Is the Department Store Dying or is this Evolution as Usual?

Is the Department Store Dying or is this Evolution as Usual?
Retail Real Estate Trend: Luxury Retailers Revive the Customer Experience


There are some questions in retail that never seem to go away. Among the most-asked concerns is the health of the traditional department store. Is this retail concept on life support? Have department stores lost their relevance? Are we in a post-department store era? Industry watchers, the media and even retailers themselves raise these queries regularly. As regional leaders in retail real estate, it’s an issue we keep a close eye on. Here are some of our recent observations.

In Retail, Change is the Name of the Game
Nothing in the retail industry is static. Since the first department stores opened in the mid-19th century, the concept has been evolving, driven by changes in economics, demographics, population migration and technology. Yes, in some cases the surviving department stores have lost their role as commercial anchors in America’s cities and even in some major malls. From the stresses on their middle class customer base to endless competition from smaller stores with unique product assortments, discounters, outlets, monobrands, club stores and online, these retailers face mega-challenges. Consider also that the ongoing cycle of discounting as a competitive tactic is eroding margins. No wonder we hear of store closings and stock downgrades and pronouncements of a post-department store era.

Can the survivors keep on surviving? It looks like they may have a fighting chance. Retailers will rise and fall as they always have. But the concept of a single space where shoppers can browse, discover and select from a wide range of items – and enjoy the experience – will likely go on. One caveat, however: if the retail icons don’t want to go out like the dinosaurs, they’ll need to continue evolving to meet customer needs.

The 21st-Century Department Store is Rising Thanks to Luxury Retailers
Department stores are writing the next chapter in their history. Many middle-market merchandisers are in transformation mode with heavy emphasis on technology. Most major players in this category, for example, have embraced omnichannel to meet the demands of tech-empowered shoppers and to counter online competition. A smoother shopping experience with electronic beacons and self-checkout counters is in the making. Smart mirrors are being featured in fitting rooms. And sales associates with tablets in hand can provide instant information about the entire inventory.

It’ll take more than tech wizardry though to reinvent the department store. High-end retailers may have found a winning strategy by restoring the joy of shopping. Neiman Marcus, Bergdorf, Barneys New York, Nordstrom and Saks Fifth Avenue are leading the charge in the U.S. Their goal, echoing the original concept of the department store, is to create a unique customer experience that goes beyond transacting. Listen to their executives and you’ll hear phrases like retail theatre and creative merchandising. To deliver those, they’re reimagining interior space with maximum aesthetic appeal, curating inventory, introducing new lines and designers, incorporating restaurants and wine bars into the retail environment, using pop-ups, and staging exclusive events. They’re exploring the concept of customizing each branch store with touches of local style. They’re doing things their online competition can’t. And they’re not neglecting technology. They’ve mastered omnichannel and moved into data mining to gain precise insights into the habits and preferences of their key customers.

Retail Real Estate Trend? Joy of Shopping at Middle-Market Department Stores
Middle-market retailers can’t (and probably shouldn’t) try to mirror the tactics of the luxury department stores, but there are signs they are scaling the joy of shopping concept to fit their markets. Ideas on the table include right-sizing space and upgrading interiors, improving visual merchandising, curating inventory to include exclusive brands, incorporating food and beverage service and upgrading staff. Localization of branches and unique in-store events, sometimes inspired by a chain’s flagship venues, are emerging. (Read more about this trend here: http://www.businessoffashion.com/articles/intelligence/whats-next-for-the-american-department-store.)

Back to the Roots of Successful Retailing
Is there a silver bullet here? Department stores may finally be on track to reclaiming relevance and appeal. They seem to be taking the advice of Macy’s Margaret Gitchell, one of retail’s first female executives. Her mantra was “never forget to astonish the customer.” That worked in the19th century and it may just be the key to surviving in the 21st.

Retail Property Managers Stress Corporate Citizenship

By Bob Carson, EVP, Levin Management

Green Products Help Both Business and the Environment
This month, more than a billion people in 192 countries are expected to take action to protect the environment in observation of Earth Day (April 22). Sustainability is always top-of-mind in the retail real estate industry, with property owners, managers and tenants all involved in the effort. At Levin Management, our property management services team is committed to using the best in planet-friendly products and processes.

Energy Efficiency is the Goal of Our Property Management Services
Energy efficiency has always been our top priority. Years ago, the emphasis was on controlling the expenses of heating, cooling and lighting the buildings in the properties we managed. Today, we’ve got a dual goal: cost-control and environmental sustainability, with a special focus on solar power, LED lighting and high-efficiency roofing.

Levin is in the final stages of our first solar project, at Capitol Plaza in Ewing, N.J. With Vanguard Energy Partners of Branchburg, N.J., a national solar construction firm, we’re installing rooftop panels at 1001 Spruce Office Center, the property’s office component.

We anticipate a significant drop in annual utility costs by supplementing electric power with this clean, alternative energy source. Besides lower bills, N.J. property owners, who install solar, benefit from tax rebates and sustainable renewable energy credits, which are market-traded certificates.

Based on our positive experience in Ewing, we’re exploring additional solar opportunities. A number of clients and larger big-box tenants have expressed interest in undertaking similar projects.

More Powerful LED Lighting is a Practical Energy Solution
LED bulbs are both energy efficient and long lasting. Their typical lifespan is four to nine years, depending on the specific use, which curbs the costs of both materials and operation.

We’ve been using LED lighting at shopping centers for years but were limited by their low illumination levels. Recent technological advances have corrected that problem. Now we’re transitioning all the parking lot lighting at Warren Plaza in Washington, N.J. to LED – with great results. We’ll be bringing LED lighting to other sites under our management soon.

New Roofing Products Provide Improved Insulation
Our property management services team likes the good news in roofing. The newest products on the market have a higher R-value, meaning they do a better job of limiting heat loss. That improved insulation equals less energy usage and lower heating costs.

New code regulations require that commercial owners use these energy-saving materials in both new construction and re-roofing. In other words, this sustainability measure is a mandate – not a choice. The catch? The cost of R-value materials is between $1.25 and $1.50 per square foot more than traditional products. Owners can expect to recoup that outlay over time with lower heating bills.

Roofs with a high R-value definitely make a property more marketable. More and more, prospective tenants – particularly national retailers – are looking for this type of roofing. They realize that, in addition to promoting sustainability, higher R-value roofs reduce operating costs. Many prospective tenants, in fact, will choose a property with an energy-efficient roof over one with traditional roofing.

Going Green Makes Good Business Sense
Earth Day reminds us of our responsibility for the environment. At Levin, our property management services team is always on the lookout for new ways to boost the value of the shopping centers we manage. We’re glad that many of the best measures for protecting the bottom line also protect our planet. Owners and operators who embrace these opportunities get a double win: enhanced property values and reduced carbon footprints. And those are both good things!