American Girl flagship in New York, New York. Photo credit: Gensler
Over the past year Kathleen Jordan, a principal in Gensler’s New York office and leader in the firm’s Retail practice, undertook an investigation into the future of the department store. Her premise was simple: for years she’s been hearing and reading about the upcoming death of the department store, but so far it hasn’t happened. To learn more, she spoke with industry leaders, visited successful examples around the world, and read a lot of articles. The result is a set of distinct advantages she sees for department stores in today’s business and retail climate, and a set of bold strategies to regain the competitive advantages these stores once held. She will share her findings in a six part blog series.
There’s a scene in the 1992 movie The Cutting Edge where the figure skating coach advises the pair of Olympic hopefuls with regard to a new routine: “There is no halfway. Halfway is bullsh*t. If you go halfway, you get hurt.”
It’s that kind of boldness that is needed right now in the retail industry. Department stores currently sit on a precipice: sales are languishing, malls are struggling, and their future existence is in question. But it doesn’t have to be this way. Exciting new strategies are emerging that capitalize on changing shopping habits and advances in technology. Department stores are uniquely positioned to lead this paradigm shift in the retail experience that consumers are already demanding. By moving forward with a bold, no holds-barred approach, and by leveraging what made them successful in the first place, they can not only survive but thrive and rise to the top of the retail segment once again.
American Girl flagship in New York, New York. Photo credit: Gensler
By examining the big picture, we can see that the deck is stacked in the department stores’ favor:
- Department stores, whether on a regional or national level, have tremendous access to merchandise based on their buying power. They can utilize this power to demand exclusives from designers as limited run collaborations, exclusive product offerings, or special events.
- The one thing that shoppers can’t buy is time, and they have less and less of it every day. The department store can look to its roots, and provide a wide selection of relevant offerings to provide the “one-stop shopping,” but with a curatorial edge.
- Department stores must find their voice and speak to customers through exemplary service, product offerings, and the overall customer experience they create.
- Department stores have lots of square footage, and they often own the buildings in which they sit. Strategic planning of the available space coupled with technology-enhanced product displays, RFID enabled stocking efficiencies, and strategic leveraging of their websites can reduce the amount of physical area required to showcase pure product without reducing their offering. That surplus space can then be used to provide unique guest experiences.
- Department stores have enormous marketing budgets. These budgets can be shifted from pure commercial advertising to training and community outreach – strengthening their connection to the communities within which their stores are located, and investing in the training of their employees to enhance the quality of their customer service.
- As anchor tenants, department stores are major stake holders in the malls within which they reside, with the clout to push 24/7/365 programming that is vital to driving traffic. They have fantastic neighbors in the mall tenants – the specialty stores - and the corporate relationships to forge strategic alliances with these neighbors to create synergies that are mutually beneficial.
American Girl flagship in New York, New York. Photo credit: Gensler
Ron Johnson, CEO of JC Penney, told the Harvard Business Review “…it’s not department stores’ size or location or physical capabilities that are their problem. It’s their lack of imagination...” To successfully compete, department stores must revisit the advantages that made them so successful initially, while adopting a willingness to pursue imaginative or radical strategies that update the current operating model to serve today’s shoppers. With that in mind, the recommendations that follow are built on this premise– four strategies that use the size, diversity and market power that department stores have at their disposal to pursue innovative product and customer engagement strategies.
My next post will talk about how department stores can use product curation to create unexpected synergies and discern what customers really want.
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Kathleen Jordan is a principal in Gensler’s New York office, and a leader of our retail practice with over 24 years of experience across the United States and internationally. Kathleen has led a broad range of retail design projects as both an outside consultant and as an in-house designer. She has led projects from merchandising and design development all the way through construction documentation and administration, and many of her projects have earned national and international design awards. Contact her at kathleen_jordan@gensler.com. |