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Department Store Retailing - US - September 2016

"There is no doubt about it: department stores are struggling to stay relevant in today’s retail climate – losing sales, customers, retail space, and partner brands. Sales continue to fall YOY (year-over-year) with no signs of stoppage in the foreseeable future. Radical change and innovation is needed in the sector and even then, not all stores may survive. Consumers have a soft spot in their hearts for their favorite department stores though, but continue to be lured by other channels and retailers who are just a little bit faster, more convenient, or more affordable. Department stores need to accept they cannot be all things to all people and focus on what they can do well: drive connections with omnichannel shoppers, provide superior customer service, and offer innovative experiential reasons to shop the brands."
- Diana Smith, Associate Director - Retail & Apparel

This report discusses the following key topics:

  • Downward spiral continues 
  • Channel-shifting is occurring 
  • Location and price are barriers

For the purposes of this Report, a department store is defined as a retail establishment, usually part of a chain that sells a broad range of nonfood items. Department stores usually sell a wide range of the following new products with no one merchandise line predominating: apparel and footwear, furniture, appliances and home furnishings; and selected additional items, such as paint, hardware, toiletries, cosmetics, jewelry, toys, and sporting goods. Merchandise lines are normally arranged in separate departments.

Examples of department stores that would be covered in this Report are: Barneys New York, Bergdorf Goodman, Bloomingdale’s, Carson Pirie Scott, Dillard’s, JCPenney, Kohl’s, Lord & Taylor, Macy’s, Neiman Marcus, Nordstrom, Saks Fifth Avenue, and Sears, Roebuck and Co.

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Downward spiral continues
            • Figure 1: Total US department store sales and forecast, at current prices, 2011-21
          • Channel-shifting is occurring
            • Figure 2: Other channels shopped more often, June 2016
          • Location and price are barriers
            • Figure 3: Select reasons for not shopping department stores, June 2016
          • The opportunities
            • Department stores are not dead
              • Figure 4: Department stores shopped, June 2016
            • Over one third of shopping occurs online
              • Figure 5: Method of shopping, by key demographics, June 2016
            • Customer service can include education on how to more efficiently shop the store
              • Figure 6: Interest in retail innovations, June 2016
            • What it means
            • The Market – What You Need to Know

              • No qualms about it: Major change is needed at department stores
                • Not keeping up with the Joneses
                  • Not all doom and gloom
                  • Market Size and Forecast

                    • Bleak outlook for department stores
                      • Figure 7: Total US department store sales and forecast, at current prices, 2011-21
                      • Figure 8: Total US department store sales and forecast, at current prices, 2011-21
                  • Market Breakdown

                    • Warehouse clubs and supercenters have stolen share
                      • Figure 9: Percentage of US sales at general merchandise stores, by type, 2000-16
                      • Figure 10: Sales at general merchandise stores, by type, 2011-16
                    • Market ebbs and flows
                    • Market Factors

                      • Opportunity to zero in on 25-34s while trying to get fair share of 55+
                        • Figure 11: US population by age, 2011-21
                      • Consumer base will become increasingly diverse
                        • Figure 12: US population by race, 2011-21
                      • Economic factors influence department store sales
                        • Assessing risks and opportunities
                          • Figure 13: Growth rate forecast by category, 2015-20
                        • Waning mall traffic doesn’t help matters
                        • Key Players – What You Need to Know

                          • Off-price store formats bring pros and cons
                            • Declining apparel sales hurt the bottom line
                              • Heightened emphasis on customer service
                              • What’s Working?

                                • Growth is in off-price formats
                                  • What about cannibalization?
                                    • Are off-price versions hurting brand image?
                                      • Figure 14: Attitudes toward off-price store formats, June 2016
                                      • Figure 15: Attitudes toward off-price store formats, by key demographics, June 2016
                                    • In their words
                                      • Off-price advocates
                                        • Off-price sceptics
                                          • E-commerce: An opportunity for growth and defense
                                          • What’s Struggling?

                                            • Apparel, footwear, and accessories see largest declines
                                                • Figure 16: Items purchased at department stores, June 2016
                                            • What’s Next?

                                              • Taking customer service to a new level
                                                • New partnerships and leased businesses
                                                • The Consumer – What You Need to Know

                                                  • Value-oriented department stores faring better
                                                    • Not online versus in-store but both
                                                      • Glass half empty or full?
                                                        • Why aren’t people shopping at department stores?
                                                          • Many opportunities to win back
                                                          • Department Stores Shopped

                                                              • Two thirds opt for value-oriented; Kohl’s on top
                                                                • Figure 17: Department stores shopped, June 2016
                                                              • Affluence is a factor
                                                                • Figure 18: Department store type shopped, by household income, June 2016
                                                              • Core targets include young adults, men (in addition to women), and Hispanics
                                                                • Figure 19: Department stores shopped, by age and household income, June 2016
                                                                • Figure 20: Department stores shopped, by gender, June 2016
                                                                • Figure 21: Department stores shopped, by race and Hispanic origin, June 2016
                                                              • In their words
                                                              • Method of Shopping

                                                                  • One third of shoppers choose to go online
                                                                    • Figure 22: Method of shopping, June 2016
                                                                    • Figure 23: Method of shopping, by age and household income, June 2016
                                                                  • Omnichannel shoppers of high value to retailers
                                                                    • Figure 24: Online shopping behaviors, by generation, June 2016
                                                                • Role of Social Media

