A Los Angeles Occasions headline in 1995 requested, “Can the department store survive?” 1 / 4 century later, CNN proclaimed that “America has turned its back on big department stores.”
These are simply two of many obituaries predicting the approaching demise of the U.S. division retailer—and all that pessimism has been backed by the information. Shops have been shedding market share for many years, first to big-box discounters like Walmart and Goal within the 1980’s and 90’s, and extra just lately to Amazon. The division retailer’s share of whole U.S. retail gross sales has fallen from about 14% in 1993 to solely 2.6% final yr.
However now, maybe improbably, there are new indicators of life within the retail format, with development this yr at Macy’s, Bloomingdale’s, Dillard’s, Nordstrom, and Belk—and indicators of stabilization at J.C. Penney and Kohl’s.
The trail that department shops are taking again into consumers’ favor is a return to what made them in style within the first place: well-maintained and engaging areas with attentive workers, a well-chosen collection of merchandise, and attractive new manufacturers. Many chains are discovering that fewer shops are higher, and have been shutting down areas to keep up high quality and model congruence.
With most merchandise obtainable on-line, usually at decrease costs, department shops should supply some actual worth to the brick-and-mortar shopper. But it surely’s an uphill climb to reverse a number of the erosion of requirements which have diminished the enchantment of department-store buying. Competitors with the Walmarts, Targets, and T.J. Maxxes of this world led many division retailer firms to chop corners and skimp on retail thrives, eroding their raison d’être within the shopper’s thoughts.
“You know what was tough about department stores?” Macy’s Inc. CEO Tony Spring just lately informed Fortune. “We didn’t execute well. A bad store, no matter what you call it, is going to fail.”
A string of dangerous seasons
And certainly many did fail. In 2020 alone, Neiman Marcus, J.C. Penney, Lord & Taylor, and Bon-Ton Shops filed for chapter safety. They have been already struggling earlier than they have been pushed over the sting by a pandemic that stored consumers away for months. A few years earlier than that, Barneys New York and Sears did the identical, ultimately going out of enterprise altogether.
As Spring informed Fortune, Macy’s current success—together with its finest quarter for gross sales development in three years—is because of a playbook targeted on much less retailer litter, a extra targeted assortment of merchandise and types, and extra staffing in key departments akin to girls’s sneakers and clothes.
Rival Dillard’s, a primarily Southern and Southwestern chain with 290 shops, has additionally seen modest development by following these primary retail precepts. In contrast to lots of its mall-based friends, Dillard’s has not often deviated from its method of neat shops and considerate product discovery, and is roughly the identical measurement at the moment because it was 15 years in the past by income and retailer rely—not like chains that expanded quickly, then closed scores of shops.
One other division retailer that seems to be staging a comeback is Nordstrom, which went non-public this summer season to revitalize its enterprise exterior of Wall Avenue’s glare. It has seen gross sales rise 4.1% within the first half of 2025. Belk, a privately held Southern chain, is seeing development too, although extra modest, in response to business estimates.
Shops, like this Nordstrom in Chicago, are making areas which might be extra inviting to consumers.
Jeff Schear/Getty Pictures for Nordstrom
Nonetheless, it’s too early to pop the champagne. Dillard’s and Macy’s modest comparable gross sales development of about 1% final quarter is hardly the mark of a roaring retail renaissance. And Penney and Kohl’s are nonetheless seeing gross sales declines, albeit much less extreme than just some quarters in the past.
In the meantime, some firms are nonetheless deep within the doldrums: Saks World just lately stated its gross sales fell 13% final quarter. In that case, the decline is basically as a result of distributors should not sending it sufficient merchandise given current delays in getting cost from the debt-laden firm. Clearly, department shops should not out of the woods.
Catering to the bargain-seekers
The vacation season, throughout which department shops get practically a 3rd of their annual gross sales, might be a serious take a look at of their nascent comeback. The Mastercard Economics Institute has forecast that gross sales will rise 3.6% November and December, a slower clip in comparison with final yr’s vacation season. And consumers are more likely to be significantly bargain-hungry, which means they are going to be holding out for offers, a pattern division retailer executives are already seeing.
“Many Americans are more stressed than ever about holiday spending, and wallets are stretched,” JCPenney chief buyer and advertising officer Marisa Thalberg stated in a current presentation of the retailer’s vacation season technique. The corporate’s response? To supply extra offers, and earlier within the season.
Kohl’s Chief Advertising Officer Christie Raymond expects consumers will go to shops extra usually through the Thanksgiving to Christmas interval, however purchase much less throughout every go to and gravitate to cheaper merchandise as they really feel the financial pinch.
“We are seeing trading down,” Raymond stated at a media briefing in October at Kohl’s design workplace in Manhattan. “Whereas some customers were maybe purchasing a premium brand, we are seeing them trade down to private brands.” This might bode nicely for the success of Kohl’s current efforts to refresh its lengthy languishing retailer manufacturers.
