What Opportunities Can 2017 Become A Potential Turning Point For Us Department Stores?

According to the world clothing and shoe net, the decline of the US Department store has been recorded in detail, but it has just entered the 2017. It seems that the largest number of department stores in the United States are competing against the final death knell.

In January 6th, the Nyman Markus group (Neiman Marcus Group), owned by Asset Management Co Ares and Canada Pension Plan Investment Board, withdrew the application after one and a half years of filing an initial public offering (IPO) with the relevant regulatory authorities.

The group submitted a listing application in August 2015, hoping to raise funds to repay its long-term debt (at the end of its fiscal year in 2016, its total debt was close to 4 billion 600 million dollars and its total long-term liabilities amounted to US $6 billion 500 million).

However, with the decrease in revenues and the continued decline in profits (a comprehensive loss of 470 million US dollars in 2016 and a cash flow statement of US $62 million, the listing is expected to be destroyed.

There is another rumor that stirs up the turmoil in the industry. It is alleged that the Rumours that Hudson s Bay Company of the Department Store Group owned by real estate developer Richard Baker will buy the chain store, but the Baker side also said the group is no longer interested in buying it.

(Hudson Bay Group spokesman declined to comment.

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Similar to the Nyman Markus group's listing plan, Macy s announced plans to close 68 of its 730 stores and lay off more than 10000 jobs (mostly management positions).

The troubled chain department store sales fell by 2.1% in November 2016 and December, down for the 7 quarter in a row.

At the same time, the 75% private holding of Barnes New York (Barneys New York) belongs to the hedge fund Perry Capital.

The troubled hedge fund company, valued at $4 billion 100 million, began liquidating its assets in September 2016 - the market is concerned about the two most heavily weighed two stores.

If the rent of Barnes Madison Boulevard and Beverly Hills flagship store rose 3 times in 2019 as expected, New York Barnes will not protect these stores.

(Barnes did not respond to BoF's request for comment.

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Specifically, apparel retailers in various fields are striving to succeed in this increasingly fragmented, customer centered and Amazon more cost-effective market.

But the challenges facing department stores are unique.

One of them is that the great convenience provided by the electricity supplier has disrupted retail sales and largely eliminated the reasons for the existence of "one stop shop".

Meanwhile, the business model of us department stores has not been upgraded to cater to the retail world directly, and consumer experience has been improving slowly.

Some retailers will face bankruptcy.

Retail consultant and Neiman Marcus executive Steven P. Dennis explained: "the competition for this best pie, or the constantly shrinking pie, is too intense." Nyman Markus

"But there is still time to change the focus," said Brendan Witcher, an analyst at Forrester Research.

Here, I will outline the major challenges facing us department stores in 2017 and what opportunities will be available.

Where did it go wrong?

1. low profit income flow has become the source of growth.

For Net-a-Porter,

And other market leading companies compete in traditional department stores.

It has invested heavily, such as heavily investing in backstage systems to improve or acquire online retailers.

For example, Neiman Marcus bought German luxury retailer MyTheresa and Hudson Bay Group in 2014. In 2016, it purchased the flash buying website Gilt Groupe and Nordstrom (Nordstrom) purchased the flash purchase website HauteLook in 2011, and purchased the private modeling service Trunk Club in 2014. Nyman Markus, MyTheresa

At the same time, many department stores began to invest in discount retail. Discount retail is expected to expand rapidly through new stores, which will grow faster in 2020.

Market.

As of the end of the third quarter of 2016, North Stone has opened 215 discount stores Nordstrom Rack, 194 last year.

Hudson Bay Group also made a bet on the discount business and opened 118 Saks Off 5th discount stores in the third quarter of fiscal 2016, compared with 91 last year.

Although the above two strategies are aimed at promoting revenue and growth, they do not always create profits.

Unlike the whole retail business, the profit margin of discount products is significantly lower, usually only 20% higher, and the price reduction is even stronger or even lower.

By comparison, the total price of commodities is between 40% and 50%.

To compensate for low profits, retailers will have to increase their inventories and increase more physical stores, which will require further investment.

Even the high growth online businesses have low profits, and their costs are also impaired while striving for customers.

For example, North Stone recently lowered its Trunk Club book value by 197 million US dollars because of its inability to make profits.

"Although business continues to bring excess growth, the expected growth and profitability in the future will be lower than the initial estimate," said a November 2016 statement. "In order to further improve customer experience and better position Trunk Club's business to achieve profitable growth, the company will make some changes in its operation."

2. high net worth people prefer "experience" instead of "product".

Although Nyman Markus and Sax's Saks Fifth once positioned themselves as high-end stores for the upper middle class, the development of luxury goods in the middle of 2000s prompted the two to focus more on high net worth individuals (HNWIs), resulting in a marked rise in the price of the Fifth.

