Alessandra Malito/MarketWatch – That avalanche of promotional emails and in-your-face advertisements isn’t cutting it for shoppers, and it’s costing department stores sales and profits — as well as their employees and locations.
This week, Macy’s M, -1.17% announced it’s cutting more than 10,000 jobs and identified 68 stores out of the 100 closures it announced last year, Sears SHLD, -4.81% announced on Thursday it’s closing 150 stores; and Kohl’s KSS, -1.13% said on Wednesday its holiday sales were “volatile.” Meanwhile, year-round promotional sales have recently come under renewed scrutiny: Macy’s, Sears and Kohl’s, along with J.C. Penney JCP, -5.02% were sued last month for allegedly misleading shoppers over big discounts, according to the LA Times. Kohl’s and Sears declined to comment; Macy’s said it does not comment on ongoing litigation and J.C. Penney did not respond to a request for comment. “I think it is a tipping point for the department store industry,” says Jeff Green, an independent retail analyst based in Phoenix, Ariz. “They really all lack a point of differentiation.”
Off-price stores such as T.J. Maxx and Marshalls, owned by TJX Cos. TJX, +0.16% , and Ross Stores ROST, +0.21% are happy to tempt customers away from Macy’s and Kohl’s, experts said. Shoppers can “treasure hunt” at these off-price stores in the hopes of finding a rare designer item at a massively reduced price, according to a recent analyst note by Wedbush Securities, a financial and investment firm. And there’s not always much of an adventure to be had in a mid-market promotional sales store where everything always appears to be discounted, Green adds.
Many consumers, of course, are moving online en masse, spending more this year than any other previous year, according to software company Adobe Digital Index. Online sales in the 2016 holiday season rose 11% from a year earlier to nearly $92 billion, according to data released late Thursday by Adobe. Among them: Online retail giant Amazon shipped more than 1 billion items around the globe this holiday season, and nearly a third of shoppers were expected to do 75% of their holiday shopping online last year. Department stores are also a venue for “showrooming” where people view items in the store only to buy them online for less, said Michelle Madhok, online shopping expert and founder of deals site shefinds.com.
It’s also easier to price compare online — and then binge on Netflix NFLX, -0.09% — and shoppers can get overwhelmed when they walk into a store replete with red signs offering unbelievable discounts, experts said. After all, retailers are also piling on the advertisements in their email inboxes and on television, and fluctuating price tags of their items. Of course, consumers love discounts, but given the barrage of offers it’s no surprise that they appear to be more discerning before parting with their cash, Madhok said. “It’s not necessarily the one big sale a year,” she said.
But department stores aren’t going down without a fight. Companies are building apps for an easier shopping experience, including lists and points, and opening their own off-price stores of their own. Macy’s opened four discount stores called Macy’s Backstage, to compete with stores like T.J. Maxx, and Kohl’s came out with Off-Aisle.
It’s also getting easier to compare prices among competing retailers, Madhok said. “It’s definitely like a full-time job to follow all the sales,” she said. Set up price alerts for items you’ve recently bought or plan to buy, as you can finagle a price adjustment if something you purchased a few days ago went on sale. There are also apps that help shoppers save, Madhok said: Paribus, which hooks up to your Gmail account and reads receipts to find price adjustments; camelcamelcamel, which tracks Amazon price history; and PriceGrabber, which looks for the lowest prices of goods.