Even the high-end retailer Nordstrom, with its well-heeled clientele, is emphasizing extra low-priced objects than ordinary this yr. At its New York flagship, Nordstrom has constructed a two-story space to showcase giftable objects, with about 800 merchandise that value lower than $100.
Again to the longer term
A century in the past, department shops started a golden age wherein they have been on the forefront of America’s burgeoning client financial system. They have been grand behemoths, usually in metropolis facilities, the place buying was an occasion—relatively than the fixed pastime it’s at the moment, usually performed by scrolling on a tool.
These have been memorable experiences: a visit to JCPenney to purchase a Sunday finest swimsuit; the joys of selecting the proper debutante ball robe at Neiman Marcus; or the much-anticipated buy of a brand new family equipment at Sears.
Within the Sixties, going buying was nonetheless an occasion.
H. Armstrong Roberts/ClassicStock/Getty Pictures
Within the 1950’s, Macy’s, Sears and Penney started increasing with massive, multi-level shops because of the mushrooming of suburban malls throughout the nation.
However a few many years later, the rise of big-box retailers that boasted decrease costs, like Walmart and Goal, challenged that supremacy. And by the 1990’s, department shops have been in secular decline. The rise of Amazon and e-commerce extra broadly didn’t assist.
Amid all this variation, department shops began to look relatively old school, a sea of sameness providing drained manufacturers in badly lit, boilerplate shops the place every little thing appeared to ultimately find yourself within the low cost bin. Underneath stress, department shops tried to chop margins by lowering staffing, which made them really feel messy and untended.
And several other leaned into consolidation—which in some methods compounded the issue. When Macy’s bought Might Division Shops in 2006 and purchased regional chains akin to Marshall Subject’s, it discovered itself with too many shops, too close to one another.
Shifts in customers’ tastes additionally dealt a blow: Prospects have been not wowed by being sprayed with fragrance upon entry to the wonder part, preferring the much less didactic approach of promoting magnificence merchandise which have made the extra youth-friendly model Ulta Magnificence a phenomenon within the final decade.
Efforts to compete with Amazon throughout its ascent within the 2010s had department shops taking part in catchup on provide chain prowess and integrating shops with e-commerce—generally to the detriment of in-store expertise. “They forgot what they existed for,” stated Joel Bines, a former retail marketing consultant with AlixPartners and a present director of North Carolina-based Belk. ”It turned all about effectivity and conglomeration and homogenization.”
In the hunt for vogue authority
Now the pendulum is swinging again towards a deal with how department shops feel and look for patrons, the merchandise they promote, and on standing out from the others. An enormous a part of that’s undoing the expansions of earlier many years: Macy’s is prioritizing 125 of its shops, or a 3rd of its fleet, whereas closing dozens extra shops within the subsequent two years. And JCPenney shed a whole lot of shops in its 2020 chapter and is now all the way down to 650 areas, from 1,100 a decade in the past.
However because the adage goes within the retail business, you may’t shrink your approach again to greatness. Shops nonetheless should make a compelling case for customers to come back again.
And there’s floor to regain with the manufacturers department shops promote as nicely. Luxurious manufacturers have sought to distance themselves from the more and more shabby in-store expertise and ubiquitous mark-downs at department shops. For years, vogue firms like Ralph Lauren pulled their merchandise from Macy’s shops to promote extra of their merchandise direct to customers on-line and at their very own shops.
However now, Macy’s CEO Spring, who’s credited with revitalizing Bloomingdale’s within the decade he led that chain, is betting that the retailer’s huge attain, with 40 million clients, mixed with its improved shops, can restore the model’s “fashion authority” and lure prime manufacturers again.
Shops are additionally seeking to companion with new manufacturers. JCPenney, for example, might be promoting unique objects by designer Rebecca Minkoff for the 2025 vacation season.
Successful again older clients
To recreate a premium buying expertise, department shops have to seek out the best steadiness between stocking sufficient selection to serve a spread of shoppers and never cluttering shops with too many merchandise. To that finish, Nordstrom and Macy’s are among the many chains trimming down their assortments.
That does depart retailers much less margin for error and requires a greater mastery of knowledge analytics to enhance demand forecasting—ensuring that what’s on supply matches what consumers need. That might be a problem for some chains. “They are dealing with this beast of too much data and not enough actionable insights,” says Shelley Kohan, a professor at Style Institute of Expertise in New York and a former Macy’s government, noting that that is an space the place AI can assist.
Nonetheless, even when all these chains do renew themselves, nobody ought to anticipate them to out of the blue re-emerge as an enormous menace to the likes of Walmart or T.J. Maxx. Attempting to win new, youthful consumers is pricey and will find yourself being futile. Some analysts say that’s why department shops ought to deal with older consumers, who’ve rather more disposable revenue. “While some are chasing the finicky Gen Z and millennials, they should really be focused on recapturing Gen X,” says FIT’s Kohan.
Successful again these current customers who bear in mind the glamor and delight of an old school division retailer buying spree is the important thing, says Bines. “Your priors become buyers again, and the buyers become loyal,” he says. “It’s a self-perpetuating cycle. And then maybe you can win some new shoppers.”
