Behind Monday's announcement that once-venerable Broadway Stores will be acquired by Federated Department Stores looms a question that has vexed the retail world for the last five years: Can the full-scale department store survive?
The answer, industry analysts and executives say, depends on a simple premise: Department stores must persuade women shoppers to once again buy the merchandise that they have for sale.
The issue goes to the heart of the retailing business nationwide in an era of intensifying competition, shrinking incomes and changing customer tastes. Apparel sales, especially women's apparel, provide a very high percentage--typically 65%--of department stores' business.
But apparel purchases have been declining as a percentage of family budgets for more than a decade, and the decline has steepened in the 1990s. People are not buying less clothing, but they are paying less for it. And that means they're buying less from Federated--owner of Bullock's, Macy's, Bloomingdale's and other stores--or from Broadway.
Where there is growth in apparel sales, it has been coming from Sears and J.C. Penney, Wal-Mart and Target--so-called general merchandise retailers. These stores have increased their share of the total apparel market to the point where they now sell as much as the department stores.
Department stores, meanwhile, have emerged from their spectacular bankruptcies of the 1980s to discover a dramatically rearranged retail landscape. Robinsons-May and Federated are now the two largest department store chains in the United States. But they are pitted against far larger companies, such as the awesomely successful Wal-Mart and the resurgent Sears, which are going after traditional department store customers.
And the momentum is with the general retailers. Target now occupies the old Robinsons store in Pasadena; Ross Dress for Less occupies the Long Beach Plaza store that once was the flagship of the Buffums chain.
The shift reflects a fundamental miscalculation by department stores that Federated and others are struggling to recover from--trying to force customers to buy merchandise they didn't want.
The women's apparel racks traditionally contained about 80% basic goods, sensibly priced everyday outfits, said Robert Breese, a retired industry executive.
Along with everyday clothes, stores sold about 20% in fashion goods at higher prices. But straining to increase profits in the 1980s, stores began to carry more fashion goods and fewer basics.