Investments in e-commerce are allowing department stores to blunt the effects of a sharp move away from shopping in the channel.

This story first appeared in the October 28, 2014 issue of WWD. Subscribe Today.

Sarah Quinlan, senior vice president of market insights for MasterCard Advisors, cited statistics from the company’s SpendingPulse consumer buying data for September showing a 4.8 percent decline in sales in U.S. department stores. However, with a 10.3 percent increase in their e-commerce sales, department-store sales for the month — combining the figures for online and off-line —were down 2.7 percent.

“We don’t like shopping in department stores at all,” Quinlan said. “It’s been the worst category for the entire year….The physical bricks-and-mortar experience of the department store is not something people wish to pay for.”

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Brick-and-mortar department-store sales have been down every month of the year except for April, when they rose 0.7 percent, while e-commerce sales attributable to those stores have risen every month since December, highlighted by a 33.7 percent jump during the final month of last year and the countdown to and immediate aftermath of Christmas.

With the migration to online buying, e-commerce accounted for 15.7 percent of department-store sales last month, versus its 6.1 percent share of retail sales excluding the automotive category. That’s a lower percentage than the 22.8 percent of apparel sales conducted online or the 41.5 percent of electronics and appliances sales brought in over the Web but above the 14.3 percent of jewelry sales transacted over the Internet.

“This is what’s saving department stores,” the MasterCard executive said, adding that “bricks and mortar gives people the ability to have that experience [in department stores] but omnichannel gives you flexibility.”

She noted a strong upturn in sales in restaurants and for travel and lodging in recent months as evidence that consumers have money to spend but are inclined to use it for more “experiential” pursuits. “We like our families and friends again,” she pointed out.

She advised retailers to develop partnerships with, for one, travel agencies as a means of boosting apparel sales for periods when consumers are likely to be spending for vacation wardrobes. Consumers are spending, she said, but “they’re just not spending with you,” she told an audience dominated by senior management of retail and apparel firms, encouraging them to be more creative and practical in their pursuit of customers and sales.

Year-over-year sales of apparel in September were up 2.1 percent, an improvement over the 0.5 percent increase in August but well below April’s 6.8 percent increase, the highest mark of the calendar year. With a weak sales trend and prices not heading upward, U.S. apparel marketers are confronted with virtually “no pricing power,” she noted.

“We buy apparel twice a year,” Quinlan said. “We buy in April and we buy in October if the weather has turned. There was virtually no back-to-school in apparel this year whatsoever.”

Although apparel purchases by women aged 18 to 35 have improved slightly in October —rising 4.2 percent after just a 1 percent advance in the second quarter of the year — she noted that Millennials in general have “no money” and are “not spending.”

“If you want to market to Millennials, why don’t you market to me?” the mother of a female Millennial asked the audience with just a drop of sarcasm. “We have money and we feel sorry for these children — I have no idea why. And we spend on them.”

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