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- Analysts say that Walmart and Target are increasingly taking market share from department stores.
- These stores have ramped up their apparel and homeware assortment in recent years and now have a bigger crossover with department stores.
- This week, department-store chains such as JCPenney, Kohl’s, and Nordstrom saw their stock prices plunge after reporting weaker-than-expected results for the first quarter.
- Visit Business Insider’s homepage for more stories.
Buying clothes at Walmart or Target hasn’t typically been seen as a glamorous way to shop, but times have changed.
Big-box stores that sell anything and everything have dressed up their fashion and homeware assortment in recent years and are becoming a bigger threat to department stores.
"There is no doubt that big-box stores have, and continue, to take some share from department stores in apparel and home," Neil Saunders, managing director of GlobalData Retail, wrote in an email to Business Insider on Wednesday.
This is both because of the "deficiencies of department stores" and the "improvements" that have been made at these stores, he said.
This week’s earnings results were telling. Department-store chains such as JCPenney, Kohl’s, and Nordstrom saw their stock prices plunge after reporting weaker-than-expected results, while Walmart and Target spiked upwards after strong results.
While JCPenney’s numbers are less surprising — the retailer has struggled significantly in recent years and is working hard to execute a comeback and make itself relevant again — for Kohl’s and Nordstrom, this was a disappointing start to the year.
"The year has started off slower than we’d like, with our first quarter sales coming in below our expectation," Kohl’s CEO Michelle Gass said in the retailer’s earnings release. "We are actively addressing the opportunities that impacted our first quarter sales and we have strong initiatives that will enhance our sales performance in the second half."
Adding more of what people want
Both Walmart and Target are changing consumer perceptions about shopping for clothes or homeware in their stores by rolling out new and trendy brands.
Some department store shoppers would previously never have considered buying apparel in these stores, Saunders said, but "new more contemporary offerings and improvements to store environments have created more interest over the past year."
Target has been doubling down on its private-label brands and unique partnerships, for example.
Only this month, it rolled out a limited-edition Vineyard Vines collection, which sold out almost immediately. The same happened when Target partnered with Hunter last year.
Read more: The clever tricks Target uses to get you to keep spending money
John Lamparski / Stringer / Getty Images
While analysts say these collaborations have a limited impact on immediate sales numbers, they give shoppers a reason to come to the store and therefore, hopefully, boost sales elsewhere.
"The real win is to drive people to stores and have them buy everything else they need," Sucharita Kodali, an analyst for the market-research firm Forrester, told The Washington Post in April 2018. "It’s perfect for Target."
Its private-label collections help to boost its profit margins while still being able to offer customers affordable prices. As they are cheaper than other well-known brands, customers are also likely to buy more.
Walmart has made a similar push into the fashion realm. It recently hired Denise Incandela, who has more than 20 years of experience working in luxury retail at Saks Fifth Avenue and Ralph Lauren, to head up its online fashion department. Incandela has overseen an effort to completely revamp Walmart’s websites (it also owns Jet.com), broaden its fashion assortment, and partner with new brands.
"We are leaning into fashion," she said at a WWD conference in September 2018. "While we know we are servicing the customer well on consumables, we haven’t had that offering on the fashion side, and our customers are asking for it."
Walmart has also been an acquisition spree, adding trendy online brands such as Bonobos, Modcloth, and Art.com to its roster and partnering with Lord & Taylor to bring more upscale clothing online. It recently launched an exclusive and affordable clothing collection with Ellen DeGeneres.
"This is very much a tale of big-box retailers being on the front foot when it comes to evolving and understanding shoppers, and department stores lagging a long way behind," Saunders said.
See Also:
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SEE ALSO: Trump’s tariffs could send shoppers into the arms of discount stores such as TJ Maxx and Marshalls
Source: Business Insider – feedback@businessinsider.com (Mary Hanbury)