Department Stores An Unintended Future

“You can never be overdressed or overeducated.”―?Oscar Wilde

Department stores have an unintended future

The primary discussion is about department stores however it applies to all of retail and any consumer facing business and for that matter most industries.

It's all self inflicted

Three years ago I wrote this article in the Globe and Mail The Not So Promising Future Of Department Stores. I was not convinced then and I am not now about their longevity. They are old, cluttered, stodgy, miss the mark on experience, and social responsibility with a lack of clarity on sustainability. And fail on social impact, especially with internal employee relations...all retailers for that matter are in the same boat with staffing.

It is their own fault for not being able to keep up with the rest of the retail world. Or is it that they just failed to keep up with my personal expectations and I simply don't matter to them as a customer? Perhaps I expect too much? After all department stores weren't retail concepts designed to turn around quickly like old battleships or like the SR71 Blackbird jet, they need a lot more room to make that next big move. An analogy by the way which is excuse driven, even the military wouldn't allow for such a situation for a foreign power or competitor in retail, to take advantage. The problem, competitors may have moved again by the time retail giants got their sails up fast enough.

There shouldn't even be a Plan B!

There are many aspects related to the future of retailing that could have been adopted by department stores. For example there is an entertainment value that would make sense, of course that would require a great deal of human capital and investments in training to create the right atmosphere. In addition to the development and introduction of technology that would enhance that sought after experience. Is the lack of all this in department stores an admission that no one knows what the future is?

It seems that people, rather employees are also a thing of the past. Before the pandemic I was in Hawaii at very high end department store. I found a sport jacket that I liked and began looking for sales associate. Apparently, they were short staffed and the one person working on the floor and department was busy with a customer who was trying on shoes. Understandable of course, who am I to expect service. I waited some 20 minutes only to find that was the last jacket.

The first sign that a business model is failing is the lack of service and staff to fulfill that objective. If department stores want to become self-serve it would be best for them to shutter their locations and turn to e-commerce exclusively, or a subscription model (which is another model that has filled my doubts). Yet even if they were an e-commerce model only it would seem to me that customers would want service. Perhaps they could then employ hundreds of fashion coordinators that could assist customers online, in person or perhaps virtually build their wardrobe like a valet out of the British TV series Downton Abbey. It does seem a little too farfetched doesn't it? To expect personalized service from an online department store or any retailer for that matter. But perhaps this is where it is all heading because I can't see this last another 10-15 years as it is.

It helps to have a vision

Aside from my own cynicism of this retail sector, I want an experience at a department store. Yorkdale Mall in Canada has a beautiful RH (Restoration Hardware) location with exceptional dining. It fits well with the overall positioning of the brand and the experience customers of this brand expect. Each room and floor in this location is about you and your personal vision of how you want to live. That's what department stores used to be and somewhere between numerous sales events and playing with balance sheets they lost that edge, and independent retailers flourished off what they couldn't deliver. For those of you born after landlines went extinct, retail chains should be considered a disruptive innovation of their time. Retailers and especially department stores need a vision other than aisles filled with product from seasons long ago.

Those darn sales events

What I have learned over the years is that once a brand is addicted to sales events it can't get off of them. JC Penney is just one of those many examples, as were Sears and Eatons in Canada. The erosion of a brand can happen gradually and then suddenly, as Hemingway was to have been quoted saying about his own bankruptcy.

And then there are brands that are simply trying to just resurrect the past to stay relevant. This week Hudson Bay announced the return of Zellers . I have only one question. Why? It is nostalgic for some, however I must admit I only visited one location and left with buying nothing. I do not recommend resurrection strategies because they tend to be ill fated unless the brand has superhuman powers.

May I recommend dancing robots?

So where do department stores go from here? It is my vision for department stores to scale down in the number of locations by half at least, strategically locating where they can capture the bulk of the traffic from locations closed. That should help with volumes, of course landlords may have a different opinion because anchor stores are no longer as easy to fill. Obviously, I would reinvest in talent, train them to sell and serve and reward them for their sales per hour and multiplying their incentives for serving best with the highest guest checks. You see service sells products and a well trained retail associate can sell a lot. Who knows we may just make retailing a profession again!

