Summary
Will Dillards put themselves in both a less profitable position, as well another year of sales declines?The positioning that Dillards plans to go to seems to have a small opportunity to grow sales and profits. Dillards cannot just put better goods on the floor to be successful, they need a total change in their service concept, which will add expenses.
Analysis
Dillards upscale approach in the short run will help grow sales volume for many of the upscale vendors, however, once the season concludes the need for gross margin support will be a major issue for both the vendors as well as Dillard's bottomline.The niche, that Dillards is planning to focus on is too small to make a major sales volume contribution, furthermore, as of today Dillards sales per square foot is on the low end of the Department retailers.Dillard's talk about less promotions, Nordstroms does not promote except four times a year, Dilllards pretends to be a regular price retailer yet their sales productivity, their margins' are below those of Macys, Bloomingdales etc.For Dillards to state that Macys does their sales in a few doors only brings greater concerns that their program will not work in the smaller markets.For example when yopu match Dillards up to the Macys division in Florida the only way their sales are close is do to the heavy markdown business they do.
In conclusion Dillard's should focus on getting the overall mix right, presentation and selling service needs greater execution before they look to attract the upscale consumer, lastly in the markets they are in v few retailers be it the Department Stores, Better specialty or the better young mens and womens businesses, will tell you these remote markets are not the drivers sales and margins.
