M - Mall Traffic Is Rising but Department Stores May Still Be Doomed
The symbiotic relationship between department stores and the malls they anchor isn't exactly a secret. Mall managers rely on major chains to drive foot traffic, and department stores count on mall operators to keep smaller tenants in place to meet the specialized needs larger players can't. Indeed, the massive growth of iconic outfits like Macy's (NYSE: M), J.C. Penney (NYSE: JCP), and Dillard's (NYSE: DDS) between the 1970s and 1990s went hand in hand with the establishment of shopping malls, which at that point were becoming fixtures of America's cultural identity.
Shopping has evolved, of course. The advent of e-commerce options has made it easier to avoid the time-consuming hassle of the mall, cutting department store revenue nearly in half since 2000. Smart department stores have adapted by turning some of their spaces into entertainment and even dining venues. It's working, too. But fresh data suggests these innovations are not yet common enough or effective enough to alter the department store industry's deteriorating trajectory.
The new Nordstrom (NYSE: JWN) store in New York City offers the apparel selection one would normally expect to see in a department store, but that's hardly where customers' options end. The recently opened locale boasts four different restaurants, two bars, and will even bring food to you while you're shopping. At the same time, the JCPenney store at North East Mall in Hurst, Texas, has been reconfigured with spacious lounging areas, a fitness studio, a cafe, a barbershop, and more. CEO Jill Soltau says the new shtick is "the fullest articulation of our brand strategy and we're going to use [it] as a lab."