The next brave new world step would be to introduce technology into these new department stores. Now there is no doubt that I would be in for a Star Trek like hollow deck experience but a virtual reality shopping experience may just satisfy that need. And not any ordinary virtual reality experience. One were the participant is taking part in fashion shows, taking an adventure with the brand of sporting goods or outer wear. Perhaps a walk through future earth where we've eliminated pollution, poverty and hunger. Not to forget that you sign up for this a virtual focus group so that we can collect all the elements of potential, scent, sight and sounds that draw consumers. Yes a virtual lab where we are testing our new concept refining it and preparing if for a launch. Brave new world indeed! Regretfully that could take decades. Okay I admit it is a little out there however if it were possible think of the opportunities. Even dancing robots for some entertainment would be fitting.

What should we really expect next? Nothing special. Department stores have shown us how vulnerable they are to mistakes and shifts. They are trapped and some should fail to allow others to succeed. Bed Bath and Beyond is a story that does not have a good ending no matter what anyone says. In fact, suppliers are cutting back shipments for lack of payments. Except for those who are propping the stock price as a meme stock, which by the way I am very surprised the SEC hasn't cracked down this because it is simply a form of market manipulation. Read more BBB

Retail - waiting for the real post pandemic

Current supply chain issues and inflation have many retailers writing down inventory and cancelling orders. The current economic situation is really very uncertain on how and when consumers will react to higher interest rates. I am not about to predict failures I leave that to the other guy. But I am going to predict as interest rates continue to rise so will trouble for Department Stores and other retailers. The pandemic is still here now with Monkeypox and even Polio is rising. Somewhere in all of this there is either an end or more trouble brewing, couple that with the Russian -Ukraine war. Out of shutdowns to a war and inflation, add in higher interest rates and the potential for a recession. I don't know what positive recovery story I can sell only that the upper 10% are doing well while in the rest of the world of consumers are resetting their priorities in all western economies. The media today tries to get a head of issues and makes them big stories at that moment however the economy, inflation, wars are all current issues still unravelling we are not even midway yet!

Personal Log: The angry 50%

Have consumers been pushed to the wall? Are they going to revolt, crowd the streets in protests? They might in different countries. However it may be a little different and perhaps have the undertones of the early 1900's where humans had enough of politicians playing them to win elections. The reality is that the 50-60% who can barely make ends meet are likely harbouring anger that will cause overreactions. Militant? I hope not! But when you are hungry, can't pay your bills and risk losing the roof over your head it's not exactly easy to just live on hope there is anger. This anger is like a meteor heading for earth.

What is fascinating about this era's inflation is that it is being played out in real time. We have never had as much information about suppliers, products and ocean shipping lanes as we do today. Economist believe that they can deflect this meteor far enough to miss the earth (figuratively speaking of course)? No one knows for certain what will happen. The optimists want you to believe it will be a soft landing, don't worry keep spending. The pessimists want you to be saving and paying off debt. The everyday person on the streets is worried about their job and life's necessities. On the one hand you have unions demanding more pay, the Bank of Canada telling companies not to pay higher wages, and other Bank Governors hoping to create enough of a slow down to increase unemployment. The consumer is the pawn in this. You may not want anger, but the truth is that inflation may get to 2-3% but nowhere does it say that prices will decline. Meanwhile the 50% have a different view. And its that they are being used, traded, shuffled all in the name of saving the economy while their own fragile economic well being is being destroyed. It is dangerous!

Blame government if you want. However, there are powerful cartels and organizations that have created a good part of this inflationary problem and governments have no legal reach. Such as ocean shipping companies, the brokers, China's shutdowns over the pandemic and the Russian Ukraine war. At the end of the day this isn't your normal inflationary outbreak like in the 70's or 80's, this is new era economics, technology and geopolitics at war. We are just lucky things are not spiralling out of control elsewhere.

Thanks for reading...

#retailing #strategy #ceo #technology #innovation #people #customer #departmentstores #management #environment #future