American Department Stores Can Save Themselves

This is an answer to a recent Vogue Business article. The well-written article was pessimistic about the future of department store retailing. Here are few examples of successful changes.

Andrew Carnegie said: “Take away my people and leave me my factories and grass will grow on factory floors. Take away my factories and leave me my people, and they will build new and better factories.” This quote is appropriate at this time.

The board of directors of European companies is more adversarial than their American counterparts. Most European boards have union members, lenders and vendors on the board and they make their decisions based on their experiences. American boards are generally composed of friends or good acquaintances of the chairman who hopes his board will help support his decisions. However, as times goes on, he may slow down because he is tired or his daughter is getting married.

New ideas are important. My recent article on Vans, the VF
VFC
Corp. shoe company highlights the weakness of the company and the inability to see the need for drastic change. The athletic shoe industry has changed, Van’s produces skate athletic shoes and proposed to cut down on their assortment. That is not a growth prospect.

On the other hand, Macy’s chairman Jeff Gennette is stepping aside at age 63 to allow Tony Spring (58), CEO of Bloomingdale’s to take over the corporate command of the whole corporation. Gennette has fought a good battle and but sees that Tony Spring will have new ideas and has proven his dynamic vision by improvements he made at Bloomingdale’s since he became CEO. From shoes to housewares, dresses and children’s wear Bloomingdale’s looks different today, has new customers and good profits. It’s Bloomie stores that gave a vision to Macy’s who will now open 30 Macy-Mini units. While Gennette brought new shoppers to Macy’s, he still lost sales volume and did not embrace innovation.

Saks
SKS
Fifth Avenue has divested itself of the e-commerce business as well as its off-price chain Off Saks Fifth Avenue. While one can agree that the off-price chain should stand alone, and appears to do well after the split. However, SFA should not have split internet business from the brick-and-mortar stores. One can say that one supports the other. More significant is SFA’s recognition that the growth of Sephora and Ultra Beauty chains nationwide as going to drain some of their beauty business. Management decided, correctly, to move the SFA Beauty to the second floor and form a more exclusive beauty department. The old-fashioned beauty department had to change. Mr. Mark Metrick, CEO of Saks Inc. got the support from a smart team of advisors. Once again, important changes that show a vision of business in the next decade.

POSTSCRIPT: It is obvious that a good team can change the dynamics of a company and that a new look will change the traffic of the enterprise. I am very mindful that a strong board of directors can help the CEO of a company effect changes that will change the direction of the company and keep in touch with the changing consumer mood. It will be less clubby but more effective and successful. I believe that department stores will continue to be successful. For total dressing, it is the place to go. For new fashion it is the place to go. For innovation it should be the place to go.