‘’A to Z’’ VERY INTERESTING….10 Things Department Stores Won’t Tell You What to know before entering J.C. Penney, Macy’s, other retail giants 1. “We’re relics of a bygone age.” The department store is a treasured American institution, with roots going back to the mid 19th century, when such now famously familiar emporiums as Macy’s and Lord & Taylor first opened. But these days, it often seems as if the department store has become an endangered species. For starters, many once-popular store chains — May’s, Filene’s, Bonwit Teller — have been taken over by competitors or have gone out of business altogether. And perhaps more important, the ones that remain aren’t pulling in as many customers as they once did: From 2000 to 2012, annual sales at such stores fell by 22%, to $186 billion from $239 billion, according to the Census Bureau. No wonder there’s been talk of more chains possibly failing — most notably J.C. Penney (JCP) , whose share price has tumbled from the $80-plus mark in 2007 to around $10 today. The reason for the decline? It has to do with the rise of competing merchants: big-box discounters (think Wal-Mart (WMT) ), warehouse clubs (such as Costco) and e-commerce specialists (Amazon (AMZN) ), all of which can offer a wide selection of goods at affordable prices and attract record numbers of customers as a result. Consider how much Wal-Mart has grown, for instance. In 1972, it posted sales of $78 million, among 51 stores; in 2012, sales hit $443 billion, at 10,000-plus stores. And when people aren’t bargain-shopping for staples, they increasingly turn to specialty retailers: Today’s consumer doesn’t have to go to a department store to buy clothing or electronic items; instead, they can just head to The Gap or Best Buy, where the product selection and customer service is built around a more niche orientation, say retail pros. Either way, it equates to a sea change in shopping: “In the past 15 years, department store advantages on convenience and access to high-quality brands have largely disappeared,” says Chris Malone, a retail sales expert who serves as a consultant to Fortune 500 companies, start-ups and non-profits and who’s the author of the book “The Human Brand: How We Relate to People, Products and Companies.” Naturally, department stores and their advocates take a somewhat different view, saying their one-stop shopping model still fulfills the needs of many customers and that the stores continue to be competitive on price. “Observers have been predicting the death of department stores for decades,” says Jim Sluzewski, a spokesman for Macy’s Inc., the parent company for both Macy’s and Bloomingdale’s stores. But the “truth is, department stores are a flexible and sustainable format that can change with customers’ needs and preferences.” And to his point, Sluzewski notes that Macy’s Inc. has seen its annual sales increase by more than $1.2 billion in each of the past three years, reaching $27.6 billion in 2012. (Many other department store chains declined to comment for this article.) 2. “The Black Friday deal is a myth.” Like many retailers, department stores tout their Black Friday specials as the deals to end all deals. And this year, many are upping the ante by starting their sales on Thanksgiving itself: Sears, Macy’s, Kohl’s and J.C. Penney will all open at 8 p.m. on turkey day, for example. But retail experts warn that Black Friday is not necessarily the best time to shop — and they’re not just referring to the unpleasant (and sometimes even deadly) jockeying among reckless deal-seekers. They’re also referring to the fact that many commonly discounted items can be had at better prices at other points during the year. Indeed, a 2012 Wall Street Journal survey found that such popular holiday gifts as an Elmo plush toy and a Samsung television could be up to 38% cheaper in sale periods other than Black Friday. On top of that, if holiday sales start to slump, department stores may be compelled to offer deeper deals in December than the ones they offered on Black Friday, retail experts say. “Discounting can accelerate as you go through the holiday period,” says Steve Coulombe, a retail-industry specialist and senior managing director with FTI Consulting, a Boston-based business advisory firm. (But as Coulombe warns, the reverse can be equally true: If holiday sales are strong, stores may not need to discount as much. Or, even worse for desperate shoppers, they may run out of popular items.) Still, department stores counter that Black Friday often is as much a bargain-hunter’s bonanza as promised, and shopping pros concur that there are definitely discounts to be had, both in-store and online (don’t forget Cyber Monday). Indeed, for some shoppers Black Friday is a festive occasion unto itself. “I think a lot of shoppers go out on Black Friday for ‘shoppertainment.’ It’s the experience of being part of it,” says Gregg Clark, a principal with the financial advisory firm EY (part of Ernst & Young). 3. “And the rest of our sales aren’t necessarily all that special.” Forget Black Friday. These days, retail experts note that department stores are continually running one-day or weekend sales or other promotions at almost every time of the year. That has left some consumers questioning whether they’re getting a true discount at all, or whether the stores are just finding ways to make their everyday pricing seem “special.” There’s even a class-action lawsuit in California that claims Kohl’s misrepresents prices in just this way; one plaintiff in the suit, Antonio S. Hinojos, has pointed to his purchase of a set of luggage and some polo shirts that were marked down by as much as 50% — Hinojos argues that the items were, in fact, at their regular prices (The case is still pending in state court and Kohl’s did not respond to requests for comment.) Many department stores insist they’re not playing any pricing games and that their frequent sales are for real. In fact, some say that they adhere closer to a model that doesn’t depend