The Department Store Business Development Plan

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The department store was first developed in London back in 1786 to allow consumers to find what they were looking for with one-stop shopping.  The industrial and economic developments of the Industrial Revolution brought significant social changes.  This gave way to the growing middle class and drove the rise of the department store (Harmon, 2016).  In 1962, the next big retail shift happened, discount stores were established.  As consumers enter the economic recession of the 1970s, they began to demand even lower prices, and discount retailers flourished and the baby boomers, started using their disposable income to exercise enormous influence.  In the 1980’s, retail focus turns from discount stores to “category killers” and club stores.  The retail merger and acquisitions era began.  Malls, specialty stores and other retailers knowing they couldn’t compete on price, decided to stress the quality of the shopping “experience” rather than just the products they sold.  Retailers are now focused on strategy “store as brand.”  Just as the railroads of the 19th century enabled the Machine Age, and revolutionized the society of the time, the Internet takes us into the Information Age, and greatly affects the world in which we live.  In 1999, Online sales of brick–and–mortar brands more than doubled to nearly $20 billion, accounting for 59% of total retail sales on the Web.  In the first quarter of 2001 the consumer’s spending slowed, the stock market tumbled, and retail had stalled.  Interest rates were cut ten times to increase “sluggish” economic growth.  The economy “officially” entered a recession.  In 2003, the weekly online retail sales reached a record setting $2 billion and grew more than 25%.  The online apparel spending in the United States grew 32% in the Third Quarter of 2006.  (Kelly School of Business, 2018).  The Great Recession looks to have changed the American consumers habits.  Consumer’s don’t want to pay full price and because of this, outlet malls have become the rage in recent years, as consumers love buying their favorite brands for less.  

While much is written about companies that thrive and do well, there are also lessons to be learned from studying and researching those that have failed.  Montgomery Ward Company, revolutionized shopping for people across rural America.  Many Americans had limited access to retail stores, before the development of cars and modern roads, and the general stores had a very limited selection of products.  Montgomery Ward would mail out catalogs to consumers with the standard nationwide prices for every item. The size of the catalog grew over time and what it did for 19th century shopping is what the internet is doing for us today.  By the early 1900s Montgomery Ward had expanded into retail operations.  Anticipating the 1930s economic depression better than its rivals, Montgomery Ward stopped opening new stores and conserved the cash and survived the economic downturn without any large losses.  Sears grew faster than Montgomery Ward by emphasizing low prices while Wards emphasized higher quality at higher prices.  Sales kept dropping for Montgomery Ward but during the first two years after WWII, Sears’ sales increased from $1 billion to almost $2 billion while top leadership at Montgomery Ward again predicted a similar downturn like after WWI, but instead they lost market share and prime locations to competitors.  During this time, Sears spent money on new modernized stores, warehouses and mail-order plants and Ward’s spent practically nothing for improvements during this time.  By the second half of the 20th century, Montgomery Ward faced competition from the lower priced rivals, K-Mart and Wal-Mart, as well as from higher-end department stores, like Macy’s and Nordstrom, while continuing to compete with Target, Sears and J.C. Penney.  The company entered into a long and slow decline.  Even though Montgomery Ward hired a new executive to follow the trends to increase the company’s knowledge of current fashion and the company continued to use celebrity marketing in its promotions to better its image amongst customers, it was still not enough and the company filed for Chapter 7 Bankruptcy following the disappointing 2000 holiday shopping season (Vitton, Nam, & Helleloid, 2015).

