Archive for the 'Department store retailing' Category

Another post-mortem on Bon Ton Stores

Because Bon Ton Stores (soon to close at this writing) is based here in Milwaukee, I’ve paid close attention to the reasons behind its demise. Here are some thoughts from a recent RetailWire panel discussion:

One key lesson: The merger of two strong players will almost always work better than the combination of weaker stores. The Macy’s-May deal included the market share leader in almost every major city in the country, even though Macy’s was criticized at the time for changing the nameplates of chains like Marshall Field’s and Famous-Barr. Meanwhile, Bon-Ton’s acquisition of stores like Carson’s and Younkers (and then choosing to maintain “local” identities) was saddled by debt and by the lack of national scale or brand equity.

Milwaukee (where I live) is one of Bon-Ton’s two “headquarters” cities, and the home of its Boston Store nameplate. As an observer, I find the CEO revolving door was an issue and the company’s slow pace of e-commerce development (compared to Macy’s and Kohl’s) didn’t help either. And as a shopper, Boston Store’s content seemed overly focused on “career” Boomers who are retiring from the workforce, without a strategy to replace them with goods for younger customers.

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Can mall anchors use space more creatively?

The following comment (from RetailWire) was triggered by a discussion about Macy’s plans to do more short-duration space allocation. I think it’s a good idea for other stores if they can adapt to the fluid mindset necessary to pull it off:

Macy’s has long experimented with the concept of pop-up space in its Herald Square flagship, because it has the space to be flexible. There is a constant stream of short-duration shops, especially on the main floor — but this is a luxury that most department stores (including Macy’s) can’t or choose not to afford.

Department stores’ use of their square footage has long been dominated by the same businesses (starting with cosmetics and handbags on the main floor) or the same “prestige” apparel brands, supplemented by exclusive brands. It’s hard to shake loose from this mentality when it’s all about space allocation and vendor agreements instead of focusing on a shopper looking for newness. (And by “newness,” I don’t mean next month’s new shipment of product from the same old vendors.)

There was an article in the Wall Street Journal over the weekend, with the scion of The Bon-Ton Stores (soon to close) regretting in hindsight his company’s failure to be more innovative. This is the problem in a nutshell: The “we’ve always done it this way” syndrome.

What should the new Penney CEO do first?

Here are a couple of related posts (from RetailWire) about the future of JCP. The first one notes the departure of CEO Marvin Ellison for Lowe’s, and the second post joins the debate about whether Penney can appeal to both Boomers and Millennials:

JCP continues to have a sales problem; its comp-store sales for 2017 and the first quarter of 2018 lagged its competitors and failed to take advantage of the continuing decline of Sears. Kohl’s experienced similar weather issues in Q1 but managed to deliver a 3.6% store-for-store sales increase.

It sounds like 20/20 hindsight, but Mr. Ellison operated in a comfort zone since joining Penney, based on his long background at Home Depot. (And now he is really moving back into that comfort zone.) The push toward home goods — especially major appliances — appears not to be the answer to Penney’s lackluster sales.

When Penney finds a suitable replacement, I expect the company to accelerate its store closure program — unless there is opportunity by heading in the opposite direction and picking up sites from Bon Ton, Sears and so forth. But Mr. Ellison’s strategic retreat (while Kohl’s pushed to maintain its store base as part of an omnichannel strategy) looks like a mistake from here.

And another post more focused on customer segmentation:

JCPenney has presented its investors (and consumers) with a false choice over the past several years, even predating the Ron Johnson era. Either “cater to our current core market of aging Baby Boomers” or “figure out how to attract Millennials.” Any store expecting to be sustainable in the long run needs to figure out how to do both.

It’s possible to carry robust assortments of both Liz Claiborne and brands targeted to younger shoppers, especially in women’s apparel. Without those younger consumers with increasing spending power to accompany their sheer numbers, the “old” JCP base will continue to shrink.

It will become clear that Marvin Ellison made a mistake shrinking the footprint of Penney’s “softlines” businesses in order to squeeze in major appliances and more furniture. In hindsight, JCP could have used this space to offer broader and deeper assortments of apparel and accessories targeted to both Millennials and their moms.

Are “food halls” an answer for mall vacancies?