                                                                  • Purchase rates are low but growing
                                                                    • Department stores experiment with social media
                                                                    • Frequency of Shopping

                                                                        • Nearly three quarters shopping department stores the same or more
                                                                          • Figure 25: Frequency of shopping, June 2016
                                                                        • Men are shopping more
                                                                          • Figure 26: Percentage of those shopping at department stores more, by select demographics, June 2016
                                                                        • Over eight out of 10 more frequent shoppers have visited a value-oriented or mid-tier store recently
                                                                          • Figure 27: Department stores shopped, by frequency of shopping, June 2016
                                                                        • Consumer preference for department stores (ranking of 5 or more)
                                                                          • Above Average (>5)
                                                                            • Average (5)
                                                                              • What about loyalty?
                                                                              • Other Channels Shopped More Often

                                                                                  • Where are all the department store shoppers going instead?
                                                                                      • Figure 28: Other channels shopped more often, June 2016
                                                                                    • 18-34s are a coveted group that is being lured by other channels
                                                                                      • Figure 29: Other channels shopped more often, by age, June 2016
                                                                                  • Reasons for Not Shopping at Department Stores

                                                                                      • Can’t please everyone
                                                                                        • Figure 30: Reasons for not shopping department stores, June 2016
                                                                                      • Consumer preference for other store types (ranking of 4 or less)
                                                                                      • Shopping Behaviors

                                                                                          • Gifting is a main reason to shop at department stores
                                                                                            • Figure 31: Shopping motivations, by generation, June 2016
                                                                                          • CHAID analysis reveals young men as more likely to shop for gifts
                                                                                            • Figure 32: Gift shopping behaviors, CHAID analysis, June 2016
                                                                                          • Good sales come to those who wait
                                                                                            • Figure 33: Deal-seeking actions, by household income, June 2016
                                                                                          • Branded credit cards and mobile apps offer opportunities to engage
                                                                                            • Figure 34: Brand engagement tactics, by gender and age, June 2016
                                                                                        • Attitudes

                                                                                            • Brand affinity is there, but it’s buried
                                                                                                • Figure 35: Attitudes, June 2016
                                                                                              • Are department stores losing their appeal?
                                                                                                • Disagree
                                                                                                  • Agree/divided
                                                                                                  • Interest in Retail Innovations

                                                                                                      • Department stores should continue investing in technology
                                                                                                        • Figure 36: Interest in retail innovations, June 2016
                                                                                                      • Finding the right fit is a universal issue
                                                                                                        • Figure 37: Interest in select retail innovations, by gender, June 2016
                                                                                                      • Younger generations seek ways to be efficient or entertained
                                                                                                          • Figure 38: Interest in select retail innovations, by generation, June 2016
                                                                                                        • Department stores can do more to attract Blacks
                                                                                                          • Figure 39: Interest in select retail innovations, by race and Hispanic origin, June 2016
                                                                                                        • What advice do consumers have for struggling department stores?
                                                                                                        • Appendix – Data Sources and Abbreviations

                                                                                                          • Data sources
                                                                                                            • Sales data
                                                                                                              • Fan chart forecast
                                                                                                                • Consumer survey data
                                                                                                                  • Consumer qualitative research
                                                                                                                    • Abbreviations and terms
                                                                                                                      • Abbreviations
                                                                                                                        • Terms
                                                                                                                        • Appendix – Market

                                                                                                                            • Figure 40: Total US department store sales and forecast, at inflation-adjusted prices, 2011-21
                                                                                                                          • Store type definitions
                                                                                                                            • General merchandise stores
                                                                                                                              • Department stores
                                                                                                                                • Traditional department stores
                                                                                                                                  • Discount department stores
                                                                                                                                    • Supercenters and warehouse clubs
                                                                                                                                      • Other general merchandise stores
                                                                                                                                        • Figure 41: Population by Hispanic origin, 2011-21
                                                                                                                                        • Figure 42: Consumer confidence and unemployment, 2007-June 2016
                                                                                                                                        • Figure 43: US gasoline and diesel retail prices, January 2007-June 2016
                                                                                                                                        • Figure 44: Disposable personal income change from previous period, January 2007-May 2016
                                                                                                                                        • Figure 45: Personal saving rate, percentage, monthly, seasonally adjusted annual rate, 2006-16
                                                                                                                                        • Figure 46: Change in US value sales by category, 2014-15
                                                                                                                                    • Appendix – Consumer

                                                                                                                                        • Figure 47: Department stores shopped in last three months, February 2015-March 2016
                                                                                                                                        • Figure 48: Department stores purchase incidence in last four weeks, February 2015-March 2016
                                                                                                                                        • Figure 49: Items purchased at department stores, January 2011-March 2016
                                                                                                                                        • Figure 50: Select categories purchased, by select department stores, February 2015-March 2016
                                                                                                                                      • CHAID analysis methodology and output
                                                                                                                                        • Figure 51: Gift-shopping behaviors, CHAID analysis – Table output, June 2016
                                                                                                                                      • Qualitative research

                                                                                                                                      Companies Covered

                                                                                                                                      To learn more about the companies covered in this report please contact us.

                                                                                                                                      Department Store Retailing - US - September 2016

                                                                                                                                      £3,174.67 (Excl.Tax)