Style Alone Isn't Enough for Department Stores to Succeed !

Implications: Style alone won't make the difference in department store performance.  Here's why.

Analysis: Heralded like it was a new idea, department stores have always relied on being a leader in style to compete in the marketplace.  The fact is department stores will never be the low cost provider of products.  They differentiate themselves by the national brands that they carry, breadth of assortment, and services offered.

Offering higher end, better styled products continues to be good strategy, provided price points are tailored to the geographical area.  But in order to sell better products, stores have to offer better service too.  Otherwise, emphasizing style without delivering service is a recipe for disappointed customers and higher markdowns.  

Unfortunately, that is just what most department stores are doing.  Staffing levels and the quality of sales associates in many big box stores have reached new lows.  Either there isn’t anyone to help you or the people in the store don’t have the knowledge to be effective.   

While consumers have come to expect poor service at likes Sears and Kmart, there remains some expectation of better service at Macys, J. C. Penney, and Target.  However, service has declined significantly in these stores also.  Fewer sales associates and longer check out lines have become the rule as opposed to the exception even in these historically better run stores.  It’s a toss up today whether a customer can get better service at a better department store or Wal-Mart.  

Part of the problem is the current recession, yes I said recession, where uncertainty is taking control of business strategy.   Looking short term, senior executives may be sacrificing reputation and customer loyalty for next quarter’s profitability.  That’s a bad trade off.   

So long as the dollar remains weak, inflation continues to rise, and consumer’s disposable income declines, most retailers are going to see weak to declining comparable store sales. That’s out of their control. What they have control over is the future of their enterprise which depends more on a long term relationship with customers and suppliers than it does on quarterly earnings where the most they can hope for is to the best of the worst performers in their sector.  

That isn’t to say, retail executives shouldn’t dogged watch expenses and reduce capital spending to achieve aggressive ROI’s.  But there’s a big difference between an optimization strategy and one that minimizes the future value of the firm.