One of the biggest issues confronting mall developers is how to fill empty space (especially from vacant anchors). There just aren’t enough brick-and-mortar retailers to fill that space without coming up with some original ideas. One recent discussion on RetailWire focuses on the concept of “food halls” as a possible answer:

Anybody who has traveled the world (and has visited department stores in the process) can’t help but be dazzled by the food halls, especially in Europe but also in Asia and elsewhere. I realize that this is an extension of “high street” shopping in densely populated central business districts, so it doesn’t necessarily lend itself to the American department store model. And yet…wouldn’t a food hall (in the European sense) be more compelling than a Backstage installation in a Macy’s store?

The growth in self-contained food halls inside malls (but not necessarily inside a department store) is healthy for several reasons — and not just as a placeholder for another anchor tenant. It capitalizes on shoppers’ growing interest in cooking, healthy eating, locavore dining, etc. — and it provides an opportunity for retailers like Whole Foods/365 or Trader Joe’s to expand their footprint. Besides, if you’re waiting for one department store to fill the anchor space of another…you’re going to have a long wait.

Case in point (from another recent post):

“Signs of the apocalypse” are rampant in some segments, such as traditional mall anchors, but overstated in other high-growth areas like off-pricers. As regional malls suffer one tenant loss after another, it’s hard to see how all of those giant locations are going to be filled — especially if the anchors were in B and C malls to begin with.

One example, in my home market of Milwaukee, is the exit of Sears (three locations) followed by last week’s announced liquidation of Bon-Ton Stores. Boston Store (the local Bon-Ton nameplate) had five locations here — including two stores with over 200,000 square feet. If you’re a mall developer losing two of three anchors, it’s easy to feel like you have a black cloud hanging over your head.

Backstage a short-term win for Macy’s

As the topic of this post suggests, I am a skeptic about whether a store-in-store location strategy for Backstage really makes sense for Macy’s. Here’s my recent comment from RetailWire:

It’s hard to argue with the sales lift that Backstage has brought to the first group of stores, but I have my doubts the long-term strategic impact. From the local Macy’s store with a Backstage installation, I see a messy collection of “stuff” that doesn’t even meet the housekeeping standards of my local Marshall’s — not to mention the standards of the rest of the Macy’s store. And the off-price space is getting very crowded, at the risk of oversaturation.

It would be worth knowing more before passing judgment: Is the sales increase driving any kind of gains in Macy’s “upstairs” departments? And what kind of product is selling in Backstage? Again, from my observation, the “upstairs” brands at Macy’s have no interest in selling their labels inside Backstage, so the brands I shopped could just as easily be found at a Kohl’s or JCPenney store.

Department stores expand off-price concepts

Macy’s reported in its year-end earnings call that it plans to expand its Backstage off-price concept to 100 more stores this year. (And Backstage is located inside existing Macy’s locations.) Here’s what I had to say on RetailWire about the wisdom of this trend:

There is a big difference between what Nordstrom and Kohl’s are doing (building out freestanding Rack and Off/Aisle stores) and what Macy’s is attempting by locating its Backstage concept inside its full-line stores. Either way, department stores are jumping on the off-price bandwagon because it’s a hot segment with the “treasure hunt” experience that some shoppers are looking for. But at what point does the segment get overcrowded?

Macy’s may feel strongly enough about Backstage to roll it into more locations, but from my experience it does nothing to enhance the overall store “brand.” (Bob is dead-on regarding the housekeeping.) And the merchandise content is not compelling, since Macy’s “upstairs” brands feel safer dealing with TJX than having their goods show up in Backstage. From what I’ve observed, there is a lot of closeout product from brands that you might find at JCP or Kohl’s but not on the main floor of Macy’s.

Macy’s drops out of the Plenti program

Macy’s was one of the charter members of the Plenti loyalty program, where shoppers could earn points by buying gas at Mobil, renting a car from Alamo, and so forth. Here’s a quick RetailWire comment about the move, which rightfully places the spotlight on Macy’s own Star Rewards program:

As a Macy’s shopper, I was confused by the purpose of the Plenti program and wasn’t sure of the benefits. I wasn’t necessarily interested in some of the other brands participating in the program, and it “muddied the waters” of the Star Rewards program. I’m sure that I wasn’t alone, and Macy’s is right to focus on revamping Star Rewards with more personalized, data-driven rewards for its best customers.


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