Urethane Blog

Ten Bad Years for Department Stores

October 8, 2020

Department Stores’ Dismal Decade Of Decline

by Tyler Durden Thu, 10/08/2020 – 14:51

By Daphne Howland, of RetailDive

The heyday is over. The question for department stores now is whether there will be a new day.

Certainly, the pandemic has made that already sticky question all the more difficult to answer. But many retailers in the space had been trying. Early this year, for example, Macy’s inched toward rehabilitation as it outlined plans to get away from so many enclosed malls, close more than 100 stores and improve its private labels. Late last year, Nordstrom made strides executing its vision for a 21st century department store when it put the finishing touches on its retail ecosystem in New York City. Now, forced to institute layoffs and take on new debt, they and many others are just hoping to hang on through the holidays.

Yet the pandemic, as devastating as it’s been to people’s lives and livelihoods, didn’t provoke the current existential crisis for these retailers. That came earlier, through consolidation and over-expansion — especially at Macy’s, which broke several cities’ hearts when it took over and renamed their local department stores as with Chicago’s beloved Marshall Field’s in the Loop 14 years ago. E-commerce is a factor, but by now, department stores are e-commerce players too. More devastating have been the declines— possibly all related —of the middle class, the mall and the need to dress up for workor occasions. 

The Great Recession was technically over by 2010, but retail has never been the same since. And the last 10 years have been especially brutal to department stores. The following timeline provides a few snapshots of how things have gone.

Department stores in the last decade

2010

Things are looking up for most department stores as they recoup from the Great Recession.

  • Nordstrom looks back at 2010 as a “terrific year that exceeded our expectations,” noting that it opened three full-line stores and 17 off-price Racks in the period, topping 200 locations for the first time.
  • Sears is a notable exception, with revenue, profit and store comps all down for the year. Still, the company signs a lease in a historic downtown San Francisco building to house a newly energized apparel team.
  • Macy’s boasts that the impact of nearly doubling in size through its takeover of the May Company a few years before came “to fruition in 2010,” propelling it to a national brand through the conversion of nearly 600 stores from regional banners to Macy’s stores and centralization of its operations.
  • Southern retailer Belk, the largest privately owned department store in the U.S., updates its logo and unveils a new slogan, “Modern. Southern. Style.”
  • Kohl’s says it will open 30 new stores, for a total of 1,089 in 49 states.
  • Dillard’s, with a footprint largely in the South and Southwest and a strong private label portfolio, announces a new line of women’s apparel and accessories from Arkansas native Korto Momolu, who unveils the collection at New York Fashion Week. At the end of the year the company acquires a former Target distribution facility with plans to grow online sales.
  • It’s J.C. Penney’s last year of positive net income.

2011

  • J.C. Penney hires Ron Johnson, who enjoys a renowned reputation as Apple’s store guru, as CEO. He takes swift and drastic measures in pricing and merchandising that are immediately controversial with its customer base and investors.
  • Sears wins “Mobile Retailer of the Year” from the Mobile Commerce Awards for innovations like bar codes in its catalogs and online order pickup services, offered at a time when few retailers are paying attention to the channel.

2012

EMarketer expects online apparel sales to help push U.S. e-commerce up 15.4% to $224.2 billion, a rise blamed for lagging traffic to malls and their department store anchors.

  • Macy’s closes five stores, but also opens five stores. In its annual report, the company attributes the year’s performance to “a three-pronged business strategy known by the acronym of M.O.M. — My Macy’s, Omnichannel and MAGIC Selling.” The company says Bloomingdale’s will focus “on an upscale niche.”
  • Sears announces a series of “hyper-local” websites, which contain localized deals beyond the national weekly circular.

2013

2014

The economic recovery continues, but consumers remain wary. The Organisation for Economic Co-operation and Development releases a report detailing how income inequality is rising in the U.S. and is already starker than in other countries studied by the group, a situation some analysts believe is pressuring retailers like department stores that sell to middle-income consumers.

2015

Mall vacancies spike — almost 15% of malls are 10% to 40% empty (compared to 5% that empty nine years before) and 3.4% are more than 40% empty, which one Green Street analyst tells the New York Times indicates a “death spiral.”

2016

About two-thirds of all shoppers are spending at off-price retailers and making 75% of apparel purchases there, according to research from the NPD Group, while Moody’s Investors Service finds that growth at off-price retailers T.J. Maxx, Ross, and Burlington will outpace specialty and department stores.

2017

Apparel sales shrink to a new low of 3.1% of the average U.S. consumer’s budget, down from 5.9% in 1987. When they do buy clothes, many shop on price and eschew department stores in favor of discounters like mass merchants, fast-fashion retailers or off-pricers.

2018

Some department stores begin to take extreme measures.

2019

Things get a little weird.

2020

Several department stores report holiday comp declines in a season notable for its markdowns, but that is quickly overshadowed by the arrival of the COVID-19 pandemic to the U.S. Supply chains are roiled and department stores, with other nonessential retailers, are forced to temporarily close their doors for weeks as public health officials scramble to contain the coronavirus.

https://www.zerohedge.com/markets/department-stores-dismal-decade-decline

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