Department Stores Get Creative to Boost Traffic

As department stores look to navigate the post-pandemic world, it may make sense to explore working with other retailers in arrangements that could benefit both parties.

“I think partnerships with other retailers are going to be a big, big driver for department stores,” says Erin Schmidt, senior analyst and co-author of the recent Coresight Research report, The Future Model in US Department Stores. “We’re seeing Kohl partnering with Sephora [to bring 850 shop-in-shops to Kohl’s locations]. So that is another big traffic driver for department stores.”

Target is also undertaking partnerships. In February 2021, it announced that it would open Apple mini-shops in 17 of its stores by the end of the fall. It is also partnering with Ulta Beauty to bring shop-in-shops to 100 stores, according to Coresight Research.

During the pandemic, e-commerce took off as consumers were unable or unwilling to shop in person. “The drawback to that is that it pulled people away from physical store sales,” Schmidt says. “The biggest opportunity for retailers right now is that they need to try to keep e-commerce at least elevated while also driving people back to the stores too.”

Schmidt says a lot of department stores are live streaming and virtual selling to engage with consumers. They also added things like “buy online pick up in store,” and curbside pickup, which she says are actually elevating digital spending.

“Kohl’s reported that they’re seeing that those types of services, when you put the delivery in the consumer’s hand, actually increases the digital spend,” Schmidt says. “So things like that can help increase the in-store traffic too.”

With digital helping to feed in-store sales, it makes sense that store closures can hurt in-store sales. For example, in Macy’s fourth-quarter earnings call for fiscal 2020, the company said that “when it closes a store, its digital sales drop significantly in that market,” according to the Coresight Research report.

With the strong correlation between digital and in-person sales, companies want to strengthen those connections.

“Nordstrom reported that it is focusing on connecting its digital and physical assets, concentrating on its top 20 markets, which account for 75% of its sales,” according to the Coresight Research report.

Nordstrom also operates seven Nordstrom Local showroom stores, which hold no inventory. However, they provide services such as online order pickup, alterations, returns and exchanges, and styling assistance, according to Coresight Research.

Having associates offering in-store and online styling advice could be a growth area for department store

“We’re seeing a great pickup in things like styling,” Schmidt says. “That has really grown quite a bit. Nordstrom is offering a lot of styling in terms of virtual services.”

Schmidt says a lot of brands are also getting into more other services. “We’re seeing a lot of brands getting more into other tangential services, like hoteling and different types of services that could lend itself to more concierge types of services,” she says. “I think that is a great opportunity.”