Department stores are aging \u2014 and so are their customers.<\/p>\n
For over a century, the stores won over multiple generations with a promise to sell shoppers a wide variety of everything. For many Millennial and Gen Z consumers, that hasn\u2019t been enough \u2014 especially as they discover items on social media, and specialty retailers, big-box stores and online players steal away sales.<\/p>\n
Department stores like\u00a0Macy\u2019s,\u00a0Kohl\u2019s\u00a0and\u00a0Nordstrom\u00a0face an existential crisis, as they try to persuade investors to bet on their futures while sales slow and their core customers age. Harsh scrutiny from Wall Street has contributed to a fresh attempt by Nordstrom to\u00a0take the company private, and\u00a0a bid by activist investors to take over\u00a0Macy\u2019s and turn it into a private company. Kohl\u2019s, too, has been\u00a0the target of activist investors\u00a0in the past few years.<\/p>\n
Oliver Chen, a retail analyst at TD Cowen, said attracting younger customers has become more urgent, since the retailers have \u201clost so much ground already.\u201d<\/p>\n
\u201cWhen you\u2019re a department store, you need to \u2014 and you should \u2014 be catering to younger and older,\u201d he said.<\/p>\n
Customer data illustrates the challenge for the retailers. At Kohl\u2019s, 40% of customers are Baby Boomers, according to Numerator, a market research firm that tracks retail trends and sales patterns with a panel of 150,000 U.S. consumers that\u2019s balanced to represent the population. At Macy\u2019s, more than a third of customers \u2014 36% \u2014 are Boomers. (Macy\u2019s data includes just its namesake stores and website, not Bloomingdale\u2019s and beauty chain Bluemercury.)<\/p>\n
Baby Boomers are age 60 or older, according to Numerator\u2019s definition. The firm defines Gen X as between ages 43 and 59. Numerator puts Millennials in the age 29 to 42 range, and Gen Z between 18 and 28, since it only collects data from consumers 18 or older.<\/p>\n
Nordstrom is the only one of the three that has a larger base of Millennial and Gen X shoppers than Baby Boomers, with Boomers accounting for 25% of its customer base. Its customer data includes both its namesake stores and its off-price retail chain, Nordstrom Rack, which has been known to draw in younger, fashion-forward customers hunting for deals.<\/p>\n
All three department stores have announced plans to woo new customers \u2014 including younger ones. Yet they have shared weak outlooks for the fiscal year, calling for little, if any, year-over-year sales growth.<\/p>\n
Chen said the retailers are paying more attention to the problem, since Macy\u2019s and Kohl\u2019s both have new CEOs and all three are trying to improve their private brands. The lines can help a retailer stand out because they are exclusive and often priced lower than national brands.<\/p>\n
Aging customers isn\u2019t department stores\u2019 only hurdle. The chains, like other retailers, have struggled with foot traffic and sales as consumers spend less on clothing, bedding and other discretionary items while more of their money goes toward everyday items because of inflation.<\/p>\n
To attract younger shoppers, Kohl\u2019s is adding trendier clothing for teens,\u00a0opening more Sephora shops\u00a0and\u00a0bulking up its baby department.<\/p>\n
In an interview with CNBC in late March, CEO Tom Kingsbury said department stores, including Kohl\u2019s, have relied too much on coupons to get customers through their doors. That formula doesn\u2019t work for Millennial and Gen Z shoppers, he said. They want compelling merchandise and clear pricing \u2014 things they\u2019re finding at off-price stores like T.J. Maxx instead.<\/p>\n
Led by Kingsbury, Kohl\u2019s is trying to capitalize on life stages that tend to spark purchases, such as decorating an apartment for the first time or having a baby. The retailer plans to\u00a0add Babies R Us shops\u00a0to about 200 of its stores in the fall. It is now\u00a0carrying more home goods, such as lighting and wall art.<\/p>\n
Kohl\u2019s has also used Sephora shops, which it is expanding to all stores, to draw in younger shoppers and try to nudge them to other parts of the store.<\/p>\n
\u201cWhen they come in for Sephora, we want to make sure we can give them product they want as well,\u201d Kingsbury said.<\/p>\n
Still, Kohl\u2019s doesn\u2019t expect to see immediate results from the moves. It said in March that it\u00a0expects net sales\u00a0to range from a 1% decrease to 1% increase for the full year, and comparable sales to range from flat to 2% higher.<\/p>\n
With\u00a0a new CEO at the top, Macy\u2019s wants to refresh its namesake brand and shutter stores that have dragged down the company\u2019s sales.<\/p>\n
