Department stores are focused as they skim market share from discounters.
Nearly a year-and-a-half after one of the largest department store mergers in retail history was announced — Federated Department Stores’ $17 billion acquisition of May Department Stores — Federated converted the beloved Marshall Field’s to Macy’s, sold Lord & Taylor to an investment group and retired nameplates such as Famous-Barr, Filene’s, Foley’s, Hecht’s, Kaufmann’s, L.S. Ayres, Meier & Frank, Robinsons-May and Strawbridge’s. But despite these roiling changes, this industry sector-in-flux managed to gain customers, according to the WWD Where America Shops survey.
“Department stores have stopped eroding, and that’s the big message,” said Wendy Liebman, president and founder of WSL Strategic Retail. “The people remaining in the business are doing a better job of preparing offerings around core categories. For the person who can afford to shop in department stores, it’s much more compelling.”
In the survey, 68 percent of respondents said they regularly shop for clothes for themselves in department stores, two percentage points ahead of last year. The discount category received 65 percent, as it did in 2005. Modest gains were made by small specialty chains, whose popularity rose from 44 percent in 2005 to 45 percent in 2006. Independent boutiques got a four-point bump to 20 percent this year.
Liebman said J.C. Penney has been a beneficiary of some of the gains, with its convenient off-mall locations and new fashion brands such as a.n.a. for casual apparel, and the dressier W and Nicole.
“The Penney’s story is really interesting,” Liebman said. “They’re happy to be in the middle, although in some ways they’re really not in the middle. For someone who would normally shop at Target or Wal-Mart, Penney’s is the trade-up.”
When it comes to where respondents shopped most often for their own clothes, discounters lost two percentage points, dipping from 30 percent in 2005 to 28 percent this year. Individual discounters lost ground in specific product categories. The percentage of women who said they shopped for accessories at Kmart dropped from 8 percent in 2005 to 7 percent in the recent survey. At Wal-Mart, there was a 1 percent decline to 35 percent, but Target saw a 2 percent jump to 30 percent in accessories.
Jeans proved to be less popular in the discount channel. Wal-Mart, for example, lost two points, to 30 percent. Kmart declined from 9 percent to 8 percent and Sears went from 11 percent last year to 8 percent currently.
“We’ve seen a movement from the discount store to the supercenter,” said Mandy Putnam, vice president of Retail Forward. “If discount department stores are losing their shopper share over time, it’s because of the closing of numerous Kmart stores. Target is still sustaining good growth. In the last few months, we’ve seen gas prices go through the roof and people are trading down a bit.”
Shoppers were asked to project their buying habits for the second half of the year, and 56 percent of respondents said they planned to buy about the same amount of apparel in the next six months as they did in the past six; 27 percent said they expected to buy more, and 17 percent said they thought they would buy less. Among people who answered “less” or “about the same,” 26 percent said their decision was influenced by the cost of gasoline.
Specialty chains increased their share in several categories, including dresses/suits/eveningwear and jeans; however, stores like Gap are still struggling to regain their footing.
“All of them took a little bit of a hit, except for Chico’s,” Putnam said. “People don’t have time to go to traditional malls and shop the whole day anymore. We see a correlation between mall-based department store sales and mall-based apparel specialty store sales. There’s so much cross-shopping between the two venues that their fortunes sort of rise and fall together.”
Despite sticker shock at the pump, consumers in the Where America Shops survey rated assortment of styles above price. They said a variety of styles was the most important store quality — 33 percent, up from 29 percent in 2005. Price lost four points as the most important quality, to 33 percent. Assortment of sizes was also a big factor; 16 percent cited sizes this year versus 14 percent a year ago.
Candace Corlett, a principal of WSL, said shoppers are more focused on assortments in surveys because they already know where to go for low prices — discounters and off-price stores.
“Finding something new and interesting and getting a lot done under one roof” is a priority, she said. “What they’re really looking for that’s hard to find is new and interesting stuff to buy.”
Among discounters, “Target continues to work pretty hard at getting the mix right,” Liebman said. “They’ve got a lot more competition today with H&M, Zara and now Mango opening, and the whole sense of fast, affordable fashion. Target’s International Flights of Fashion is a good example that they’re recognizing they have to be faster and sharper.”
It remains to be seen whether specialty stores such as Gap will regain their position.
“Gap has become so commoditized,” Liebman said. “But their pricing is not that of an everyday commodity. Who is their customer? One day it’s Sarah Jessica Parker, the next it’s Joss Stone. The fundamental issue for them is relevance.”
While department stores have stabilized, in Liebman’s opinion, she said their challenge is to live up to the promise of the hype — especially Macy’s, which has been tirelessly touted by Federated. “The next round is, ‘What will Macy’s be like when it becomes 700 stores?'”