By  on May 22, 2006

WISMAR, Germany — Are department stores on their way to becoming "dinostores"?

The format faces perils of almost seismic proportions in today's changing marketplace, according to retail executives addressing the first international department store congress here last week. The congress was organized by The Management Forum, Textil Wirtschaft and Karstadt Department Stores, which also celebrated the opening of the first Karstadt department store 125 years ago in this former East German town on the Baltic Sea.

While all of the executives pointed to the dangers at hand, the merchants' main message was that there is a lot of life — and promise — still left in the species, but only if stores are prepared and willing to adapt.

Differentiation is the name of the game, merchants and analysts from the U.S., France, Thailand, Germany, Switzerland and England said. Stores must be more clearly delineated as brands that are recognizable to consumers, and the customer experience enhanced. This can be accomplished through more individual assortments and presentation, by staging memorable events, improving and/or expanding services, investing in personnel and by expressing uniqueness rather than standardization on every possible level, executives suggested.

"It is painfully clear that we are in the midst of a retail revolution that is powerful, relentless and, in many ways, poses the greatest threat to the future of the traditional department store," said Andrew Jennings, president and chief operating officer of Saks Fifth Avenue.

The American market is being "turned on its ear," he said, by escalating consolidation. "Big names are changing hands. Wholesalers are buying retailers. Private equity firms are on a shopping spree. Private label is growing. Online shopping is exploding. And specialty retailers are looking to expand their presence in new geographies," he told the audience, which had representatives from the fields of retail, marketing, manufacturing, real estate and market research.

However, Jennings was far from pessimistic. He noted Saks Fifth Avenue is well into the first phase of a multiyear program to revitalize the brand, and has made strides in connecting with target customers through differentiated designer product ranges and major events. E-commerce, far from being a threat, has developed into a bonus. Five years ago, saks.com was in its infancy. Two years ago, it ranked as Saks' 15th-largest store. Currently, it is the third-largest store in the Saks network, he said, and is on its way to becoming number two after the New York flagship.

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