There were a lot of enabling factors established by top executives of Montgomery Ward that led them to be one of the top American Retailers but there were also factors that inhibited them from growing, which contributed to the decline of the company and becoming obsolete and dissolved.  A few choices made by the company’s managers contributed to the company losing out on the retail market.  When Ward chose to compete on quality, Sears emphasized low prices, Sears simply grew faster.  In the mail order business, it is hard for the customer to appreciate the quality differences but price differences are easily seen.  Montgomery Ward was always one or two steps behind Sears and was always playing catchup.  The CEOs style of management was autocratic and dictatorial, which led employees, including senior managers to leave the company.  As a consequence, there wasn’t any debate or discussion within the company that could lead to innovation.  The company lost estimated $50 million a year.  One of the first signs of financial trouble was a decline in net income, cash flow and market share.  The company held slow moving inventory that required liquidation which had a negative impact on earnings but it created a much-needed cash flow.  Cash flow is not enough to keep a company going.  Frequent changes in management, strategy, product categories, store names, and retail management left the company with no consistent position in the market, nor in the eyes of the customers.  The many attempts to reorganize, rejuvenate, revitalize, and reimagine, while mostly creditable, all contributed to its downward spiral (Vitton, Nam, & Helleloid, 2015).

Montgomery Ward never developed a niche, a strong brand identity, or a reason for consumers to come and shop at Wards.  Consumers now place a high value on convenience and instant gratification, resulting in the increased demand for online shopping and the diminished use of in-store options.  In order to avoid failure, retail store executives need to determine which choices are the most efficient and profitable, to both increase foot traffic and respond to the demand of online shopping.  Each store needs to have its own unique identity to help succeed and stay relevant in the marketplace today.  In order to stay relevant these days, retailers need to rethink how they attract and keep consumers.  Retailers need to know what the consumers’ tastes and preferences are, and how will they evolve in the future since the expectations are constantly evolving.  Consumers are driving the change that is happening daily.  A seamless experience needs to be delivered.  In order for a company to know if they are providing what the consumer needs and wants is by the right internal and external data and analytics.  Data that can help you understand truly how you are serving your customers is by: using social media networks to see what consumers are saying, tracking customer behavior in-store and online, what identifying factors are you using to identify anonymous online shoppers and what characteristics are you using to personalize product offerings.  Companies need to build a good view of who their consumers are and develop the ability to continue to learn those consumers’ tastes while they evolve.  Learn who they are and make it part of their organizations DNA to constantly evaluate and evolve.  Company leaders must be able to recognize when it’s time for something new and the organization must be agile enough to pivot and meet those needs.  Good retailers are already meeting consumer expectations.  The best retailers are innovating and creating new experiences that the consumer doesn’t even know they want yet (Hogenson, 2018).  When baby boomers were in their high purchasing years, they wanted products that were: mass, commercial, global, generic, prestigious and status.  Millennial and Gen Z consumers want products that are: locally-sourced, ethically made, with fair salaries paid to everyone in the supply chain, environmentally friendly, artisanal, genuine and practical.  It’s very hard to change from one form of retail, what boomers want, to what Gen Z consumers want.  For a big organization, it’s almost impossible (Kestenbaum, 2017).

An innovation is creating a new experience that the consumer doesn’t even know they want yet which shows that you are staying ahead of the competition.  This could be done by creating a personal concierge on your company’s website, who would recommend several items that they, superimpose photos onto a consumer’s avatar.  The consumer can reject or accept any of the items and they can browse to research customer reviews and prices from their living room couch.  If the consumer enters the physical store to try on the items, a sales associate would greet the person by their name and walk them to a dressing room stocked with their online selections plus some additional items.  If they like any of the items they can scan the bar code into their smartphone, send videos to their friends to ask their opinion or checkout when ready.  This has provided a personalized and seamless customer experience that was quick, easy and non-stressful (Rigby, 2011).

SWOT Analysis:

Strength

Omni-Channel Selling:   Macy’s retails its products through a combination of in-stores and online business formats.  It also retails its products through various online portals that includes www.macys.com, whose quality and functionality are continually upgraded by the company.  The company provides shopping facility through mobile applications.  Macy’s advertises and markets through direct mail, in-store marketing, catalogs and television shopping.  It offers these products through department stores, specialty stores, general merchandise stores, off-price and discount stores and manufactures’ outlets.  These initiatives made the company as the ‘Omni-channel retail organization’.  This diverse retail and marketing channels help to increase brand awareness, store traffic and sales (Global Data, 2017).