A luxury retail companies says that price increases can almost equate to the same store sales growth.

"In the past, if you raised the price by 9%, then your same store sales increased by 9%," the man said. "But we did not really attract many new customers. The volume of pactions has never increased, and they have begun to lose customers who are determined to buy luxury goods."

But nowadays, those who can afford to buy the luxury goods continue to spend more money elsewhere.

"There is no wealth left by that generation," Dennis said. "Silicon Valley's successful entrepreneurs are not the big consumers of shops like Niemann Marcus and Sax."

Indeed, the global activity exploration and ticketing platform Eventbrite survey shows that 78% of the "millennials" think they prefer to spend money on "a very desirable experience or activity, rather than buying high aspirations."

More importantly, although 51% of Nyman Markus's customers are under 50 years of age or below, and 40% of customers have a net family assets of more than $1 million, the average age of the retailer is still 51 years old.

"The peak consumption of luxury goods is usually between 50 and 50.

"After 55 years of age to 60 years of age, products are generally less expensive," Dennis added. "If your customers are aging, you have to find new customers.

But there seems to be no evidence that today's more than 40 year old consumers have the same consumption patterns as their previous generations. "

According to a study released in 2014 by the Center on Wealth and Philanthropy at Boston College (Boston College), $59 trillion will be pferred from the US baby boom generation to their offspring in the next 50 years.

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The strength of the dollar makes retailers almost unable to attract foreign shoppers.

Data from the US National Travel and Tourism office show that the international tourists visiting the United States in 2015 spent 216 billion 800 million dollars in the United States, a decrease of nearly US $4 billion over the previous year.

Although the figures for 2016 have not yet been released, the situation is expected to be similar.

The new immigration policy promulgated by the Trump administration will exacerbate this situation, because its policy impedes the entry of specific national tourists into the United States.

4., the number of stores remains high.

Although Macy and s, which are defeated by Amazon and fast fashion rivals, are closing 68 stores in terms of price and fashion style, the department store still has more than 600 stores. Messi

Retailers should invest more in fewer outlets to concentrate on traffic rather than on the promotion burden.

As Witcher said, "offline retailing is too big."

5. daily product mix.

Hundreds of retailers offer thousands of choices, and it is more difficult to win customers on the same product as competitors.

Although exclusive cooperation can help differentiate the product mix, not every exclusive product will eventually become a popular "it" product.

"Retailers still think it's important to sell their products in the store," Witcher said. "But I understand that I can find the same blue sweater in 25 different stores."

If the products are the same, the lowest price will become the winner, and the acceleration of sales promotion will lead to profits being misappropriated.

What will happen in the future?

1. more industry consolidation.

Department stores must constantly consolidate and integrate to reduce operating costs, increase shareholder value and provide better services for customers.

Retailers are expected to close more stores and sell more real estate in the coming months.

The Hudson Bay Group is working hard and is also a potential acquirer.

"HBC's real estate portfolio allows us to get low-cost financing and other retailers' resources," Baker of Hudson Bay group told BoF in 2016. "This gives us huge access to capital.

We can make promises that our competitors dare not make, because we have financial strength and flexibility. "

2. stores are turning to franchise mode.

Outside the United States, most department stores operate franchises, holding the "landlords" who rent their space operation brands in their stores and receive sales commission as a reward.

Such a practice can reduce the risk of department stores and encourage brands to strive for greater profits.

This is becoming more and more important as more and more brands develop their own direct marketing channels.

3. it's important to have your own views.

"American department stores try to do well in all things," Witcher said. "But mainly to create a unique customer experience."

The goal of many department stores is to become a destination for all people to provide all goods, rather than to inherit the world's top professional boutiques to carve a personalized retail world.

One of the ways is to add experience elements, such as catering (even though retail sales are lagging behind, Barnes's restaurants in New York and Bo Dorf Goodman are doing well.

But we also need to improve customer service.

For example, North Stone has invested in backstage systems in the past 10 years to ensure that the experience from the front desk to the backstage is smoother.

"You need to have your own value proposition," Witcher added.

4. turn to digital culture.

In the final analysis, most retail managers, especially senior managers, have never received relevant training to run half of the revenue from digitalized enterprises.

"Most of them are talking about corporate culture and organization," Witcher said. "They go all the way up, but it's hard to think out of the box.

Startups do not have this problem, because their overall strategy is digital at the beginning.

But the recruitment of new talent is just one of them.

Another major problem is the implementation of new ideas that require cash, and many American department stores do not.

Although mergers and layoffs can be regarded as a very successful temporary repair strategy, "retailers can not save money to achieve growth," Witcher said. "This requires investment and understanding of customers' shopping routes and pain points."

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