The Analyst Team

July 6, 2021

Are department stores dead?

With sales increasing 203% from April 2020 to 2021, here’s four reasons why they have a bright future.

Despite department store sales down $114 billion in 2020, Wall Street is enthusiastic about the future, with stocks for Macy's, Kohl's and Nordstrom up by 53%, 45% and 21%, respectively. 

We outline why these businesses are still relevant and offer insights to optimize major calendar events through 2022.

Are you a department store retailer or is your brand stocked at one? Get in touch here to see EDITED in action to optimize your trading strategies. 

1. Retailers are capitalizing on pop-ups & expansion

According to PopUp Republic, the pop-up retail industry has grown an estimated $10 billion in US sales. Both brands and department stores benefit from the collaboration, leveraging each other's mailing lists and marketing strategies while maximizing real estate. These partnerships also allow a more agile retail landscape, where it's less about competition and more about working together to create experiential retail opportunities.

Department stores are also expanding in various ways to compete with discount clothing chains and competitive industries such as beauty and home. Macy's rolled out several new Macy's Backstage locations, while Kohl's extended its consumer reach and product offering by teaming up with Sephora. See below for a breakout of recent developments.

are department stores dead

Image via Sephora

Expansion & reopenings

  • Sephora mini-shops will debut in 200 Kohl's locations by fall 2021. This partnership allows Sephora to reach customers outside of malls, while the department store can draw in younger customers with higher-end beauty products.

  • Macy's is expanding its Backstage business with 45 new locations across ten states, as executives announce it is critical to business growth. The Herald Square flagship location is under construction to upgrade subway access and build a commercial office tower above the store to enhance the store experience and neighborhood.

  • To reach a broader range of customers, John Lewis will expand its online offering of menswear, womenswear and childrenswear over the next 12 months with more than 100 fashion brands.

  • Despite the Robinsons physical store closing in Singapore in January, Robinsons Online will launch on June 24th as a digital department store with over 200 brands and future collaborations teased.

  • Belk launched an in-store luxury sunglass concept, Sunnies at Belk, more than doubling the assortment and adding luxury brand options.

Activewear market

  • In March 2021, fitness app Tonal partnered with Nordstrom, bringing the home gym and personal training experience to more customers. The concept space exists in the Women's Active department in 40 Nordstrom locations across 20 states.

  • Selfridges reopened its stores in London, Manchester and Birmingham in April 2021 and teamed up with SoulCycle to bring "Outside Studio" to customers

Luxury brand pop-ups

  • Neiman Marcus is the exclusive US wholesaler to feature the Prada Outdoor pop-up shop featuring the "Coast" collection - a multidimensional and multisensory experience, running from June 8th - 27th.

  • Premium fashion label Cuyana created a portable showroom called Cuyana in Motion to try out new locations without the long-term lease commitment.

  • At Selfridges London this summer, Dior will launch a pop-up boutique Dioriviera and will take over the department store's rooftop restaurant.

are department stores dead

Image via Kaitlin Saragusa

2. Financials prove positive growth

According to Mastercard SpendingPlus, department store sales increased by 202.7% from April 2020 to 2021 and 9.6% compared to 2019, emphasizing consumer interest to shop again in these locations.

Macy's and Kohl's announced a decrease in net sales for Q4 YoY, down 17% and 10%, respectively. However, for the first quarter ending May 1st, 2021, these department stores declared a significant spike YoY, up 62.5% at Macy's and up 69% at Kohl's - highlighting consumer habits online and in-store with both digital and store sales increasing.

Forward-looking initiatives from Nordstrom's Q1 earnings press release include broadening the reach of Nordstrom Rack, increasing digital velocity and winning in essential markets. A press release from Kohl's included growing activewear, beauty and homeware and investing in omnichannel capabilities - all of which have helped increase sales to-date.

are department stores dead

Image via Tal Yellin, CNN

Note: seasonally adjusted

3. Tech & innovation enhance experiences

QR codes

Oftentimes, a large format store can feel overwhelming if a return or exchange is needed. Department stores should note that consumers are likely shopping with their mobile phones and a QR code may be the quickest way to assist. This handy technology also allows for an increased opportunity to cross-sell products and track purchasing behavior.

Who's doing it?