heavily on sales. “We’ve been careful over the years about not becoming overly promotional because this isn’t the best way for us to build trust with our customers,” says Colin Johnson, a spokesman for Nordstrom. In the end, consumer advocates say the best advice for shoppers is to do a little research beforehand — or even inside the store — so that they can be sure they’re taking advantage of all available coupons and discounts and that they’re getting the best price for a particular item versus what competing stores charge. Websites like CouponCabin, DealScience and RetailMeNot can help steer shoppers to online, mobile or printable in-store offers. And apps like TheFind or the eBay-affiliated Red Laser can assist with price checks to see if one store can beat another’s deal. Shopping strategists also say it’s good to inquire about price-match deals and price-adjustment policies (in case of future discounting), since some department stores indeed offer them. 4. “We design our stores to keep our customers on their feet.” Anyone who’s ever needed to use the restroom in a department store knows how tough they can be to locate. And that’s not by accident, retail experts note. The thinking goes something like this: The more ground that stores get shoppers to cover — yes, even, as those shoppers are looking for the loo — the more merchandise they’re exposed to and they’re more they may eventually buy. But that’s just one of many tricks in the department store trade. Others include placing up (or down) escalators in non-contiguous locations (again, the goal is to keep shoppers walking around the store), putting high-profit items in the most trafficked spots (there’s a reason perfume counters are always on the first floor) or even pumping in appropriate scents (say, a little coconut oil in the swimsuit department) to make shoppers more primed to buy. “There is a science to layout and positioning of merchandise,” says Kathleen Jordan, a principal with Gensler, a global design firm. That said, retail experts say that many stores are moving away from this model, particularly at a time when clean, customer-friendly design is becoming more a rule in retail (the Apple stores are often considered a prime example). “There is a delicate balancing act between increasing exposure to your merchandise and not creating a bad shopping experience,” says Kathy Gersch, an executive vice president with business consulting firm Kotter International and a former Nordstrom executive. Department stores also often point to conveniences they’ve started to offer and changes they’ve made to their layout in this regard. At Nordstrom, for example, clerks use handheld point-of-sale devices so customers don’t have to walk to a checkout counter. 5. “We might be a little bit racist.” In recent months, a number of incidents at department stores have come to light involving African-American shoppers who have been stopped by police after buying a high-ticket item — on the grounds that it was acquired by fraudulent means. At Barneys New York’s flagship location, Trayon Christian, a college student, was handcuffed following his purchase of a $350 Salvatore Ferragamo belt, according to news reports. (He claimed he was suspected of using a fake debit card.) At Macy’s flagship store in New York, Rob Brown, an actor, was similarly apprehended following his purchase of a luxury watch, according to Brown’s public account of the incident. (He claimed he was accused of using a fake American Express card.) In both instances, the men were eventually cleared of wrongdoing, according to reports, but they have both taken legal action against the retailers, alleging the stores engage in racial profiling that leads to police action. (In Brown’s case, he’s now part of a class-action lawsuit.) Both Barneys and Macy’s have denied that the stores had contact with the police. Additionally, both stores tell MarketWatch that they do not engage in discriminatory practices. Nevertheless, the problem goes much deeper than these incidents, say legal advocates and criminal and business scholars. They argue that some department stores routinely engage in racial profiling of customers. “I think it’s fairly pervasive” in the industry, says Jerome D. Williams, a program director at the Rutgers Business School in New Jersey, even though “shoplifting and larceny come in all sizes and colors.” (Williams makes the point, however, that it’s important not to “paint every store with the same brush,” since problems can vary from store to store and chain to chain.) 6. “When it comes to shoplifters, it’s our customers who pay the price.” Shoplifting is a serious problem for retailers — a $13 billion annual one, according to the National Association for Shoplifting Prevention. And because they carry such a wide array of goods, department stores are a natural target for thieves. But while stores often carry insurance to ease the financial impact of thefts, losses can be difficult to estimate, according to security experts. The end result? Goods are often priced higher to cover the shortfall: The Global Retail Theft Barometer, an annual study underwritten by theft-prevention specialist Checkpoint Systems, notes that the cost to U.S. shoppers to make up for theft losses averaged $300 per household in 2012. If that’s not disconcerting enough, security experts say that department stores often let suspected shoplifters go — because it can be too much of a hassle (and too much of a legal expense) to pursue action against them. Then again, when a store does decide to press ahead, local police and court systems may still not pay much heed, says Barbara Staib, a spokesperson for the National Association for Shoplifting Prevention, because of other crime-fighting priorities in these belt-tightening times. “Resources are reduced for everyone in the public sector,” says Staib. Even more discouraging to retailers: If a store wrongly accuses a suspected shoplifter, it could face a lawsuit, experts note. Add it up and the decision by a department store to take action becomes “highly discretionary,” says Brian Smith, a professor at the Henry C. Lee College of Criminal Justice. Still, department stores do pursue countless cases against shoplifters, say many security experts and industry insiders. Additionally, they take all sorts of other security measures to prevent thefts in the first place, from increasing video surveillance to putting electronic tags on merchandise. “I think retailers are working very hard to improve this,” says Staib. 