Why are department stores failing?

The once powerful department stores that anchored malls and streets around the world are now a failing concept.

From Debenhams to HoF, Macy’s to Barneys New York, and Sears to JC Penney, the list of department stores that have declared bankruptcy, shut multiple stores, or have been running in losses is long. And it’s not just Covid-19 or the e-commerce boom that can be blamed for it.

“The concept of department store is beginning to fail whether it is the UK high street, or 5^th avenue in the US,” said Jayant Ganwani, CEO of Lals Group.

In 2011, US department stores employed 1.2 million employees across 8,600 stores, according to estimates from the research firm IBISWorld. But in 2020, there are now fewer than 700,000 employees in the sector, working across just over 6,000 locations. The pandemic saw more sales declines, lay-offs, and store closures so these number would’ve shrunk further now.

But why are department stores dying, despite the ease and convenience of the one-stop-shop that people once lauded?

“Department stores do not give the brands the identity that they want. Consumer brands have come back to realise that in a department store they don’t capture enough data, consumer’s journey, loyalty etc.,” he explained.

“In Dubai, every brand has a boutique of their own and they end up being present in a department store. Sometimes it’s counterproductive and duplicant.”

However, by far, department stores were the best collaboration between retailers. Considering the business model isn’t working anymore, the industry will have to think of new concepts and innovative ways to work together.

“I think we are going to see in the future where like-minded retailers that offer complimentary products to each other, collaborating to create larger retail experiential environments. I think a superstore that has complimentary products by three or four retailers would work,” he said.

“I think it would translate into better rentals for people, more staff efficiency, and common marketing platforms. You don’t need a marketplace for everything. If you have a good enough operator that has everything in a single journey, that would be idea,” he concluded.