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Can Department Stores Win Back Shoppers?

Mid-priced department stores like J.C. Penney and Kohl’s tried to compete with online retailers and discounters by cutting back on endless promotions and adding celebrity clothing lines. But experts say weak results like the ones J.C. Penney released late Tuesday indicate that rather than keep changing with the times, they should embrace their past.

Department stores continue to lose ground. They accounted for 10% of retail spending in the 1980s, 5% in 2000 and around 2.5% currently, according to consulting firm Customer Growth Partners. And that trend shows no signs of ending. J.C. Penney swung to a fiscal first-quarter loss, with sales falling by 20% to $3.15 billion. Earlier this month, Kohl’s and Sears also reported weaker than expected sales. Analysts say these companies all have one thing in common: they cater to recession-scarred, middle income customers. “Upscale stores are doing terrifically and mass department stores are doing terribly,” says Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consultant and investment bank.

To lure customers, department stores should return to offering more frills like gift-wrapping and tailoring, analysts say. “Personal service is what drove department stores 100 years ago,” says Paul Swinand, an analyst with Morningstar. “During the 2000s, they got caught up in real estate and growth and forgot this.” In fact, department stores have cut tens of thousands of employees in recent months, according to the Bureau of Labor Statistics.  Swinand says clothing is one area where bricks-and-mortar department stores have a distinct advantage over online retailers as shoppers typically prefer to try the items first. (Kathy Grannis, as spokeswoman for the National Retail Federation, says some stores cut costs after the busy holiday period.)

There are other innovative ways to keep consumers engaged: experts say more department stores may start partnering with edgy independent retailers rather than relying on celebrity-endorsed clothing. “Using celebrities to sell cheaper designer clothes is becoming passé,” says Derrick Daye, managing partner at LA-based consultancy The Blake Project. Kohl’s has lines by Jennifer Lopez; J.C. Penney has clothing and accessories endorsed by veteran designer Liz Claiborne. But, Daye says, big-box stores have been more innovative: on Tuesday, Target previewed “The Shops,” 25 rotating independent in-store boutiques with collections from Cos Bar, a high-end beauty parlor from Aspen, and Kirna Zabete, a boutique in Soho. (J.C. Penney and Kohl’s did not respond to requests for comment.)

Another way to build customer loyalty is to host salons and cultural events rather than just shift inventory, experts say. Apple’s New York Soho store recently hosted evenings with film director James Cameron and actress Meryl Streep to talk about their careers; Apple quietly announces these appearances online, which Daye says adds to the cool factor. Rochester, NY-based supermarket Wegmans has regular movie nights for customers. Of course, department stores do host special events. On Wednesday, American Idol stars will sign autographs for shoppers who make any purchase at Kohl’s store in Alhambra, Ca. But Daye says that’s not a free event. “I like the idea of a celebrity coming in and sharing, rather than just smiling and signing autographs in return for store purchases,” he says.

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    • > you might as well believe in vdoooo.Careful, he’s sticking pins into your effigy right now.> Professor, With all due respect the U.S. got its ass kicked economically the last decade.gettingrational, with all due respect — your cranium is stuck in your rectum. That’s less of an insult than it is an observation. The US’s portion of the world economy is 25% — we manage this despite the fact that we are not more than 1/20th of the world’s population. Our individual productivity is vastly higher than that of any other nation of size and substance (i.e., I exclude places like Lichtenstein).I believe that, within 50 years, if things don’t crack up due to certain absurdities we still have to deal with (i.e., rogue nations gaining nukes), that the economics types like Dr. Perry are going to decide that they’ve been woefully undervaluing US productivity as it is, and that this is, in fact, a large part of the so-called “trade deficit” with China, as China “steals” our IP and then sells us manufactured goods. An accounting for that is due, and that’s where a lot of the difference is going to come from.The economic system isn’t founded on rational principles at the moment, not just because of government funny-money accounting (one of the first things that needs to be written into the Second Constitution is that the government at all levels is required to use GAAP, just like any business is), but also because it doesn’t do an even remotely good job of ascertaining the actual value of various forms of IP, much less track it in a way which doesn’t result in a vast shadow economy. The current pricing mechanisms don’t do a very good job of that, either — many IP producers would rather sell you a disk for ‘x’ dollars than sell the dozen and a half people who actually wind up with the contents of that disk for ‘x/10′ dollars (The RIAA/MPAA, of course, demand the ‘right’ to sell all 18 of them for ‘x’ dollars, which is ludicrous in itself, and one source of the economic confusion)At some time in the future, there are going to be economics juniors in class asking their professors, “Jesus, professor, WTF were they thinking?”

    • Customer service…when I stand in a long line because only two or three of the ten registers are open…I realize the lure of online shopping….retailers need to wake up..don’t let customers have that kind of shopping experience.

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