7. “Our credit cards can cost you in the long run.” Department stores often tempt shoppers to sign up for their credit cards by offering special bonuses — say, 10% off that day’s purchase or interest-free financing for a period of time. But financial experts warn that shoppers should approach such offers cautiously since such cards typically come with higher expenses than the norm — in some cases, interest rates can easily top 20%. “In general, store cards are not good for financing purposes,” says Odysseas Papadimitriou, founder of CardHub, a site that monitors credit cards. (Papadimtriou adds that store cards often have higher rates because stores are often willing to take on customers who are bigger credit risks.) On top of that, experts note that stores benefit in other ways from issuing the cards, since it offers them a direct marketing pipeline to customers. And should a customer fail to pay the bill, the “hit” for the store isn’t as bad as it seems, since the store is not out the actual cost of the item, but just what the store paid for it — in other words, the pre-markup price. That’s not to say consumers, especially those who pay off their balances in full every month, should turn a blind eye to department store cards, since they can offer savings beyond that introductory offer, experts note. “Anyone who does a significant amount of shopping at a particular retailer would be foolish not to take into consideration the card they have to offer,” says Papadimitriou. Retailers not only tend to give cardholders extra customer-loyalty coupons, but they’ll often consider giving cards to consumers with poor credit who might otherwise be rejected by traditional card companies, experts say. 8. “Personal shoppers are our gateway drug.” Don’t have time to shop? Department stores make it easy for busy folks by offering them personal shoppers — that is, professionals who will help them assemble their wardrobe, pick the perfect birthday present or work through a holiday gift list. Macy’s offers a “By Appointment” service. Nordstrom has its “Personal Stylist” team. (“We’ll solve your style problems on your lunch break,” the retailer touts.) But it’s worth keeping in mind that department stores have something of an agenda when it comes to personal shoppers, say retail experts. That is, they use them to attract a particular type of customer. “Stores really only want to offer these services to high-end customers who spend freely and frequently,” says business consultant Chris Malone. Indeed, a study by America’s Research Group, a firm that researches the consumer sector, found that of the customers who used a personal shopper, 75% did so more than three times a year. And Stephanie Nelson, who runs the CouponMom site, says she’s seen first-hand how personal shoppers can steer a customer to a higher-priced item. They’re “not going to be finding you the least expensive belt, if you know what I mean,” she says. Department stores counter that they’re providing a service — and one that can be customized to suit a customer’s needs. “Personal shoppers operate within the style and budget parameters set by the customer,” says Macy’s spokesman Sluzewski. 9. “We’re hoping you get hungry.” While restaurants have been a staple of department stores for decades, they have become an even bigger part of the equation, according to some observers of the retail scene. Consider that at the Bloomingdale’s flagship New York store, there are no fewer than six eateries, from a Magnolia Bakery (they’re famed for their cupcakes) to a dining establishment helmed by celebrity chef David Burke. And Nordstrom has 230 restaurants and coffee bars spread throughout its 100-plus stores. Why are the stores offering up Caesar salad alongside ladies’ slacks? In-store restaurants have never been considered big profit centers. But there’s another logic behind offering dining, say retail experts: The longer the store can keep customers from leaving, the more those customers are likely to buy. Put simply, no retailer wants to lose a sale just because a shopper got a craving for sandwich or a latte (or a three-course meal, for that matter). Plus, dining can turn a department store into something larger. The idea is to keep the shopper happy, says retail expert Kathleen Jordan. “Get them whatever they want or need throughout the day and make the store a destination, not just a place to get a product.” 10. “So much for happy returns.” Department stores often advertise that they make it easy for shoppers to return unwanted items. But they do periodically revise their return policies, often tweaking them to their advantage. For example, Sears went from a 90-day to a 60-day return period on some items, according to ConsumerWorld.org. (A Sears spokesperson notes that the company has extended return periods on some items this holiday season.) Any tightening of return policies speaks to the fact that in a challenging retail environment, stores can’t afford to be as flexible anymore, say retail experts. When it comes to the bottom line, “return policies can break a store,” says Peter Hempel, president of DDB New York, a marketing company, and a former head of marketing for Gap Inc. Still, many stores do maintain very flexible policies. Nordstrom makes the point of not even having a formal policy: “We take a liberal approach to returns and stand behind what we sell,” says spokesman Colin Johnson.
Posted on: Tue, 26 Nov 2013 09:06:40 +0000
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