/02may/COVR_department.htm
-------------------
Our next articles provide samples of the different strategies used by
traditional department stores to cope with the changing shopping
habits of consumers.
Sears, Nordstrom and J.C. Penney are the ones being eyed by analysts
as making a comeback in the retail industry.
“Sears' $1.9 billion purchase of Land's End in June came out of the
blue to most industry observers, but could be just the thing to revive
Sears' own softline sales.”
“The buzz on Wall Street for JCPenney has been growing more favorable.
The No. 5 retailer has been threatening its own comeback for several
years now. With noted turnaround artist Allen Questrom occupying the
CEO slot, the threat has greater credibility. Penney is well into the
second year of his five-year revitalization plan.”
“Nordstrom Inc., a leading fashion specialty retailer with 133 stores
in 26 states, is ironing out a few new wrinkles in its store formats,
but has been a leader among its brethren in testing out new ideas.”
“The Future of the Department Store”
http://shoppingcenterworld.com/ar/retail_future_department_store/
Barnard's Retail Trend Report
http://www.retailtrends.com/backissue.html
“Wal-Mart wannabes”
http://money.cnn.com/2002/09/20/news/companies/retail_departmentstores/
Search terms used:
"traditional department stores" problems issues analysis statistics
changes future -siam -china
I hope these links would help you in your research. Before rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
Thanks for visiting us.
Regards,
Easterangel-ga
Google Answers Researcher |
