The Pandemic Could Bring an Opportunity for Department Stores

Department store performance has been rocked by the pandemic, which is no surprise. This retail segment was already struggling prior to the pandemic, and the event only exacerbated existing issues. However, recent location analytic data from Placer.ai suggests that there could be opportunity for department stores following the pandemic—namely that department stores allow for the compilation of several brands and items under one roof.

There are many variations of successful models that department stores can deploy to capture foot traffic and fulfill demand. According to Placer.ai, this could include a Neighborhood Goods model that sells direct-to-consumer goods. Another approach is through outdoor shopping centers, as retailers like Kohl’s has done, and finally, department stores have the opportunity to partner with traditional brands to help them recover their retail footprint.

Other department stores have found opportunity in supporting ecommerce and online shopping. A recent report from Reonomy found that big-box retailers were converting brick-and-mortar locations into fulfillment centers. Bed, Bath & Beyond for example, converted 25% of its brick-and-mortar stores into regional fulfillment shops.

While there is opportunity for department stores to usurp customers during the pandemic and beyond, so far, data shows that they have been the most impacted retail segment and are recovering slowly compared to other retail segments. Placer.ai data shows that weekly visits t department stores have been down nearly 50% in July to 41.4% for the week of August 10. General retail weekly visits, on the other hand, were only down only 15% to 13% during the same time period.

Other big box retailers, on the other hand, are continuing to thrive. Walmart, for example, has proven to show adaptability through the pandemic. As transaction volumes and foot traffic has dropped, the average basket size increased 27% and visit duration increased 4.5%, according to Placer.ai data. While the pandemic has brought changes for the retailer, Placer.ai also asserts that visits will return to normal once retail patterns return to normal.

While Walmart has seen a decline in weekly visits and transaction volumes, some retailers are seeing increases compared to 2019 numbers. Sam’s Club, for example, saw a 14.3% increase in weekly visits in mid-July, and in mid-August, the retailer saw a 5.5% increase in foot traffic. On average, monthly visits are up 5.4% for the first seven months of the year. Neighborhood Goods stores, on the other hand, also saw decreases in weekly visits, but less significant than Walmart. For this brand, weekly visits were down 5.8% in mid July and 2.2% in mid August. While these stores have all been disrupted, they also represent a segment of the retail market that is showing resiliency through the pandemic.