Sector Spotlight: Department Stores

Sears, which has been in the department store business for nearly 125 years, recently announced the launch of Now + Here, a new department aimed at juniors and young men.

Parent company Sears Holdings Corp. (Hoffman Estates, Ill.), has called it “part of our overall apparel transformation,” an upgrade effort being driven by John Goodman, Sears’ new executive vp, apparel and home.

Pretty progressive for a retailer known more for vacuum cleaners and power tools, but typically running a few lengths behind the fashion apparel trends. Not only is it a strong statement that Sears is getting back in the game, but it’s also a clarion call for the department store sector as a whole. In fact, there’s a flurry of activity from this group of retailers who’ve seen their supremacy slip in the last couple of decades.

Fashion Focus

“Actually, the department store concept is as viable as ever,” says Steve Gardner, vp, department stores, at FRCH Design Worldwide (Cincinnati). “In this economy, convenience is more and more important, the ability to get a wide array of goods all under one roof in one shopping expedition. But department stores have to re-examine their strategies and take a whole new look at how their shopping environments can reconnect with a younger shopper – not only those looking for value but also those looking for fashion and trendiness.”

It’s a territory the department stores once dominated. But what made them so viable – large store environments packed with nearly every category of merchandise – is also what made them vulnerable. Their selection wasn’t as sharp as the boutiques nor as deep as the category-killers, and their prices couldn’t compete with the discount mass-merchandisers. The only way they found to compete on price was by a constant flurry of markdowns, coupons and special sales. As the 20th Century came to a close, a common observation was that the only reason to go to the department store was for those 40-percent-off prices. And if something’s full-price today, wait, it will go on sale tomorrow. It made the whole department store offering seem shabby.

But the good news is, a decade into the new century, many of those aging department store organizations are jumping into the new-initiatives pool.

Music and Fashion

Sears’ new Now + Here areas, located at the mall entrances, feature trendy, youthful-sounding brand names like Battle Gear, Girly Grunge, Biker Chic and Sweet Dreams. To drive the youth and energy message even further, Sears has teamed up with Live Nation, a Beverly Hills, Calif.-based producer of live concerts, for some in-store music events. “We know teens are really inspired by music when making their fashion purchases,” said Melanie Henson, Sears Holdings chief marketing officer, when the initiative was announced. “The synergy of music and fashion drives the hottest trends for young shoppers.”

The biggest department store organization, Macy’s Inc. (Cincinnati), is also going after the young men’s market with the launch of Slade Wilder, targeting high school and college-age shoppers. The brand icon is a snorting, mud-pawing wild boar. To launch the brand, Macy’s is using a variety of media, including in-store kiosks that play boar snorting sounds and floor decals that make it look as if the boar had tracked mud on its way into the store.

J.C. Penney (Plano, Texas) is reportedly investing $100 million to bolster its $1.5 billion Internet business – its 21st Century version of the iconic Penney catalog. To help drive that business, the department store retailer is rolling out kiosks to 100 stores this year to capture online sales on the floor, and also to help shoppers find products that aren’t in the store.

The Bay’s New Look

The granddaddy of all North American department store organizations, The Bay of Canada – part of the 340-year-old Hudson’s Bay Co. (Toronto) – is modernizing, upgrading and slimming down under the dynamic leadership of fashion retail veteran Bonnie Brooks, who took over as president and ceo of the department store operation in 2008. Her 35-year resume includes a stint as senior vp at Holt Renfrew, the Toronto-based fashion retailer any aggressive retail organization would want to emulate. “If anyone can change The Bay, she’s the person,” Glenn Pushelberg of Toronto-based design firm Yabu Pushelberg told Canada’s Maclean’s magazine when Brooks was hired. “There are very few people who could make it relevant today.”

Some of the changes from Brooks will upgrade the fashion and trend component and some will close the books on The Bay’s life as a full department store.

“We were trying to be everything for everyone,” says Richard Hamori, The Bay’s general manager of store planning, design, construction and procurement. “We had way too many brands and, because of that, too many of them had no significant presence. We were losing sight of who our customers were and what they wanted. And we were also losing sight of who we are and what we ought to stand for.”

In the process of becoming a high-design apparel brand option, Hamori says The Bay is rightsizing once-formidable departments like furniture and consumer electronics, even questioning the relevance of the offering. It’s not an easy decision, admits Hamori, noting that some ancillary product categories, like mattresses, are very lucrative with high margins.

The Bay is also upgrading some new brands and creating an improved environment and merchandise presentation. “Our brands reinforce who The Bay is,” says Hamori. “For us these days, it’s brands like Juicy Couture, Halston, Balmain, Alaia and Nina Ricci. We are also anticipating the launch of possibly the biggest Coach shop in North America.”

Brand Exclusives

“Exclusive brand relationships will change the face of the department store shopping experience,” says Barb Beeghley, FRCH’s vp, planning and merchandising, who points out Macy’s relationship with Tommy Hilfiger and Material Girl, Penney’s with Liz Claiborne and Mango, and Kohl’s with the Ralph Lauren Chaps brand. It becomes the reason to go to Macy’s rather than Dillard’s, Dillard’s rather than Penney’s, Penney’s rather than Sears.

It also reinforces their efforts to attract new customers. Like Sears and Macy’s, The Bay has its sights set on the younger, trendy set. “We’re trying to stay on top of who’s hot,” Hamori says, “and stay flexible, too, so we can expand our presentation of what’s selling and cut back on what’s not.”

The Bay is supporting the new image with special events and product launches, to which they invite a who’s who of the local art and design communities. “We’re also hiring people who fit the new culture,” he says. “We want young, trendy fashionistas who know how to talk to, interact with and advise customers. Employees have to match the new environment – enthusiastic, knowledgeable, engaged.”

The challenge for department stores is to figure out exactly who they need to be and which merchandise categories will support the new brand initiatives. “Department stores had lost their point of view,” says FRCH’s Beeghley, “sacrificing any strong reason for shoppers to go inside. Now they’re editing their assortments and making their environments exciting and interesting again.”