Innovation Won’t Save Department Stores. The Right Products Will.
Mid-market American department stores like Macy's, Kohl's and Nordstrom need more than new owners and retail formats to win back customers; they must reinvent their entire value proposition with a selection that can compete with online fast fashion and off-price players. Time is running out.
Macy’s survived the catalogue scare, and countless other evolutions in how Americans shopped, from QVC to the rise of e-commerce. But there’s something different today about the cocktail of threats facing Macy’s and other department stores that cater to the middle class, including Kohl’s and Nordstrom. No matter how many unprofitable stores they close or innovative retail concepts they try, they keep losing customers, whether to historic online threats like Amazon, newer, more nimble competitors like Shein or off-price stalwarts including TJ Maxx that are better geared towards stretched household budgets.
Last month, Macy’s announced it will close another 150 stores by 2026, effectively halving its footprint from 2018. Kohl’s and Macy’s have both been targeted by activist investors more interested in selling off their real estate assets than revitalising retail. The Nordstrom family is reportedly exploring taking its namesake chain private, as a series of turnaround plans have done little to boost revenue, which peaked in 2018, or slow a decade-long slide in the company’s stock
What’s going to get people to go into any store? The answer one, two, three is product,” said Lundgren. “You can have great service and bad product … You have to have a unique product that is fair in value and exclusive or limited in distribution to your channel. Macy’s used to be the king of that.”
As difficult as that sounds, some department stores are on their way.
The problem is, consumers are returning to malls but often walking right past the department store with the big sign at the entrance. In-store sales for both Macy’s and Kohl’s declined about 5 percent in 2023 compared to the year prior. Nordstrom’s sales rose in late 2023 - but credit goes to its off-price chain Nordstrom Rack.
That’s because there’s still a sense that all department stores offer the same stale brands, many of which could be found at discount retailers or online, often at a lower price. By contrast, revitalised mall chains like Abercrombie & Fitch and PacSun lure shoppers with the promise of something unique and appealing.
After all, a store that offers a large selection of products and reliable service will never go out of style. In theory.
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