I don't think department stores are failing because they're a bad business. I think they're failing because they're being gutted by corporate raiders for their real estate assets.
I have come to absolutely detest online shopping. I have to return so much stuff, live with so many things that I don't actually love, generate sooooo much trash, and spend hours on hours researching everything because I can't hold it in my hand.
Then I walk into REI and ask them if I can try on a size 9 wide of a running shoe. They tell me they don't have it, so I ask them if they have any wide... they don't have a single wide shoe. Then I ask what they have and they say "Ohh we have 200 of the exact same shoe in the exact same size in stock"
And then I go order 5 different 9-wide shoes on amazon and return 4....
Have you shopped at Nordstroms and do you have money? Here's how Nordstroms won me over back when I was in a better economic class than I am today:
My daughter had a speech impediment and other issues that caused her to not feel great about herself. Little girls can be scarily mean and self organize pecking orders of meanness in some way based on self confidence which my daughter didn't have. The women at Nordstroms made her feel like a princess and made her feel good about/have confidence in herself in a way that overruled the meanness from the girls in her class (sorry small town little miss, the fancy ladies at Nordstroms in the nearest big city overruled your opinions).
Nordies then every season called and let my wife know when new things came in, and held back items in my daughter's size and the next up for her to come try on, and then would just go get them when we came in. No 'oh we don't have that size'. When they know you daughters taste and name, have brought smiles to her face, and made her confident when running into other kids from her school when out and about where before she would want to run away, well, it makes you a customer for life (or until your life falls apart and finances no longer work).
Shopping therapy probably isn't the healthiest mentally, but Nordstroms was way cheaper than what we were already spending on speech therapy a year and 1000% better for my daughters opinion of herself. I would (and did) pay anything for that. Again, maybe not healthy and it wasn't intentional (we just went in originally to get her something fancy to wear on our fancy Christmas night out to dinner and The Nutcracker) but it was shockingly life changing for my little girl. I'll add that this endorsement of (probably gross) classist/capitalism consumer therapy is brought to you by someone raised by hippie parents in Santa Cruz.
You cannot go there and get bad service in my experience. Other department stores you will have to wait around, or go hunting for a sales associate who is likely so overwhelmed they can't really help you anyway.
Nordstroms keeps enough people around that you can frequently have what amounts to personal shopper service. Of course, you pay for it, but there are clearly consumers that are happy to pay that premium (myself included.
aside: I dated a girl who was missing one foot, and Nordstroms was rather famous in the amputee community for giving 50% discounts. Pretty slick PR move really.
> I have to return so much stuff, live with so many things that I don't actually love, generate sooooo much trash, and spend hours on hours researching everything because I can't hold it in my hand.
I hate the research part, especially Amazon hasn't improved their system since the late 2000s. I'm sure lots of great improvements on the logistics and business-development side, but the store feels like hobby project and "we couldn't make filtering work, so whatever".
But on the trash part: you generate visible trash. But if you frame it slightly differently: the mall you'd go to needs to be built and heated and fully staffed, and thousands of cars need to drive there etc etc, and that consumes a lot of resources. It's just not visible, and with online-shopping it is. But I'm pretty sure online-shopping is more efficient even if you have to return 4 out of 5 shoes.
> I hate the research part, especially Amazon hasn't improved their system since the late 2000s.
Pretty sure it's regressed. I think there used to be a bunch more filters you could do based on a product category that I think went away as they added more products.
Real annoying when you want like a 4 GB memory card and it splits up your input of "4 GB" into "4", "GB" and then shows you everything with a "4" or a "GB" in it...
> Real annoying when you want like a 4 GB memory card and it splits up your input of "4 GB" into "4", "GB" and then shows you everything with a "4" or a "GB" in it...
I'm still not convinced it's not a social experiment to find out just how much it will take to make users give up and go away.
Or the size filter on clothes. Great, I can filter by size to only see pants that'll fit me. Wow, nice selection, let's open this one. Ohh... it has that size in general but it isn't available. I've come this to just writing a scraper, getting all the data and then filtering it properly just so I can buy some pants.
> the mall you'd go to needs to be built and heated and fully staffed, and thousands of cars need to drive there etc etc
And that isn't the case with the logistics for fulfilment centers and storage scattered all over the place? Just not visible to you, but as per your example times 4, which wouldn't be the case if you get something that fits at the first try.
> I have to return so much stuff, live with so many things that I don't actually love, … and spend hours on hours researching everything because I can't hold it in my hand.
i’ve basically stopped shopping online for these exact reasons. including my entire Christmas shopping list, all bought in actual stores.
