It’s no longer news that consumers haven’t been ringing registers at department stores like they used to. Experts predict that more than 50% of department stores in malls across the US will be shuttered by the end of next year. While these statistics make it seem like death is inevitable for department stores, there is still a place for them in retail—provided they pivot correctly.
In this article, we’ll discuss how department stores can reinvent themselves and avoid drifting away into business history.
Omnichannel Retailing
For consumers, shopping no longer begins and ends in the store. Nearly 75% of shoppers have examined products at a physical store before purchasing them online. Consequently, omnichannel retailing is critical to the survival of department stores. Walmart’s improvements in traffic, sales, and productivity are linked to their omnichannel investments of the past several years.
One way department stores can create omnichannel experiences is by offering features such as the ability to check in-store inventory online, reserve and collect, and implement shared cart functionality in their mobile apps. These features allow mobile consumers to shop anywhere, with all the information they need to make the right purchasing decisions.
With consumers demanding fast delivery times, fulfillment is another area where retailers have to step it up. Ship-from-store omnichannel fulfillment is a sound strategy that allows for leveraging existing inventory throughout their store network to support online order fulfillment. However, to avoid out-of-stock issues and late deliveries, department stores will have to invest in supply chain systems that can provide them with accurate and real-time visibility of their inventory.
Endless aisle is another key omnichannel capability that department stores should master. Endless aisle connects shoppers to available inventory at store level, and if an item is not on hand, it can be ordered online and shipped to their home.
To successfully implement this strategy, department stores need the technology and infrastructure to pick, pack, and ship from their stores. Store associates must be armed with mobile devices powered to view customers’ online and offline purchase history, along with real-time store inventory.
Data Power
Whether buying in-store or online, consumers generate enormous amounts of data that department stores can harness to make data-driven decisions and drive real frontline differentiation.
To start with, department stores will have to acquire the technology to assemble customer data from various touchpoints for a single customer view. These tools include Customer Data Platforms (CDP), Data Management Platforms (DMP), and content management platforms. They’ll also need to develop a data strategy to help address issues such as how data will be sourced, which tools will be used to process it, and how employees will be empowered to use it.
Data is nothing without the people who make it work. Walmart credits its successful use of data to its Big Fast Data Team, which helps collect and use data effectively. Department stores must have data teams with a diverse range of skills to obtain insights from customer data. According to Deloitte, the primary roles to consider when staffing a data team are insight generators, architects, data governors, and business translators.
Since data is of no use if it’s locked up, department stores also need to do away with silos and empower teams to access and analyze data independently, using self-service tools.
Improved Online Experience
Although more consumers are moving to online shopping, they’re choosing brands that deliver superior digital experiences. In fact, 54% of shoppers would switch to a competing brand if an overall digital experience didn’t meet their expectations.
Department stores can improve the digital shopping experience by providing shoppers with hyper-personalized experiences in real time using artificial intelligence (AI). Harnessing this emerging technology will enable them to understand customers at a granular level, predict their behavior, curate better experiences, and make more relevant recommendations.
To improve the online experience, department stores will have to invest in the latest technology to understand the online shopping behaviors of their customers—which may mean working with small, specialized tech companies. Target, as one example, has a startup accelerator program to help improve its in-house data analytics.
Keeping up with consumers’ need for independence, department stores must find ways to deliver an online experience that allows consumers to control their own journeys. This can be accomplished through two-way digital dialogues based on each customer’s unique preferences, interests, and needs.
Department stores can also invest in immersive technology such as augmented reality (AR) to create an online customer experience that resembles a store visit. However, retailers must stay clear from treating technology as a mere gimmick and strive to offer immersive solutions that move the needle.
Smaller Store Formats
With decreasing foot traffic, department stores will have to “go small or go home” to survive. Smaller stores allow retailers to be more agile, maintain more specialized inventories, and meet consumers’ need for convenient shopping.
Additionally, department stores must curate merchandise to differentiate themselves from smaller retailers, creating an individualized experience with inventory that varies at different locations. To curate the right products and freshen up their offerings, department stores will have to lean on customer data while utilizing private labels or partnering with other brands.
Apart from location and product assortment, stores will have to consider leveraging technology like contactless payments and self-checkouts to encourage easy and efficient shopping.
Furthermore, small stores can even be merchandise-free and serve as a pickup point for online orders or showrooms to drive experiences. Nordstrom Local, for example, is a small retail space with no inventory at all. The location is billed as a “service hub,” offering services such as buy online/pickup in-store, returns, curbside pickup, alterations, and tailoring.
While no one can predict what the future of the department store will look like, the presence of massive mall outlets as we know them will almost certainly diminish. Department stores that will remain standing are those that are agile, technologically driven, and customer-focused.
