There’s an undeniable reality shaping up in shopping land: Midrange department stores have been suffering a nerve-jangling, long-term identity crisis that’s practically scared off their shoppers.
The effects became clear late last month when Federated Department Stores Inc. announced that by early next year it would close 68 of the midpriced Robinsons-May stores, including 14 in Southern California and 21 in the region. Further, Federated plans to convert many of the other regional department stores it bought in the $11 billion May Department Stores acquisition into Macy’s, another department store chain it owns.
To some observers, the closures and changes aren’t a surprise, but the inevitable collision of shopping and demographic trends that are reshaping the department store landscape. Department stores have been stuck in a no-man’s land for a while now. Discounters have them beat on prices, high-end retailers shame them on service and middle-range specialty stores surpass them in selection.
The muddle of the middle market has confused shoppers who aren’t quite sure what’s moderate, discount or merely on-sale-again this week. In turn, operators of midmarket department stores such as Robinsons-May can’t easily spot who, exactly, is their kind of shopper. And as the middle class itself shrinks, there are fewer of those shoppers to go around.
“It’s a little difficult to categorize consumers these days, at least the way we used to,” said George Whalin, president of Retail Management Consultants in San Marcos. “You’ve got this crossover thing happening. It used to be that you could identify a consumer by their income and the stores they shopped. Now, affluent consumers will shop at Costco and also at Saks Fifth Avenue and Neiman Marcus.”
Retail analysts define “moderate” mainly by price: tops are $29 to $69, for example; skirts or pants are $49 to $110. Go much below and you’re “discount"; much above, you’re “high end.”
Robinsons-May, part of the May Co., wasn’t just competing with other department stores, said Marshal Cohen, chief analyst at market research firm NPD Group. “One out of every other shopper at a Robinsons-May is also shopping at a Wal-Mart or a Kmart. That leads to a tremendous amount of price competition,” Cohen said.
If your store image is little fuzzy around the edges “you are at a higher risk of being overlooked,” Whalin said.
Robinsons-May did not respond to numerous requests for comment.
According to Cohen, the Robinsons-May identity crisis came about because “they tried to be something for everyone and ended up being nothing for anyone.” The closures also are part of Federated sharpening its corporate identity by focusing on its higher-end stores, he said.
There’s already been a shakeout at the top. In Southern California, high-end retailers as I. Magnin, Bullock’s and Buffums were the dinosaurs of yesterday, old-line stores that died off when they failed to modernize their management and update their stores, selection and image. Survivors such as Saks Fifth Avenue, Neiman Marcus and Nordstrom were more careful to pare down underperforming stores, explore new technologies and create lavish promotions.
Today, a buying spree has made Federated a multiple-personality chain that’s the parent of Macy’s, Bloomingdale’s, and for now, Robinsons-May, itself the product of a merger. When Federated finishes its May Co. acquisition next year it will have almost 1,000 stores, making it the country’s largest department store chain.
It will also be in need of its own nipand tuck. Federated plans to unify the many May Co. regional stores such as Filene’s in the Northeast, Famous-Barr in the Midwest and L.S. Ayres in Indiana. The Robinsons-May scenario will, evidently, play out across the country.
Many of those regional stores will become Macy’s, allowing Federated to create a 730-store Macy’s chain with a more efficient system of national advertising, simplified pricing and a nationwide wedding registry, Federated Chairman Terry Lundgren said in a statement.
Analysts have applauded Federated for clearing out the lower-middle range of its broad spectrum of stores, especially the poorly performing ones. After all, even the once-glorious Robinsons-May isn’t really Robinsons-May anymore.
“A good deal of their problems were self-inflicted,” Whalin said. “This was a company that hasn’t been very well run for a very long time. The stores were dirty, cluttered and poorly merchandised. In this environment, you can’t run not-very-good stores. The competition is way too fierce.”
Still, many shoppers may wonder where they will go for moderately priced clothing, shoes and housewares. The answer is already on their many credit card receipts from better-managed chains, specialty stores and discounters that made going cheap chic, such as Target. The middle hasn’t gone away, but it has changed, said Whalin, who counts stores such as Kohl’s, JCPenney, the Gap and Chico’s as the leaders in the moderate level. Discounters such as Ross or TJ Maxx have entered malls and cut into the middle-customer base too, Cohen said.
“All those stores were competing directly with department stores and taking away that value-oriented part of the equation,” Cohen said. To survive, stores made their stratifications sharper and more polarized.
When the Macy’s conversions begin sometime in fall 2006, consumers may begin to enjoy a more streamlined shopping experience.
“Frankly, we were over-department-stored anyway, especially in Southern California,” Cohen said. “You have malls on each side of the highway exit.”