Retail Watcher: Department Stores Aren't Dead Yet, But Face 'Assault' From Many Angles

A firsthand visit to many malls makes it clear that department stores are struggling — but not yet dead.

The Expert

Bloomberg Gadfly's Sarah Halzack.

The Thesis

The department store sector is certainly "not in good shape" as evidenced by the cumulative hundreds of store closures by Macy's Inc M, J C Penney Company Inc JCP and Sears Holdings Corp SHLD, Halzack said in a video. Among the remaining department stores, many  remain "ghost towns" and investors are feeling the pain as well.

What pushed these once "dominant" department stores to "devastated"? The conventional answer is that the rise of online shopping led the demise of these stores, but this is only one part of the answer, Halzack said. 

"Department stores are struggling because they are being assaulted from so many angles." 

For instance, off-price retailers "don't do a shred of e-commerce business," but their "treasure hunt-like atmosphere" easily stole market share. And department store beauty counters were once a major attraction point for consumers, but the key millennial demographic group are opting instead to shop at Sephora and Ulta Beauty Inc ULTA.

Many high-end fashion brands made it clear they want to reduce their reliance on department store sales, which causes a hit to their "fashion credibility."

Bottom line, one of the few last hopes for department stores is to "close more stores more quickly to focus only on their shops in well trafficked malls" —before it's too late.

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