Being mostly retired and looking from the sidelines, I’m viewing our current industry as a complete mystery. In my career, I did business with everyone from Walmart/K Mart to Neiman Marcus/Saks but the focus of my career was the “asses of the masses”—mid-tier department stores.
COVID-19 has had an enormous impact. However, I think it mostly highlighted endemic issues that already existed within the industry. The mid-tier department store world has been reduced to Macy’s, Kohl’s, and regionally Dillard’s; all others are either gone or so reduced they’re no longer meaningful. This list grows endlessly: Bon-Ton, Stage Stores, Belk, Stein Mart, JC Penney, Sears, Lord & Taylor, etc. plus specialty chains that duplicated portions of department stores: J Crew, Brooks Brothers, Men’s Wearhouse, Jos A. Bank, etc. As depressing as this list is already, it keeps expanding. Many of these stores deserved to disappear; the pandemic just accelerated the process. I’ve always wondered that if a business goes away and no one cares, did it deserve to exist in the first place?
So, mystery one: What happened to all these lost sales? We’re talking about billions of dollars in sales that seem to have simply disappeared. Certainly, they didn’t all go to Amazon or Stitch Fix or the off-price channel. Is it possible that the consumer never really needed these goods and that the pandemic completely altered buying habits? Just think of the infrastructure and direct expenses required to run these businesses that are now gone and nobody seems to care. Did forced isolation teach consumers that they didn’t really need those new shirts and pants? It was once thought that if a mall anchor went away, the remaining stores would prosper from less competition. What happened instead was that a missing anchor meant less traffic, and less business, for everyone.
Mystery two: where are any new significant menswear brands? Department store business was once built on massive, iconic menswear brands. Then, in an effort for department stores to differentiate, gain control of their business and improve margins, they committed to building private label brands. The same labels that built department store business were now forced to sell the very successful off-price channel to sustain their sales volume. This made the labels less desirable to department store consumers and the department stores allowed the dilution. We still have Levi’s, Calvin Klein, Ralph Lauren, Tommy Hilfiger, and Tommy Bahama (exiting department stores in favor of their own stores) but many brands have become labels of diminishing significance. Where are the $100 million brands that would become $1 billion labels? History says that a void is filled by something new. I find no one even close to filling that void. Why no new megabrands?
Mystery three: in such a dire environment, how are small and medium-sized vendors hanging in? It’s a rare vendor who is not projecting less volume in the near or mid-term: how are they able to reduce expenses enough to stay in business? What future do they face? When we get back to trade shows, the booths will again be filled with smaller companies unlikely to make it. I have been critical of the shopping center companies buying bankrupt retailers: this has so far been very good for them but, with a whole different set of profit parameters, many of these stores will continue to exist without ever making money. Does this make any sense? Most of these newly purchased retailers needed to go away in the natural evolution of business. Is this also true for the multitude of vendors in the same dire position?
So, I have questions but not answers. I do think that the pandemic, which accelerated store closings and the growth of online commerce, has permanently altered our retail world and consumer shopping patterns. If we start to think with a blank sheet, the solution may well write itself.
Fred Rosenfeld is an industry consultant; he can be reached at firstname.lastname@example.org.