If you don’t want to fall into a deep depression, don’t read the article in today’s The New York Times entitled “The Death of the Department Store: ‘Very Few are Likely to Survive’”. It goes on to describe the “Shuttered flagships. Empty malls. Canceled orders. Risks of bankruptcy.” And on and on, emphasizing the fact the department stores were in a state of decline for at least the past decade, well before the shutdown that caused March sales of clothing and accessories to fall by half, with April projections even worse.
I don’t want to dwell on the article but allow me just a few highlights:
*Department store cash flow has dropped dramatically. Analysts project that Macys has about four months of liquidity, Kohls six months, JCPenney seven months and Nordstrom, 12 months.
*The entire executive team at Lord & Taylor has been let go; payments to vendors have been suspended for at least 90 days.
*Neiman Marcus is on the verge of bankruptcy with $4.8 billion of debt, expensive rents and a large percentage of their 14,000 employees on furlough.
*E-commerce at department stores is off 40 percent.
*Brands are losing millions of dollars in cancelled orders: fall is on hold and resort has been cancelled. Industry analysts believe that most brands will end up going direct to consumer; surviving department stores will end up leasing space to key brands.
Personally, I’m more optimistic than The New York Times. I believe department stores will need fewer, smaller stores going forward and a good amount of reinvention but I’ve been reading about the death of department stores for my entire career (don’t ask…) and I don’t think that COVID-19 will do them in. Excessive price promoting, perhaps, out-of-season timing, and the need to show short-term profits to shareholders, but I believe this shutdown will allow time for creative juices to start flowing and a new generation of department store merchants to think out of the box.
That said, what an opportunity for local specialty stores! Yes, the next few seasons will be highly promotional with the supply/demand ratio completely out of whack. But people who’ve been on lockdown for endless months will crave human contact: a friendly smile, a home-made brownie, a glass of wine, a hug. And I truly believe customers will react to product that’s special, that’s not widely distributed (yes, there are still brands that don’t sell online), that’s artisan-inspired or handcrafted or has a story to tell. And who better to tell it than independent store owners who live and love and breathe the business. So many of their innovative ideas are now resonating, even while their stores are closed: closet cleanings, style boxes, gift cards with all kinds of incentive/charity tie-ins, Instagram images of well-dressed clients wearing clothes from their store, selling items on Instagram Stories where a client can buy the item through a direct message (DM), and virtual pop-up shops with key vendors online.
Call me naïve but I believe the retail pendulum will soon swing back to more intimate venues with unique product, impeccable service and more inspired ideas than we’ve ever seen. I just wish I could tell you when.