Discounters show they must change fast or die
Mainstay department stores struggle to survive
Ricardo Thomas / The Detroit News
Nationwide, Montgomery Ward stores are going out of business, like this store in
Dearborn, following changes in the buying habits of its clientele.
Retail closings
Some of the retailers announcing store closures:
Ricardo Thomas / The Detroit News
Barbara Garcia of Canton Township shops for a handbag in Parisian, a division of
Sak's, in Livonia. Parisian is a newer concept store, catering to quickly changing
demands.
By Karen Talaski / The Detroit News
DETROIT -- How the mighty department store has fallen.
Once a retail mainstay, department stores are struggling to show their relevance in
a marketplace dominated by discounters and specialty stores.
Stores that ruled the retail landscape now face closures, bankruptcy, even
extinction. Last month, 128-year-old Montgomery Ward announced its demise, citing
competition and declining sales.
In our own back yard, Metro Detroit will witness the end of an era when its beloved
Hudson's nameplate disappears. Later this year, the formerly Detroit-based department
store will adopt the name of Marshall Field's, its more popular and well-known cousin,
a move its corporate parent believes will enhance its brand identity and market
position.
The Hudson's name recalled the days of one-stop shopping for Mike Lobsinger, 51, of
Bloomfield Hills. "There never was a better store than Hudson's. It's a shame we can't
capture it in a bottle forever for everyone," he said.
But to regain their prominence, department stores say they must move forward --
fast -- and reinvent themselves. They must build new identities, focusing on traits or
specific products that make them stand out, and learn to move quickly to capitalize on
consumers' ever-changing needs.
Some will fail, experts say, but the survivors will be more responsive to their
customers, provide a better selection and offer competitive prices.
Department stores are learning a lesson from the world of science, said Joe Grillo,
an analyst who covers the industry for Deutsche Banc Alex. Brown. Grillo calls it
"retail Darwinism."
"Retail is about evolution," he said. "It's about new concepts coming in and
attracting the customer, taking market share from the existing operators."
Department stores grew out of necessity. As cities expanded, citizens who lived
beyond the hubbub looked for stores that sold a variety of goods so they could finish
their shopping in a single trip. Between 1870 and 1950, the department store became
the major outlet for goods and services in this country.
Montgomery Ward, founded in 1872 as a catalogue retailer, opened its first store in
1926. Four years later, the company operated 550 stores across the country. Wards and
its young rivals -- stores like JCPenney and Sears, Roebuck & Co. -- carried
everything a household needed from floor to roof.
But department stores felt the pinch as the nation's social and demographic
patterns shifted. Consumers flocked to suburban areas, where shopping malls emerged.
Shoppers' time became more limited, and fashions moved faster as television and later
the Internet grew in popularity.
"The department store industry continues to be the fashion authority for the
majority of Americans. However, this position is being challenged on one side by the
growth in specialty retailers and on the other by better execution from the mass
retailers such as Kmart with Martha Stewart," said Michael Exstein, retail analyst
with Credit Suisse First Boston.
Ricardo Thomas / The Detroit News
Montgomery Ward, founded in 1872 as a catalogue retailer, opened its first store in
1926. Four years later, the company operated 550 stores across the country. Now, Wards
is closing for good.
Rethinking shopping
Discounters gave one-stop shopping a new definition, Grillo said. Instead of
wandering a mall for hours, consumers could head for Target, park close to the door,
grab a cart and complete several errands in less time with less stress.
"Retail is about theater. It's about attracting the consumer. It's not only about
having great products, but keeping an eye on the whole shopping experience," he said.
Discounters are nibbling away at chain department stores, according to U.S.
Department of Commerce. Discount stores earned 65 percent of the retail market in 1998
with sales of $184 billion. Those figures increased in 1999 to 67 percent and sales of
$203 billion, the most recent figures available.
Chain stores saw sales drop from $43 billion in 1998 to $42 billion in 1999. Their
market share also dipped from 15.1 percent to 14 percent.
While department stores have kept one eye on the shopper, they've had to train the
other on their competition. Consolidation among department stores over the past two
decades has led to bigger and more efficient chains, Exstein said, that have the money
to buy out their weaker rivals.
Most at risk are regional department stores, which do not have their rivals' buying
power. Monty Mitzelfeld, co-owner of Mitzelfelds in downtown Rochester, said
consolidation has made it harder for single-store operators like him to compete.
"We're all dinosaurs," he said. "It's just a matter of who's going to be the best
dinosaur."
Even larger chains are under pressure. Along with 252 Montgomery Ward closures,
JCPenney closed 36 under-performing locations in 2000. Even Saks and Nordstrom have
announced store closures this year as retail sales slow in pace with the economy.
Mitzelfeld counters his competitors with customer service -- his salespeople know
customers by name, size and preferences. Sears is testing stores with wider aisles and
shopping carts. JCPenney is focusing on private brands to encourage repeat customers
and a larger market share.
Newer department store concepts are working their way through the market, reviving
customer interest. Parisian, a division of Saks, Inc., will be an anchor tenant at the
refurbished Meadowbrook Mall in Rochester Hills. It becomes Meadowbrook Village in
2002.
This is Parisian's second Metro Detroit location. It also is an anchor at Laurel
Park Place in Livonia.
Parisian's designer apparel and its ability to anticipate trends were the best fit
for this growing area of Oakland County, said Jim Fielder, vice-president of
acquisitions and marketing for Robert B. Aikens & Associates LLC in Troy.
"Because of the information age, consumers change their opinion on what's in and
what's out faster than they ever have before. So it puts the pressure on the store to
keep up with what their desires are and to keep it fresh," he said
