The Top Ten Department Stores, Shopper Marketing, Macy's

The Top 10 Department Stores

A few years ago, it seemed department stores were becoming extinct, that there was no place for these bloated beasts of shopping past in today’s fast-paced, digital, 24/7 shopping environment. While the department store landscape has shifted, predictions of its demise couldn’t have been more wrong. For those players still on the field, the game has become one of the most exciting in retail for both industry observers and shoppers.
 

The Top Ten Department Stores, Shopper Marketing, Macy's

Apparel Magazine has ranked the Top 10 department stores, a list comprised of retailers with at least $100 million in annual sales that are publicly traded on the U.S. stock exchange, by profit margin for their most recent fiscal years, respectively. Privately held retailers are not included, as well as Nordstrom, because it files with the SEC under Retail – Family Clothing Stores, rather than Retail – Department Stores.
 
The Top 10 Department Stores:
1.       Dillard’s
2.       Kohl’s
3.       Belk
4.       Macy’s
5.       Saks
6.       Neiman Marcus
7.       Burlington Coat Factory
8.       Bon-Ton Stores
9.       JCPenney
10.     Sears
 
As websites, mobile apps, tablets, smartphones and everything else digital continue to proliferate, the role of the physical store – albeit a quickly changing one – has never been more important. For department stores that do it right, their larger footprints offer added opportunity to entertain their customer (as JCPenney proposes to do with its new Town Square concept, where shoppers will gather socially for fun activities and services – and then shop); to devote more space to in-store digital offerings (as Macy’s is doing with digital displays side-by-side with physical product, offering both a touch and feel, as well as an endless aisle of product and a way to interact with it); and more space for more physical offerings (such as Macy’s soon-to-be-unveiled acre of shoe-selling space in its flagship herald Square location, which is in the middle of a massive $400 million renovation).
 
While some other department stores have made a big splash reinventing themselves recently, Dillard’s has more quietly been focusing on inventory control and expense discipline, while striving to "own" the spot as the destination for an edited merchandise selection of revered national and exclusive brands, supported by outstanding customer care. This focus led to an impressive 4% increase in comp-store sales and improved gross margin growth by 30 basis points (following increases of 190 and 410 basis points in 2010 and 2009, respectively). Increased focus on its online store is highlighted by its new state-of-the-art, 850-000-square-foot Internet Fulfillment Center in Maumelle, Ark.
 
With exclusive and private brands continuing to rise as a percentage of total sales, Kohl’s is up 240 basis points to 50.3% in 2011, helping to drive Kohl’s 6.21% profit margin. Kohl’s store expansion rate has slowed in recent years and most of the company’s anticipated 20 new store openings this year will be in a smaller format (55,000-to-68,000 square feet vs. 90,000 square feet). Kohl’s also continues to remodel its existing store base, completing 236 remodels in the past three years with 50 on tap for 2012, a process the company has honed with experience; a typical store remodel now takes just seven weeks — half the time it took in 2007.
 
The tagline "Modern. Southern. Style." is just part and parcel of a massive revitalization project going on at Belk that is already producing strong results for the company with comp-store sales up 5.5% and profit margin up 132 points over last year. Over a five-year period that began in 2011, Belk is investing approximately $600 million in a number of key strategic initiatives in the areas of merchandising, rebranding, e-commerce, store remodels and customer service. In June, Belk opened a new $4.5 million 515,000-square-foot e-commerce fulfillment center in Jonesville, S.C., to support its growing e-commerce, whose sales grew 10%, to $72 million, last year. The retailer is also rolling out a new Oracle enterprise system providing solutions in areas of purchasing, planning, allocation, replenishment, demand forecasting, pricing and promotion, merchandising, financial planning and size optimization.
 
Macy’s is supercharging its omni-channel strategy, one of three key strategic initiatives underway at the company, by integrating stores, the Internet and mobile devices to put the company’s entire inventory at the service of customers anywhere, by equipping 282 of its more than 800 Macy’s stores to pick and ship orders. Two other key initiatives contributing to a third consecutive year of significantly improved financial performance — including the addition of more than $1 billion in top-line sales, same-store sales up 5.3% and online sales up 40% — are: My Macy’s localization, focused on tailoring the merchandise assortment and shopping experience by store; and MAGIC Selling, focused on improving customer engagement in stores by training associates to "meet and make a connection" with every customer. The retailer is also continuing adoption of RFID throughout both Bloomingdale’s and Macy’s locations.
 

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