Department Stores Industry Trends

Off-Mall Locations

As traditional shopping malls draw less traffic, companies are looking to off-mall locations to expand. Between the early 1990s and mid-2000s, the average number of shopping mall visits decreased 50 percent, according to the US Department of Commerce. Off-mall sites can be more convenient than regular malls, expand the list of potential store locations, and allow companies to enter smaller markets. The growing popularity of open-air malls has also attracted many department stores.

Falling Retail Prices for Apparel

Competitive price pressure, combined with the advent of inexpensive, quality apparel from discounters, has resulted in falling prices for clothing. Retail prices for apparel, department stores' main category, decreased 10 percent between 1997 and 2006. Department stores are relying increasingly on discounting and promotion to remain competitive. Declining retail prices also pressure margins.

Industry Consolidation

Department stores continue to consolidate as companies look for marketing and operational synergies. The Sears/Kmart merger provides Sears with massive incremental distribution of Craftsman, Diehard, and Kenmore products in Kmart's off-mall locations. By acquiring and converting acquired stores to the Macy's name, Macy's, once also known as Federated Department Stores, can expand and leverage its brand nationwide.

Fewer or Smaller Departments

Specialty and discount retailers have chipped away at department stores sales in many ancillary categories, resulting in fewer or smaller departments. Many companies have eliminated or reduced selling space for consumer electronics, toys, furniture, and books due to competition from large retailers, such as Best Buy, Wal-Mart, Target, and Barnes and Noble. The increased focus on apparel and fashion-related merchandise makes department stores more susceptible to fashion trends.

Lifestyle Marketing

Some companies are developing merchandising and marketing plans around lifestyle and psychographic classifications (such as contemporary, traditional, or career), and implementing plans specific to different markets. Grouping customers by lifestyle allows companies to appeal to key segments more effectively and develop emotional relationships. Marketing by demographic has proven less than effective for department stores since customers in the same age bracket can have significantly different interests and needs.