To get a better perspective of what is happening to department stores it is helpful to see how their current retail model originally developed and evolved. Beginning in the early 20th Century, department stores consolidated several independent specialty stores under one roof: hat shops, dress shops, accessories shops, jewelry stores, shoe stores and perfume shops. The department stores eventually followed consumers to suburban areas with shopping malls, the department stores being the “anchor” for other stores in the mall. This model worked well for over 100 years with the whole point being the idea that shoppers could buy a variety of clothing and accessories from one trip to the department store, but this century-old model is breaking down for the following reasons:
- Online sales. This reason is the one everyone reads about, but it is not the biggest reason for brick-and-mortar retailer problems. After all, online sales still only represent less than 10% of total retail sales.
- Destination consumer purchasing behaviors. Destination retailing is driving most consumer purchasing today. If consumers want to buy something at the lowest price possible they will specifically go to Wal-Mart or to Amazon. If they want to buy perfume, 99% of them will go to a department store. But they are not sticking around the store to buy other products.
- Consumers need for engagement. This factor is huge. Today’s consumers want to shop with retailers who engage them. Entertain them. Educate them.
Any retailer who wants to survive this shift in retailing needs to do the following:
- Become a destination for consumers.
- Engage, entertain, and educate consumers using emotions and the five senses as a guideline (i.e. Starbucks/Taste; Flower shops/Sight; Perfume stores/Smell; Gardening stores/Touch)