A Los Angeles Instances headline in 1995 requested, “Can the division retailer survive?” 1 / 4 century later, CNN proclaimed that “America has turned its again on large shops.”
These are simply two of many obituaries predicting the approaching demise of the U.S. division retailer—and all that pessimism has been backed by the info. Department shops have been shedding market share for many years, first to big-box discounters like Walmart and Goal within the 1980’s and 90’s, and extra lately to Amazon. The division retailer’s proportion of complete U.S. retail gross sales has fallen from about 14% in 1993 to solely 2.6% final yr.
However now, maybe improbably, there are new indicators of life within the retail format, with progress this yr at Macy’s, Bloomingdale’s, Dillard’s, Nordstrom, and Belk—and indicators of stabilization at J.C. Penney and Kohl’s.
The trail that shops are taking again into consumers’ favor is a return to what made them widespread within the first place: well-maintained and engaging areas with attentive employees, a well-chosen number of merchandise, and attractive new manufacturers. Many chains are discovering that fewer shops are higher, and have been shutting down places to keep up high quality and model congruence.
With most merchandise obtainable on-line, typically at decrease costs, shops should supply some actual worth to the brick-and-mortar shopper. Nevertheless it’s an uphill climb to reverse a number of the erosion of requirements which have diminished the enchantment of department-store purchasing. Competitors with the Walmarts, Targets, and T.J. Maxxes of this world led many division retailer corporations to chop corners and skimp on retail thrives, eroding their raison d’être within the shopper’s thoughts.
“You understand what was powerful about shops?” Macy’s Inc. CEO Tony Spring lately informed Fortune. “We didn’t execute nicely. A foul retailer, it doesn’t matter what you name it, goes to fail.”
A string of unhealthy seasons
And certainly many did fail. In 2020 alone, Neiman Marcus, J.C. Penney, Lord & Taylor, and Bon-Ton Shops filed for chapter safety. They have been already struggling earlier than they have been pushed over the sting by a pandemic that saved consumers away for months. A few years earlier than that, Barneys New York and Sears did the identical, finally going out of enterprise altogether.
As Spring informed Fortune, Macy’s current success—together with its greatest quarter for gross sales progress in three years—is because of a playbook targeted on much less retailer litter, a extra targeted assortment of merchandise and types, and extra staffing in key departments corresponding to ladies’s sneakers and attire.
Rival Dillard’s, a primarily Southern and Southwestern chain with 290 shops, has additionally seen modest progress by following these fundamental retail precepts. In contrast to a lot of its mall-based friends, Dillard’s has hardly ever deviated from its system of neat shops and considerate product discovery, and is roughly the identical measurement immediately because it was 15 years in the past by income and retailer rely—not like chains that expanded quickly, then closed scores of shops.
One other division retailer that seems to be staging a comeback is Nordstrom, which went personal this summer time to revitalize its enterprise exterior of Wall Avenue’s glare. It has seen gross sales rise 4.1% within the first half of 2025. Belk, a privately held Southern chain, is seeing progress too, although extra modest, based on trade estimates.
Jeff Schear/Getty Photos for Nordstrom
Nonetheless, it’s too early to pop the champagne. Dillard’s and Macy’s modest comparable gross sales progress of about 1% final quarter is hardly the mark of a roaring retail renaissance. And Penney and Kohl’s are nonetheless seeing gross sales declines, albeit much less extreme than just some quarters in the past.
In the meantime, some corporations are nonetheless deep within the doldrums: Saks International lately stated its gross sales fell 13% final quarter. In that case, the decline is basically as a result of distributors usually are not sending it sufficient merchandise given current delays in getting fee from the debt-laden firm. Clearly, shops usually are not out of the woods.
Catering to the bargain-seekers
The vacation season, throughout which shops get practically a 3rd of their annual gross sales, can be a serious take a look at of their nascent comeback. The Mastercard Economics Institute has forecast that gross sales will rise 3.6% November and December, a slower clip in comparison with final yr’s vacation season. And consumers are more likely to be significantly bargain-hungry, that means they are going to be holding out for offers, a development division retailer executives are already seeing.
“Many People are extra careworn than ever about vacation spending, and wallets are stretched,” JCPenney chief buyer and advertising officer Marisa Thalberg stated in a current presentation of the retailer’s vacation season technique. The corporate’s response? To supply extra offers, and earlier within the season.
Kohl’s Chief Advertising and marketing Officer Christie Raymond expects consumers will go to shops extra typically throughout the Thanksgiving to Christmas interval, however purchase much less throughout every go to and gravitate to cheaper merchandise as they really feel the financial pinch.
“We’re seeing buying and selling down,” Raymond stated at a media briefing in October at Kohl’s design workplace in Manhattan. “Whereas some clients have been possibly buying a premium model, we’re seeing them commerce down to non-public manufacturers.” This might bode nicely for the success of Kohl’s current efforts to refresh its lengthy languishing retailer manufacturers.