It plans to close\u00a0<\/strong>more than a quarter\u00a0of its an approximately 500 namesake stores by early 2027. At the same time, Macy\u2019s is trying to go where younger shoppers are, including suburban strip malls and beauty aisles.<\/p>\n The company plans to\u00a0open up to 30 of its smaller off-mall Macy\u2019s stores\u00a0over the next two years. The locations are roughly one-fifth the size of its traditional mall stores and typically next to grocers, big-box stores and off-price retailers, which have steadier foot traffic.<\/p>\n It\u2019s also\u00a0opening more Bloomingdale\u2019s stores\u00a0and more locations of Bluemercury, its beauty chain \u2014 and taking steps to woo younger customers in the process.<\/p>\n Macy\u2019s CEO Tony Spring, who\u00a0stepped into the role\u00a0in February, previously led Bloomingdale\u2019s, which carries luxury brands but also has popular private labels like clothing brand Aqua. It\u2019s also known for unique customer experiences, such as limited-time events or collections that tap into pop culture moments like the \u201cBarbie\u201d movie.<\/p>\n He\u2019s hinted more of that is coming to Macy\u2019s. The company has\u00a0debuted new, exclusive clothing brands\u00a0and given others a makeover. It\u2019s trying to make Macy\u2019s more of an attraction, including by having a play area in Toys R Us shops within the stores or\u00a0cocktails inside of Bloomie\u2019s, its smaller, off-mall version of Bloomingdale\u2019s.<\/p>\n Despite efforts to jolt sales, the company\u2019s forecast is muted: Macy\u2019s expects full-year net sales to range between $22.2 billion and $22.9 billion, down from $23.09 billion in the prior year. It expects comparable sales, which takes out the impact of store openings and closures, to range from a decline of about 1.5% to a gain of 1.5% compared with the year-ago period on an owned-plus-licensed basis and including third-party marketplace sales.<\/p>\n One of the dilemmas for Macy\u2019s? Gen Z and Millennial shoppers aren\u2019t as loyal, TD Cowen\u2019s Chen said. They shop high and low, buying a luxury handbag one day and an outfit from Target, Costco or Zara another.<\/p>\n \u201cYou can actually look better for cheaper now,\u201d he said.<\/p>\n Compared to its department store rivals, Nordstrom has had more success with younger shoppers.<\/p>\n Some of that boils down to what the Seattle-based retailer carries: Nordstrom has been quicker to sign deals with hot brands and direct-to-consumer names, such as Skims, Kim Kardashian\u2019s shapewear company; and Beis, the handbag and luggage brand started by actress Shay Mitchell. It launched Australian fashion brand Princess Polly in January and timed the debut of millennial-focused fashion brand Nasty Gal with an activation in Los Angeles coinciding with Coachella.<\/p>\n Another advantage for Nordstrom? Most of its stores\u00a0are Nordstrom Rack locations, off-price stores that may have a friendlier price point for younger shoppers.<\/p>\n Still, CEO Erik Nordstrom said on the company\u2019s March earnings call that the retailer wants to do better. He said it\u2019s starting to a see a turnaround with the younger customer, \u201cwhich is an area we have a multi-year plan to improve.\u201d<\/p>\n Nordstrom is trying to increase its fashion-forward merchandise in a new way, too. About a month ago, it rolled out a third-party marketplace that allows it to sell a wider variety of items without taking on the risk of owning the inventory. The marketplace approach follows the model that\u00a0Amazon\u00a0and more recently,\u00a0Walmart, has used to bulk up its online offerings.<\/p>\n With the marketplace, Nordstrom has said it will double or triple the number of items sold through its website and app. Macy\u2019s, too, has begun using a third-party marketplace to add more items and brands.<\/p>\n Like Macy\u2019s and Kohl\u2019s, though, Nordstrom has a lackluster forecast: It expects full-year revenue, including retail sales and credit cards, will range from a 2% decline to a 1% gain compared with the previous fiscal year, which had an additional week.<\/p>\n Marketplaces can help department stores, as they\u2019re under pressure to tightly manage inventory yet appeal to what different age groups want, said Christine Barton, a senior partner who researches consumer habits for the Boston Consulting Group.<\/p>\n Cost pressures can cause a retailer to place safer bets and order the same kind of merchandise that they always carry.<\/p>\n \u201cYou take away some of that newness,\u201d she said. \u201cYou going back to more tried and true brands or products and so that becomes a bit of a self-reinforcing prophecy in terms of that younger consumer.\u201d<\/p>\n Breaking away from those old habits is something that department stores will need to do if they want to become a staple for younger generations \u2014 and stay relevant for decades more, she said.<\/p>\n<\/p>\n Department stores are aging \u2014 and so are their customers. For over a century, the stores won over multiple generations with a promise to sell shoppers a wide variety of everything. For many Millennial and Gen Z consumers, that hasn\u2019t been enough \u2014 especially as they discover items on social media, and specialty retailers, big-box […]<\/p>\n","protected":false},"author":0,"featured_media":4628,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-4627","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/4627","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=4627"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/4627\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/4628"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=4627"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=4627"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=4627"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}