How department stores are targeting younger customers to survive

Department stores like Macy’s and Kohl’s are historically more popular with older demographics and struggle to capture the attention of Gen Z and Millennials. With younger generations now making up a much larger audience, there is an urgent need to attract this audience, especially as customer spending has declined over the past few years and hurt most department stores. The question is, can they turn around and build new meaning, or is it too late?

Lack of competitiveness in relation to other sales channels

Department stores have traditionally attracted boomers (now people over the age of 60) and have never focused much on reaching younger customers. According to research conducted by Numerator, currently approximately 40% of customers at Kohl’s and Macy’s stores are baby boomers. Just 6% of shoppers are Gen Z, including at Nordstrom
Nordstrom
, highlighting its serious lack of appeal to younger generations. Department stores appear to be aging as much as their customers, which is a concern after the troubling results recorded this year.

Indeed, Macy’s just reported another sales decline this quarter, while Nordstrom closed dozens of stores last year and halted operations in Canada. The same pattern appears to apply to Kohl’s, which warned of a weak sales outlook for 2024, with earnings expected to be below expectations for the full year. What apparently hit American department stores? Like shopping malls, department stores have not reinvented themselves to cope with the rise of e-commerce, social commerce and more engaging store formats. Most of them lack an engaging purchase path, exclusive brands and activations, and therefore fail to attract a younger demographic. And as customers age, focusing solely on this demographic is dangerous and means retailers are falling behind.

“When you run a department store, you have to – and should – serve both the young and the old,” Oliver Chen, retail analyst at TD Cowen, told CNBC. To achieve this, a recovery plan is needed that firstly designs a more engaging, unique shopping experience that attracts Millennials and Generation Z and drives them to stores, and secondly, provides a range of services that compete with e-commerce.

Kohl’s and Macy’s reviews store formats, brand offerings and experiences

To increase footfall in its stores and attract a younger audience, Kohl’s has partnered with Sephora to bring shopping options to more than 200 of the chain’s stores. Through this initiative, both retailers benefit from their customer base and can increase sales, although Kohl’s undoubtedly benefits most from the partnership. Sephora’s popularity among teens and millennials gives the retailer the opportunity to expand its appeal and meet additional shopping needs, as well as hopefully attract new customers.

Macy’s, on the other hand, has focused on overhauling its store formats and adding new brands to provide shoppers with a more enjoyable and unique shopping experience. In an earnings call, CEO Tony Spring recently outlined some of the retailer’s efforts to boost sales and generate more enthusiasm in its stores. “We need more diversity,” he said. “We need less redundancy. We need more interest in the assortment and I think this makes a difference in how customers visit stores.” Underperforming stores are expected to close so that investment can focus on smaller formats that do well in suburban areas, as well as other high-potential stores that take on brands like Donna Karan and develop others like French Connection, Free People and Hugo Boss. It also provides more services such as personal shopping and styling, personalization stations including fragrance bottle engraving, as well as fashion shows and other engaging experiences.

It is quite clear that most department stores in the US are aging and have largely failed to reinvent themselves. As a last resort, retailers including Nordstrom, Kohl’s and Macy’s are reviewing their store formats, brand offerings and in-store services to reverse weak future sales and earnings forecasts. However, introducing new brands and redesigning store formats will not be enough: a proper redesign must be carried out to compete with e-commerce, engaging pop-up brands and high-experiential shopping malls that combine entertainment, convenience and exclusive partnerships and events that will drive footfall both young and older buyers.