3 Lessons of the Department Store Struggle

In a year of bad news for traditional retail, July shone a hopeful light on the department store struggle. Business Insider estimates that 6,700 US department store, fashion and other retail branches closed down as of August 1. Simultaneously, year-over-year department store spending has shrunk by 4.1%. However, with July showing a 1.8% of month-over-month increases, are we seeing a turn-around in the department store struggle? More importantly, what are they doing to change their fortunes and what can retail broadly learn from it?

Standouts in the Department Store Struggle

Consumers still vote with their feet. Why do they walk into some department stores more in the last few months to buck the overall trend?

Analysts point to different winning strategies. Nordstrom’s loyalty programs, and a savvy investment in eCommerce integrated with its relatively small fleet of 116  full-line stores made a difference.

Then there’s Kohl’s efforts to rationalize retail space across its 1100 branches. As Kohl’s bumps up its eCommerce game, it will reduce floor space for products in half its locations. The company will reduce the number of products available in store and encourage customers to buy online for in-store pickup or home delivery.

Efforts by Kohl’s and Nordstrom resulted in higher operating profit performance, analysts say.

They also point to three concepts all retailers should keep in mind.

Integrate eCommerce and Physical Retail

Winning strategies in the department store struggle include integrating online and in-store experiences. In general, this means turning multi-channel into omnichannel and providing consistent customer experience. Customers should know exactly what products are available and expect fulfillment options such as buying online and picking up in store or buying online or home delivery.

Loyalty Programs Work

Nordstrom Rewards single-handedly brought in 56% of the company’s sales in its most recent quarter, up from 48% last year. Clearly, when customers like you, they’ll spend more with you, especially if you reward them with points on purchases and early access to special sales.

Optimize Inventory for Every Channel

You could argue that the most critical element to all this is proper inventory management. In the department store struggle, inventory management entwines with optimizing real estate and integrating eCommerce. In fact, all multichannel retailers must ensure their products don’t collect dust on the shelf or in the warehouse. They have to carry the right amount of stock to meet demand from every channel, without sitting around sucking up cash in storage and warehouse costs.