Supermarket retailer ASDA offers a clothing recycling program where customers can sign up to receive a QR code and drop off their items at a nearby location for a 10% voucher. Kohl's offers Kohl's Pay, helping toward a more seamless checkout experience with personal offers and Kohl's Cash loaded into one QR code. Bloomingdale's and Bergdorf Goodman include QR codes in both catalogs and mail in order to drive traffic to their products.

are department stores dead

Image via ASDA Email UK - Apr 20, 2021

Experiential retailing

While pop-ups are a fantastic way to draw consumers into your store, experiential retail can also take the form of digital innovation. Partnerships with tech-led companies allow retailers to provide something to their customers that cannot be obtained at home. This also drives foot traffic to your store, presenting additional opportunities for a sale.

Who's doing it?

John Lewis is offering consultative experiences at its nursery department, as well as interactive spaces for children to play and parents to relax. Dick's Sporting Goods is fusing technology with athletics in the grand opening of its two House of Sport locations. These interactive concepts include batting cages with HitTrax™ technology and golf driving bays with TrackMan™ simulators. Target is remodeling its stores to give improved lighting in the beauty department and in-store branded shops from tech partner Apple.

are department stores dead

Image via Dick's Sporting Goods

Livestream shopping

Consumers are no longer content with the traditional browse, click and pay experience. While online shopping continues to grow, quarter-on-quarter results are beginning to taper off. The US livestreaming market is expected to reach $25 bn by 2023. However, there is still a way to go to catch China, which is guessed to have driven nearly $125 bn in sales in 2020.

Who's doing it?

Bloomingdales has hosted over 50 shoppable events while stores were shuttered during the pandemic. Nordstrom launched its live-streamed shopping channel back in March and is forging on to become a digital-first business. Future events include a happy hour-themed trend event and an interview with makeup guru Charlotte Tilbury. Walmart is investing heavily in livestream shopping via TikTok creators in an effort to win over a younger audience. The retailer's first event on the platform garnered seven times more views than anticipated and increased its followers by 25%, according to its CMO.

are department stores dead

Image via PYMNTS

Mobile app exclusives

With mobile shopping on the rise, app development holds significant opportunities for department stores amid the market's competition with e-tailers like Amazon. A seamless mobile shopping experience is expected and now attention has turned to in-app features that can set a retailer apart. Sales and discount incentives are a great way to get the consumer to engage with a mobile app initially.

Who's doing it?

Macy's ran an exclusive 50% off beauty products exclusively through their app on May 8th. On May 25th, JD Williams offered 30% off all fashion, footwear and lingerie from 6pm to midnight only on its mobile app. Nordstrom Rack offers a $5 off $50 promotion for first-time app downloaders. JCPenney offers rewards and coupons delivered straight to customers via its mobile app.

are department stores dead

Image via Macy's Email US - May 8, 2021

4. Key calendar events are still ahead

Back-to-School

As summer begins, retailers are already preparing for a robust back-to-school season ahead. According to CNBC, spending in the US is expected to surpass pre-pandemic levels. MasterCard SpendingPulse forecasted sales from mid-July to early September to rise 5.5% YoY and 6.7% vs. 2019. Department stores will reap the benefits, with a 25% YoY increase expected as shoppers return to malls. 

Motivation stems from the desire for a fresh start and a highly anticipated sale season. Hone in on July, August and September for optimal messaging. This period also serves as an opportunity for back-to-work promotions as well to capture full-family shopping potential. Licensing will be another huge win, with the chance to sell college and university merchandise ahead of the start of the season. 

are department stores dead

Image via Mastercard SpendingPulse

Black Friday

The spending holiday is expected to look much different this year compared to last. Names like Target and Walmart are already herding the bulk of pre-sale traffic online, which will benefit their ecommerce sales. However, while several stores will remain shuttered on Thanksgiving, enticing deals and the return of more comfortable in-store shopping will bode well for department store retailers. According to a RetailMeNot survey, 20% of consumers began their holiday shopping in September and 15% in November. Start offers promptly in order to catch early shoppers. 

are department stores dead

Image via Unsplash via Ashkan Forouzani

The New Year

The beginning of a fresh year brings key moments to push activewear lines, which were already a big investment category over the past year. The rise of smart fitness led to consumers purchasing in-home technology to stay healthy, such as Peloton bikes, Lululemon's MIRROR and Tonal's Home Gym. As COVID restrictions lift, many consumers will be looking to return to boutique fitness studios and gyms, prompting a soar in workout gear. Highlight these opportunities in email features and social posts as motivation for an active year.

are department stores dead

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Contributions by Avery Faigen and Krista Corrigan