- the amount of time researching what i was buying online was beyond ridiculous
- the colors or size or material was just plain wrong or misleading more than it was correct
- after all of the research, i would still end up returning so much of it.
over the past year i just save all that time and frustration and just go to the store, hold the thing, and buy it. done. so much easier.
i can’t stress how much i detest the dishonesty and misleading garbage of online stores.
I understand this in part is an issue with the fashion industry. AFAIK you might order 100 green S, 100 red M and you get 150 blue L and 50 red M (simplified example). Haven't done anything related to this in over ten years though. Things might have gotten better and depend on your scale/leverage.
Your personal experience not withstanding: Nordstroms most recent financial statements indicates that they pulled in ~$150mm on $15b in sales for the past few years. That seems like a pretty healthy business to me.
Yes, but the nearby stores that stock them might only carry the popular sizes and models. New Balance does offer some locations with complete shoe fittings and unique size ordering, but their closest location may be hours away. Sometimes a trip to the website is the only option, but it's tough to fit a shoe on a foot in a virtual setting. :)
Also, the way that Macy’s leadership talks about the business and the merger’s they’ve pursued, they consider the business to be a “toll bridge”, where they are the only large scale department store in America and thus if you want certain premium fashion goods to have distribution throughout the United States, you have to sell to them in a way that they can generate a profit.
They don’t seem to care about the customer at all and there stores are very rundown and not well maintained. It doesn’t feel like a luxury. They seem focused on selling premium fashion brands on their distribution network with location numbers. They don’t care about anything else.
And that's the reason they're being gutted. They're not crazy growth businesses anymore but have enough cash flow and real estate to make it profitable to be bled to death by these vultures.
If they cannot generate enough profits to even justify holding on to the real estate rather than putting the real estate to some other use, is that meaningfully different from failing?
Anecdotally, but it seems like a lot of these sites that once hosted these department or big box stores don't wind up getting redeveloped. At best, they might be home to a Spirit Halloween for a couple months out of a year. Having to compete with online retailers is certainly a challenge, but it doesn't seem like what private equity does to these legacy companies benefits anyone but their investors' desire for short-term profits.
Many private equity firms are perfectly happy to extract cash from viable businesses and bankrupt them. They have an asset, and they want to convert it to some other kind of asset. It often has very little to do with whether the business is failing.
Essentially, it's arbitrage. "Can be arbitraged" is not the same as failing. You can talk about things like "efficiency", but the problem with that is that the metric being used to measure efficiency is laughably simplistic - deliberately so, it's just a way to justify socially irresponsible behavior.
Yep. The department store model still makes sense in Nordstrom's target price bracket. The whole point of a physical store in the 21st century is that it can provide a hands-on, in-person experience that an online store can't. Nordstrom sells premium products where that kind of experience is worthwhile.
I don't need a physical store to compare two different 6-foot USB cables. I do need a physical store for a suit, or a nice pair of shoes, or cologne.
> I don't need a physical store to compare two different 6-foot USB cables.
i’ve had the opposite experience. the number of times i’ve received knockoff usb cables is crazy. or misleading specs from their amazon “store” pages, cables that just die in a week, usb charging bricks that don’t have the charging power they claim, etc…
sure, amazon exchanged them, but at that point the convenience of ordering online has gone up in smoke.
haven’t had the same problem if i just buy a cable from the local camera shops where they’ve vetted which cables they carry. buy it and it just works.
Huh, I've had much better luck, often buying from shadier places. I've bought a couple dozen cables from $CHINESE_RETAILER and they've all met the listed speed/power specs. I like to think I have an eye for spotting the passable items in an ocean of dropshipped sludge, but I'm not omnipotent. I do have an American brand that I'll order cables from if my money isn't paying for it.
Corporate raiders only targeted "distressed assets". They didn't pay full-price for healthy brands to gut - the whole point was to flip cheap (failing) stores.
Their goal is a quick profit. That can be a failing business but it can also be a business which isn’t as profitable as Wall Street investors want and has salable assets. The debate between short term and long term value is a famous example of how priorities shift based on the investors’ timeframe.
> I don't think department stores are failing because they're a bad business. I think they're failing because they're being gutted by corporate raiders for their real estate assets.
I think you are confusing cause and effect at least the case I know of, Sears. Because Sears' core business was dying, because of Amazon, the best way to get value out of it was to raid its real-estate assets. It may have hastened Sears' demise, but it probably was the smartest thing to do from a business standpoint.
A lot of people imagine that private equity etc. is scooping up successful businesses and running then into the ground. A company like Sears was a confused mess when they were bought.
On a short enough time frame, the golden egg currently inside the goose is more valuable than the goose itself. The problem comes when you kill the long-term profits trying to get an immediate return.
Thinking you can make more money in the short term (for example, by selling real estate) routinely kills the ability to earn a profit long term (which is now eaten by rent on land you used to own).
