Department stores on the upswing: two approaches to change management and brand architecture

J_crew Department stores are making a comeback.  Sales are up 4.1% compared to 1.3% at the specialty chains.  J.C. Penny will make around $1 billion this year, having lost roughly that amount in 2003.  Bloomingdale’s is opening 4 new stores.  (All figures and quotes from NYT article by Barbaro, below.)

This is big news because department stores have been in decline for several decades and were widely regarded as down for the count.

The usual explanations for this decline are vanishing sales staff, badly organized stores, and fashion insensitivity.  I think there was another explanation that didn’t get enough attention.  The specialty retailer was a better meaning manager.

We can chart the decline of the department store against the rise of the national brand.  As branding got better, and marketers became more skilled, the department store became more punishing.  It was so uninviting, so unorganized, and so aesthetically unforgiving, even the best brands began to wilt.

A response was inevitable.  Ralph Lauren said, "leave this to us," and build little boutiques into the department store.  These boutiques out-earned the rest of the floor because they continued to build the brand.  Mr. Lauren’s store was a bastion of privilege in what was otherwise biggish, boxish and artless.  I heard, but never confirmed, that Mr. Lauren had a full time staff member to search out those "rowing team" photos that gave the store it’s preppy feel.  The boutique could do meaning management that the department store hadn’t known since in it’s golden palace hey day. 

It wasn’t long before the boutiques in-store gave rise to retail specialty out-of-store.  The Gap, J. Crew and Victoria’s Secret would do on a larger scale what the boutique had done on a small one. Product lines, store design, retail interactions all of these could now be devoted to the same branding objective.  Small was beautiful.  Meanings were managed.

There are lots of reasons that department stores are getting better. They have worked on the retail staff problem (no one so well as Nordstrom’s.)  They have made stores more beautiful and less confusing.  And the number are buoyed by the success of the high end (e.g., Neiman Marcus and Saks).  James Gold, CEO of Bergdorf Goodman, says his store is doing well because "the rich are getting richer at a staggering rate."

But there is another factor that catches the attention of those of us who loiter like ill-tempered teenagers at the corner of anthropology and economics.  (I understand that some of you are still tormenting the owner of the Quick-Mart.  Yes, I understand he’s a Keynesian…all the more reason to leave him alone.)  It turns out that the department store is now able to manage meanings in a way that boutiques and specialty stores cannot. 

“The great advantage the department store has is the ability to quickly move from one brand to another to keep itself fresh,” said Stephen I. Sadove, the chief executive of Saks, whose sales have improved sharply over the last three months on the strength of designer brands like Tahari, Theory and Juicy Couture.  “The specialty store does not have that luxury,” he said.

Ah, this is interesting.  The specialty store could go deep.  It could cultivate the brand carefully and well.  But in a hyperactive marketplace, where consumer taste change often and shifts suddenly, the real challenge is remains current.  And it is easy to do this with many brands supplied by other players than one perfectly managed brand of one’s own.   Retail, a river runs through it!  This is it’s adaptive advantage.  Potentially, the department store can be a complex adaptive system. 

I know this sounds a little "long tail" and it is, to the extent that Chris Anderson is imagining system that contains and distribute lots of differences.  But notice that this "river" is not filled with lots of tiny consumer choices of the kind Anderson has in mind.  What gives the department store it current advantage is that it can dial up Theory one week and Juicy the next.  (Forget Juicy Theory, that’s for the lads on the corner.)  In point of fact, the rise of the department store may be taken as a proof of the wisdom of a chunky marketing, one that contemporary markets require the bundling of more, more nimble brands, not the thousands and thousands of one-off transactions enabled by Amazon and eBay.

Now, because marketplaces are nothing if not responsive, we can imagine that Ralph Lauren, The Gap, J. Crew to find away to take back their advantage.  The stores will have to put in place chunky marketing strategies, incorporating more brands that cover more difference.  Existing, house, brands will have to become rivers of their own, with more variety and change running through them. 

This will take sensationally difficult meaning management.  The marketer will move from intensive meaning management to something more extensive and noisier.  I believe this marks a transition from the brand and meaning management of the 1980s to the new meaning management of the 21st century. 


Barbaro, Michael.  2006.  Showing a New Style, Department Stores Surge.  New York Times.  November 17, 2006. here

10 thoughts on “Department stores on the upswing: two approaches to change management and brand architecture

  1. Hilarie

    JC Penney has also done a remarkable job in updating and creating great products. With women’s fashions in particular, they have created a mix of classic and updated styles. I have purchased roughly 90%+ of my work and casual wardrobes from them for at least the past 6 years. No one else comes close to offering what JC Penney does. And they have developed strong brands – St. John’s Bay (casual), Worthington/east5th (work), a.n.a. (updated work and casual). I’m looking forward to JC Penney’s continued success and development!

  2. jens

    editor’s essay on the same topic in today’s ft ‘how to spend it’ supplement (no link – only on paper)

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  5. ayesha

    I’d agree with Tom. I think dept stores have really pulled their act together – they’ve had to – but they do have a ways to go especially in the customer service dept. I was at Bloomingdale’s in NYC this past weekend and it was a complete mob scene which can be a turnoff for some, but the screeching 20-somethings seemed to be loving it.

  6. Jim

    I think we would all agree that some retailers have turned the corner and others have more than a long way to go.

    I see even the successful retailers as being the brand that is never the hottest; but can always bring the hottest to consumers, and never have to burn their wings. After all, in the spirit of Plenitude, a brand can only be the hottest by changing to the new bulls eye, something few, if any, have ever done.

    Retailers are asking for a different trust than product brands or narrow retailers; trust me to get you what you want or need, and I’ll even let you tell me what it is.

  7. artme

    The department stores can switch the different specialty brand-store “modules” to keep the mix fresh. But not without costs. There has to be some consistency as well, customers don’t like to discover too many changes, or fair-weather friends either. It’s not that easy, because the department store is selling their identity as being one who is solid enough to trust in the market, a guide. To change every moment something isn’t fresh is more like junk-bond finances, to keep the analogy. And who said product brands in their stand-alone units, don’t the ability to evolve in the same way, that is, change certain “modules” within their system and merchandise, shift atitudes, team up with cross-promotions, and so on.
    I don’t think the posting gets close to explaining how the many Hechts and other name-department stores now all fall into one big Macy/Bloomingdales. But it was interesting.

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