Department stores were once a dominant force in the American economy, but these days, department stores have either closed up for good or are struggling to survive. Could this once-thriving industry ever make a comeback? And if so, what would that look like?
Motivational Factors for the Decline of Department Stores
Before we can speculate about the potential comeback of department stores, we have to understand the factors that led to their decline.
These are some of the most prominent:
- Online stores and eCommerce. Ask most people why traditional department stores are failing, and they’ll likely cite the rise of online shopping and eCommerce. Why would you go to the department store to buy a sweater for $50 when you can stay at home and get the same sweater online for $30 with free shipping? It’s certainly a factor in the decline of department stores, but it’s not the only factor worth considering.
- The mall bubble. The growth rate of malls from the 1970s to the mid-2010s was more than twice the growth rate of the population. Department stores, of course, were often planned, designed, and built with malls in mind; some of the biggest names in the industry often served as landmark stores in their respective malls. But with such an oversupply and waning fascination with these megastructures, visits to local malls have been declining for years (and are unlikely to recover).
- The shrinking middle class. It’s also worth noting that the primary demographics of department stores tend to be middle-class Americans, who have significant disposable income, but who aren’t wealthy. Over the past few decades, the middle class has been slowly shrinking away, with more people becoming lower-class or upper-class, and therefore falling out of the bounds of typical department store customer targeting.
- An increasing emphasis on experience. Today’s consumers are more focused on experiences than consumer goods. They’d much rather spend their extra income on going out to eat or traveling than buying consumer goods. Since department stores offer a diversity of consumer goods, and not much in the way of experience, they’ve fallen out of favor.
- Bad financial management. We also can’t ignore the fact that many department stores were simply poorly managed. They were unable to efficiently circulate inventory, they took on too much debt, and they optimized their finances for the short term.
- The COVID-19 pandemic. On top of all these other factors, the COVID-19 pandemic has been devastating for brick-and-mortar businesses that rely on foot traffic to survive.
Could Department Stores Ever Make a Comeback?
Now to the question at hand. Could department stores ever make a genuine comeback?
The short answer is yes, it’s possible, but there are several things that would need to happen. First and foremost, if a currently struggling department store business wants to recover, they need to thorough research and understand their biggest challenges. This is why retail consulting firms in Chicago and other major cities throughout the United States have become so popular; department stores and other retail businesses are hiring consultants for an expert analysis of their customer behavioral patterns, financial management, and overall strategy. Once this is in place, retail leaders can begin putting together a plan to recover.
Department stores also need to adapt to the modern era, which means some combination of the following:
- Hybridizing online and in-store options. Many experts have suggested that the successful retail stores of the future will be ones that attempt to hybridize the online shopping and in-store models. This makes a lot of sense; in-store shopping allows customers to see what they’re getting and browse for the perfect product, while online shopping tends to be more convenient and faster. Why not attempt to get the best of both worlds?
- Providing more of an experience. There’s too much competition for a department store to thrive while only offering a handful of products at decent prices. If department store brands want to stand out, they need to redefine themselves; they need to provide more of an experience, and one that their target demographics are willing to pay for.
- Correcting financial mistakes. In possibly the most difficult transition, department stores would need to find some way to correct their financial mistakes. That means reducing debt, optimizing for long-term balance sheets (rather than short-term gains), and enforcing tighter inventory controls.
Unfortunately, many of today’s failing department stores are facing irreversible damage. They’ve taken on too much debt, their brands have lost favor with the American public, and there isn’t enough infrastructure left to make a reasonable pivot. It would be unfair to say they don’t have a chance—because even these struggling businesses could potentially turn things around under the right conditions—but younger and newer businesses may have a better shot.