Even the high-end retailer Nordstrom, with its well-heeled clientele, is emphasizing extra low-priced gadgets than traditional this yr. At its New York flagship, Nordstrom has constructed a two-story space to showcase giftable gadgets, with about 800 merchandise that price lower than $100.
Again to the long run
A century in the past, shops started a golden age during which they have been on the forefront of America’s burgeoning shopper economic system. They have been grand behemoths, sometimes in metropolis facilities, the place purchasing was an occasion—somewhat than the fixed pastime it’s immediately, typically achieved by scrolling on a tool.
These have been memorable experiences: a visit to JCPenney to purchase a Sunday greatest swimsuit; the fun of selecting the right debutante ball robe at Neiman Marcus; or the much-anticipated buy of a brand new family equipment at Sears.
H. Armstrong Roberts/ClassicStock/Getty Photos
Within the 1950’s, Macy’s, Sears and Penney started increasing with giant, multi-level shops because of the mushrooming of suburban malls throughout the nation.
However a few many years later, the rise of big-box retailers that boasted decrease costs, like Walmart and Goal, challenged that supremacy. And by the 1990’s, shops have been in secular decline. The rise of Amazon and e-commerce extra broadly didn’t assist.
Amid all this transformation, shops began to appear somewhat old school, a sea of sameness providing drained manufacturers in badly lit, boilerplate shops the place all the pieces appeared to finally find yourself within the low cost bin. Underneath strain, shops tried to chop margins by lowering staffing, which made them really feel messy and untended.
And several other leaned into consolidation—which in some methods compounded the issue. When Macy’s bought Could Division Shops in 2006 and bought regional chains corresponding to Marshall Area’s, it discovered itself with too many shops, too close to one another.
Shifts in shoppers’ tastes additionally dealt a blow: Prospects have been not wowed by being sprayed with fragrance upon entry to the wonder part, preferring the much less didactic means of promoting magnificence merchandise which have made the extra youth-friendly model Ulta Magnificence a phenomenon within the final decade.
Efforts to compete with Amazon throughout its ascent within the 2010s had shops taking part in catchup on provide chain prowess and integrating shops with e-commerce—typically to the detriment of in-store expertise. “They forgot what they existed for,” stated Joel Bines, a former retail guide with AlixPartners and a present director of North Carolina-based Belk. ”It grew to become all about effectivity and conglomeration and homogenization.”
Looking for trend authority
Now the pendulum is swinging again towards a deal with how shops feel and look for patrons, the merchandise they promote, and on standing out from the others. A giant a part of that’s undoing the expansions of earlier many years: Macy’s is prioritizing 125 of its shops, or a 3rd of its fleet, whereas closing dozens extra shops within the subsequent two years. And JCPenney shed a whole bunch of shops in its 2020 chapter and is now all the way down to 650 places, from 1,100 a decade in the past.
However because the adage goes within the retail trade, you’ll be able to’t shrink your means again to greatness. Department shops nonetheless must make a compelling case for shoppers to come back again.
And there’s floor to regain with the manufacturers shops promote as nicely. Luxurious manufacturers have sought to distance themselves from the more and more shabby in-store expertise and ubiquitous mark-downs at shops. For years, trend corporations like Ralph Lauren pulled their merchandise from Macy’s shops to promote extra of their merchandise direct to shoppers on-line and at their very own shops.
However now, Macy’s CEO Spring, who’s credited with revitalizing Bloomingdale’s within the decade he led that chain, is betting that the retailer’s large attain, with 40 million clients, mixed with its improved shops, can restore the model’s “trend authority” and lure high manufacturers again.
Department shops are additionally trying to companion with new manufacturers. JCPenney, as an example, can be promoting unique gadgets by designer Rebecca Minkoff for the 2025 vacation season.
Successful again older clients
To recreate a premium purchasing expertise, shops have to search out the proper steadiness between stocking sufficient selection to serve a variety of consumers and never cluttering shops with too many merchandise. To that finish, Nordstrom and Macy’s are among the many chains trimming down their assortments.
That does go away retailers much less margin for error and requires a greater mastery of information analytics to enhance demand forecasting—ensuring that what’s on supply matches what consumers need. That can be a problem for some chains. “They’re coping with this beast of an excessive amount of information and never sufficient actionable insights,” says Shelley Kohan, a professor at Style Institute of Know-how in New York and a former Macy’s government, noting that that is an space the place AI will help.
Nonetheless, even when all these chains do renew themselves, nobody ought to anticipate them to all of a sudden re-emerge as an enormous risk to the likes of Walmart or T.J. Maxx. Attempting to win new, youthful consumers is pricey and will find yourself being futile. Some analysts say that’s why shops ought to deal with older consumers, who’ve way more disposable earnings. “Whereas some are chasing the finicky Gen Z and millennials, they need to actually be targeted on recapturing Gen X,” says FIT’s Kohan.
Successful again these present shoppers who keep in mind the glamor and delight of an old school division retailer purchasing spree is the important thing, says Bines. “Your priors develop into patrons once more, and the patrons develop into loyal,” he says. “It’s a self-perpetuating cycle. After which possibly you’ll be able to win some new consumers.”
