The "New Normal" Department Store

For American department stores, from Nordstrom’s to Macy’s, Bloomingdales to Belk’s, Neiman Marcus to JC Penney and Kohl’s, along with their brand partners and vendors, 2015 came in like lion and went out like a lamb. In fact, the entire channel experienced a challenging first half, a tough third quarter… and then things got worse.

2015 has been the apparel industry’s most promotional year on record and yet department, and luxury, stores continue to brim with too much inventory, and not enough shoppers. 

Despite the weather, these challenges are only the tip of the iceberg, and not the whole story. 

It’s not the weather. 

And, it’s not the strength of the American dollar. Nor is it the product assortment or the relevance of brands, fear of terrorism or the global economy, although these are contributing factors.

Actual Photo of Abandoned Shopping Mall - Seph Lawless

The word “ disruption” is too moderate to describe what is occurring. The retail landscape is in a state of “ upheaval.”

Tectonic plates are shifting and the new landscape will not resemble the previous world order.

Whether for awareness, comparative shopping, sharing, or transacting, the Internet’s influence on consumer spending is exceeding all expectations.

The rate of the Internet's influence on spending is increasing, while the size of a screen now fits in the palm of your hand.

Ubiquitous price transparency has escalated and allows, in fact it encourages, customers to be more discount and value-oriented than ever before. Today, “an educated customer,” to paraphrase Sy Syms, is no longer our best customer, they are our only customer.

With today’s highly informed consumer, a brand, a vendor, or a retailer can no longer exploit the ignorance of their customer; now it’s the other way around.

And big data indicates that Americans are shifting much of their spending to non-apparel categories, particularly to “smart” devices and their related ecosystems, and experiences including dining out, travel and sporting events.

Not only have the path-to-purchase and products purchased changed, the planning and timing of these purchases is evolving too. “Buy now, wear now” and is enabled by same-day, or next-day, availability… not only for seasonal goods, but also for counter-seasonal goods.  If you’re planning a trip to Hawaii, there is no need to buy bathing suits and warm-weather apparel during the spring or summer, you can find these goods, a full assortment of brands and sizes, on sale on Amazon.com 365 days a year, no advanced planning required.

Physical stores are no longer the only venue for last minute purchases; even this historical competitive point-of-sale advantage has disappeared.

"New Normal" consumers shop by phone, while in a store, and pay with their watch.

Welcome to the “New Normal.”

The apparel industry, from suppliers and brands, to retailers and supply chain, must transition from the “old normal” to the “new normal.”

It is not easy.

The apparel industry cannot successfully navigate tomorrow’s landscape with yesterday’s maps.

Strategies, tactics and infrastructure must be reinvented and built anew.  

All is not lost.

Tom's, Warby Parker, Shapeways, and Threadless have paved the way to "new normal" business models.

It is important to note that this growth is not a “race to the bottom.” Product, branding and market innovation provides these champions, and their partners, with higher average retails and greater contribution margins, not less.

"The top-rated shopping meccas in the country have flourished, while hundreds of others closed or turned into zombie malls... This has created an unwillingness to open new malls -- only 6 have opened since 2006. Shoppers have concentrated in top-tier malls, where vacancy rates are at all-time lows and national retailers have invested in their best stores to spruce up offerings." - Bloomberg

Retailers need to provide great, or unique, experiences.

Tabor, a new menswear boutique in Charlotte, N.C., provides a pig roast, Bloody Marys and a live folk singer, along with fashion designers and artisans from who were making wallets, taking orders for custom belts and chatting with customers about their clothing lines. - Wall Street Journal

Curbside, provides what’s known as “curbside pickup” for retailers in malls. Customers order online through the company's app and then pick up their orders at the mall, curbside,  never getting out of their car. 

Nordstrom has created a unique omnichannel ecosystem with full-line stores, off price stores (Nordstrom Rack), Flash Sales (Haute Look), Personal Shopping Service (The Trunk Club), Millennial Shopping (The Rail); all channels sharing one logistics system and inventory hub. 

Macy’s is opening “Back Stage,” an off-price play.

Marshall’s has launched an ecommerce site.

Costco features triggers as one reason to shop in-store.

“Costco rotates upward of 25% of its hard-goods and its products inside the racetrack as triggers. The result is that, of the 3,600 items for sale, a full 1,000 may be offered only for that particular moment and may not be available upon a future shopping visit.” -  Fast Company.

Retailers are re-evaluating their door counts, store locations, and how human, inventory and other resources are deployed to support all channels of shopping.

Ecommerce is neither the savior, nor Satan.

Depending upon who you believe, ecommerce is either 10% or 20% of apparel and accessories purchases; this leaves, at a minimum, 80% of sales occurring in physical stores.

The “new normal” overwhelmingly includes smart devices to inform purchase decisions in new and evolving ways.

The “new normal” argues for integrated online and offline “experiences.” Stores will present curated assortments with brand and consumer-relevant points of view, and new pay & carry models.

The “new normal” in-store experience will invisibly leverage technology to invisibly fulfill a customer’s desires, immediately and without friction.

With mobile devices quickly becoming our “first screen,” the online world will be woven into our real-time shopping experiences. These devices rarely leave our hands, even while shopping in physical stores. Therefor they should become part of the in-store experience, a window to on-hand inventory, size and color assortment, features and benefits and delivery options.

No matter how much you think you understand your product, brand and customer there is more to learn.  And through knowledge comes relevant innovation.

Disruption is the mother of invention. 

Labor was difficult, the delivery painful, the baby is doing fine. She looks and acts different from her parents. The old standards, tests and measurements no longer apply. She’s better than normal, she’s the new normal, and she's hungry.

(c) David J. Katz, New York City

#BigIdeas2016

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David J. Katz is executive vice president and chief marketing officer at Randa Accessories, a $700 million global consumer products company. He is a public speaker, co-author of the best-selling book "Design For Response: Creative Direct Marketing That Works" [Rockport Publishers] and has written over 200 published articles. He has been featured in The New York Times, The Wall Street Journal, New York Magazine, and Women's Wear Daily.