Department stores want young shoppers

Department stores are aging, and so are their customers.

For more than a century, these stores have held the promise of selling shoppers a variety of everything, endearing them to generations. For many millennial and Gen Z consumers, that’s not enough, especially as they find products on social media, specialty retailers, big-box stores and online players stealing sales.

like a department store Macy’s, kohls and nordstrom Companies are facing an existential crisis as they try to convince investors to bet on their futures as sales slump and core customers age. Intense scrutiny from Wall Street is contributing to new efforts by Nordstrom to take the company private and efforts by activist investors to buy Macy’s and take it private. Kohl’s has also been a target of activist investors in recent years.

TD Cowen retail analyst Oliver Chen said attracting younger customers has become more urgent as retailers have “already lost a lot of ground.”

“As a department store, we need and should cater to both young and old people,” he says.

Customer data illustrates the challenges for retailers. At Kohl’s, 40% of his customers are baby boomers, according to Numerator. Numerator tracks retail trends and sales patterns using his panel of 150,000 U.S. consumers, balanced and representative of the population. At Macy’s, more than a third (36%) of his customers are boomers. (Macy’s data only includes stores and websites with the same name, not Bloomingdale’s or beauty chain Bluemercury.)

By molecular definition, baby boomers are over 60 years old. The company defines Generation X as people between the ages of 43 and 59. Because Numerator collects data only from consumers 18 and older, Millennials are defined as those in the 29 to 42 age range, and Gen Z is defined as those in the 18 to 28 age range.

Nordstrom is the only company among the three that has more millennial and Gen X shoppers than baby boomers, with boomers making up 25% of its customer base. The company’s customer data includes both its namesake stores and off-price retail chain Nordstrom Rack, which is known for attracting young, fashion-conscious customers looking for bargains. It is being

All three department stores announced plans to attract new customers, including young customers. However, both companies share a weak outlook for the current fiscal year, with little, if any, year-over-year sales growth.

Chen said retailers are paying more attention to the issue as Macy’s and Kohl’s both have new CEOs and all three are working to improve their private brands. These lines are upscale and often priced lower than national brands, helping retailers stand out.

The aging of customers is not the only hurdle for department stores. Like other retailers, these chains are struggling with foot traffic and sales as inflation forces consumers to spend less on clothing, bedding and other discretionary items and more on household goods. There is.

To attract younger shoppers, Kohl’s is adding trendier clothing for teens, opening more Sephora stores, and beefing up its baby department.

CEO Tom Kingsbury said in an interview with CNBC in late March that department stores, including Kohl’s, rely too much on coupons to keep customers coming into stores. That equation doesn’t apply to Millennial and Gen Z shoppers, he says. They want attractive products and clear pricing. Instead, it’s something you’ll find at off-price stores like TJ Maxx.

Kohl’s, led by Kingsbury, is trying to capitalize on life stages that tend to drive purchases, such as decorating an apartment for the first time or having a baby. The company plans to add approximately 200 Babies R Us stores by fall. We currently carry more household items such as lighting and wall art.

Kohl’s is also using its expanding Sephora Shops throughout its stores to attract younger shoppers and direct them to other parts of the store.

“When they come to Sephora, we want to make sure we also give them the products they want,” Kingsbury said.

Still, Kohl’s doesn’t expect immediate results from the move. The company said in March that it expects full-year net sales to be in the range of 1% down to 1%, and comparable sales in the range of flat to 2%.

With a new CEO at the top, Macy’s wants to revamp its eponymous brand and close stores that were hurting its sales.

Macy’s plans to close more than a quarter of its roughly 500 namesake stores by early 2027. At the same time, Macy’s is expanding into areas with younger shoppers, such as suburban strip malls and beauty sections.

The company plans to open up to 30 smaller Macy’s stores outside malls over the next two years. The stores are about one-fifth the size of traditional mall stores and are typically located next to grocery stores, big-box stores, and low-cost retailers, providing steady foot traffic.

The company is also opening more Bloomingdale’s stores and its beauty chain, Bluemercury, and taking steps to attract younger customers in the process.

Macy’s CEO Tony Spring, who took over in February, previously led Bloomingdale’s, which not only carries luxury brands but also owns popular private labels such as clothing brand Aqua. The brand is also known for its unique customer experiences, including limited-time events and collections that incorporate pop culture moments like the Barbie movies.

He hinted that it will be introduced further into Macy’s. The company debuted a new luxury clothing brand and revolutionized others. The company is trying to make Macy’s even more appealing, including by creating play areas inside its Toys R Us stores and offering cocktails inside Bloomy’s, a smaller, off-mall version of Bloomingdale’s. .

Despite efforts to boost sales, the company’s outlook is bleak. Macy’s expects full-year net sales to be in the range of $22.2 billion to $22.9 billion, down from $23.09 billion a year ago. Comparable sales, excluding the impact of store openings and closings, are expected to range from approximately 1.5% down to 1.5% year over year on an owned plus license basis and including third parties. Party Marketplace Sales.

One dilemma for Macy’s? Gen Z and Millennial shoppers are less loyal, says TD Cowen’s Chen. They shop for nothing, whether it’s a luxury handbag some days or clothes at Target, Costco, or Zara.

“It’s actually cheaper and looks better now,” he says.

Compared to its department store competitors, Nordstrom has had more success with younger shoppers.

Part of that boils down to what this Seattle-based retailer carries. Nordstrom is earlier closing deals with popular and direct-to-consumer brands, such as Kim Kardashian’s shapewear company Skims. Beis is a handbag and luggage brand started by actress Shay Mitchell. The company launched Australian fashion brand Princess Polly in January, and timed the debut of its millennial-focused fashion brand Nasty Gal with a Los Angeles outing to coincide with the Coachella music and arts festival.

What’s another advantage for Nordstrom? Most of the stores are Nordstrom Rack stores, off-price stores that are more affordable for younger shoppers.

Still, CEO Eric Nordstrom said on the company’s March earnings call that the retailer wants to do better. He said things were starting to improve for younger customers, adding: “This is an area where we have a multi-year plan to improve.”

Nordstrom is also trying new ways to increase its high-fashion products. About a month ago, the company rolled out a third-party marketplace that allows customers to sell a wider variety of items without the risk of owning inventory. The marketplace approach follows this model: Amazon And recently, walmartoffered a large number of online services.

With the marketplace, Nordstrom announced it will double to triple the number of products sold through its website and app. Macy’s has also started using third-party marketplaces to add more items and brands.

But like Macy’s and Kohl’s, Nordstrom has a lackluster outlook. Full-year sales, including retail sales and credit cards, are expected to be in the range of 2% down to 1% up compared to the prior year, which had additional sales. week.

Department stores are under pressure to meet the needs of different age groups while tightly controlling inventory, said Christine Barton, senior partner in consumer habits research at Boston Consulting Group. says the marketplace is helpful.

Cost pressures may lead retailers to take a safer bet and order the same types of goods they always carry.

“You take away some of that novelty,” she said. “When you go back to more tried and true brands and products, it becomes a bit of a self-reinforcing prophecy for that younger consumer.”

If department stores want to become a staple for younger generations and remain relevant for decades to come, they need to break away from these old habits, she said.