Department Store as Endangered Species

As Christmas nears, many needy institutions seek the public’s charity dollars. Please consider the local department stores.

It shouldn’t be hard to feel charitable. In many cases, it’s the time of year they’re most attractive--bustling with life, offering such rare services as salespeople and free gift wrap. In

some cases, the need is particularly poignant: They may not be around next year.

Their desperation shows. Some kicked off their Christmas season by Halloween this year. Some, fearing mere goods won’t draw customers, are running sweepstakes and offering premiums.

Their current November, Thanksgiving and pre-Christmas sales top off a year of almost back-to-back two- and three-day sales. And still one could have shopped almost alone some days and most

evenings.

As it is, the retail landscape is “excessively over-stored” for today’s consumer, according to Price Waterhouse’s Management Horizons division in Columbus, Ohio. The consulting firm’s recent

report on retailing in the year 2000 predicts that half of today’s retailers will be gone in a decade.

Traditional department stores are considered most vulnerable, having faded for years. In prime downtown locations, they used to offer one-stop shopping for everything from sewing goods to

refrigerators, and they commanded the loyalty of customers holding their individual charge cards.

Then came competition of all kinds. In the ‘50s, it came from new suburban stores, drawing people out of downtown, and from the advent of discount stores, particularly those selling hard

goods.

In the ‘60s, it came from the regional mall, itself “a one-stop shop,” says Leonard Berry, director of the center for retailing studies at Texas A&M.; Such malls were (and are) “anchored” by

department stores but featured smaller specialty stores as well, selling goods department stores also sold--stationery, linens, separate categories of fashion (casual clothes, kid’s

clothes, shoes).

Mass merchandise specialists took over in the ‘70s, selling more of the same merchandise department stores offered, but in great volume and at deep discount--Toys R Us, Home Depot, fabric

stores. In the ‘80s, it was fashion specialty chains such as the Gap, the Limited, Ann Taylor, offering particular customers savings in time and energy if not discounts. Such stores offer

particular, distinctive styles--young, trendy, career-oriented. “With everyone working, who has time to hunt and peck through a department store?” says Sarah Stack, retail analyst at Bateman

Eichler, Hill Richards Inc. in Los Angeles.

“Over the last 30 years, all these new formats have arisen, each in its own way taking market share from department stores,” says Thomas M. Murnane, Management Horizons’ executive vice

president in Los Angeles. “Discounters offer convenience and price, specialists offer fashion and service, mass merchandisers offer assortment and price.” And bank cards and national charge

cards dissipated store loyalties further.

Department stores were still attractive enough to become buyout prey in the ‘80s, when some buyers were attracted to anything standing. Whatever their market problems before the mergers,

acquisitions and debt-heavy takeovers, the stores involved had problems thereafter. They were left cash-poor, saddled by debt, and depleted, long on financial management and short on

merchandising talent, help, ideas and even goods from some top manufacturers who “are afraid to ship for fear of not getting paid,” says Carl Steidtmann, chief economist at Management

Horizons in Columbus.

The most common response is price cutting--”the crudest form of competition if they don’t have a good combination of other store attributes, like quality, selection, fashion,” says Murnane.

It’s also a competition department stores must lose, given their overhead.

The most secure stores, in fact, compete on bases other than price. Nordstrom, Saks Fifth Avenue, and others often cited as healthy, offer fashion, quality, service, even relatively high

prices, because they’re “catering to a customer not as affected by price,” says James Slayden, a retired retail executive now teaching retail management at USC.

Some experts seem to suggest that such fashion and service would save all department stores. But the kind of fashion admired, and the service usually touted--helping customers accessorize

outfits, calling them with merchandise bulletins--is more appealing to big spenders and marketing analysts than to middle-class shoppers.

There are still people who believe that, somehow, department stores will survive. As Slayden points out, “For 40 years, we’ve been burying the department store,” and they’re not dead yet.

Department stores have “unique locational advantages, heritage and image,” says Murnane. They should even have more customers “as the consumer population ages,” says Berry. “People in their

50s grew up with department stores, and they’re used to them.”

Maybe so. But for some stores, even the merriest Christmas may not be enough.