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Singing a Different Tune: Dept. Store Naysayers See Hope Amid Gloom

Rumors of the demise of the department store are apparently exaggerated. Here’s a report on the state of the sector and challenges that lay ahead.

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“Department stores have long been aware of the need to change. Now, at least, they are reconciled to it,” said Walter Salmon, the Stanley Roth Sr. professor of retailing emeritus at the Harvard Business School. The problem is twofold. “How do they become more attractive to consumers? That requires a lot, including moving from inventories with immense duplication to being thoughtfully edited and getting very good at private label. Secondly, they have to immensely reduce, if not eliminate, high-low pricing, and lower their initial prices,” which he says are usually too high. He rated service in the stores as somewhere between “poor and a travesty” and said divisional buyers are outmoded and lack clout with vendors. “Seismic” changes are required. Long term, Salmon sees few department store survivors. “Four or five would be a high number.”

Most analysts see Penney’s as a survivor, along with Federated, particularly with Bloomingdale’s on a roll with its renewed emphasis on contemporary and less widely distributed merchandise, as well as May, Saks Inc. and Neiman Marcus. “We are really moving the dial, whether it’s reducing the clutter and raising the standards of our stores with 70 to 75 percent less signing, our Hot At campaigns, which push newness, or with our bridge business, which is exploding,” said Michael Gould, Bloomingdale’s chairman and ceo.

However, the debate continues on Sears, as well as regionals such as Dillard’s, Belks, Mervyn’s, Gottschalks, Bon-Ton, and Marshall Field’s, the subsidiary of Target, which are endangered because they don’t have the buying clout of the nationals. “Some department stores are showing signs of life. Others you have to wonder about,” said Walter Loeb, president of Loeb Associates. “It really depends on who you are talking about. Stores are still thinking too traditionally. They have to reinvent and that’s very difficult.”

SHARE WARS
Department stores and national chains such as Sears, Roebuck
and Dillard’s are losing share to Wal-Mart and Target.
 
2000 Sales
2003 Sales
% Change
General merchandisers
406.2
455.7
Warehouse clubs/superstores
140.2
193.5
Total
546.4
649.2
18.8
 
Department stores
238.7
230
National chains
97.4
89.3
Total
336.1
319.3
-5
SOURCE: US CENSUS BUREAU, FIGURES ARE IN $BILLIONS
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