In 1995, a Los Angeles Times headline posed the question, “Can the department store survive?” Twenty-five years on, CNN proclaimed the answer to that “America has turned its back on big department stores.”
TL;DR
- Macy’s, Dillard’s, and Nordstrom are showing signs of recovery by focusing on improved store environments and curated selections.
- Department stores are reverting to original strengths like appealing spaces and attentive staff to entice shoppers back.
- Many chains are reducing store count and product assortment to enhance quality, consistency, and customer experience.
- Challenges remain, including competition and the need to offer tangible benefits beyond online shopping.
These are merely two of numerous obituaries forecasting the imminent downfall of the U.S. Department store—and all that pessimism has been backed by the data. For many years, department stores have seen their market share decline, initially due to large discount retailers such as Walmart and Target during the 1980s and 1990s, and more recently because of Amazon. The department store's share of the entire U.S. Last year, retail sales dropped to just 2.6%, a significant decrease from approximately 14% in 1993.
However, surprisingly, the retail sector is showing renewed vitality, with Macy’s, Bloomingdale’s, Dillard’s, Nordstrom, and Belk experiencing growth this year, while J.C. Penney and Kohl’s indicate stabilization.
Department stores are regaining shopper appeal by reverting to their original strengths: meticulously kept and appealing environments staffed by attentive personnel, offering a curated assortment of New brands and products. Several retail chains are discovering that a reduced number of stores is advantageous, leading them to close down outlets to preserve both quality standards and brand consistency.
Given the prevalence of online shopping, frequently featuring reduced prices, physical stores need to provide tangible benefits to customers who visit them in person. However, reversing some of the decline in standards that has lessened the attractiveness of department store shopping presents a significant challenge. Rivalry with retailers like Walmart, Target, and T.J. The rise of "Maxxes" prompted numerous department store chains to reduce expenses and forgo retail embellishments, diminishing their perceived value in the eyes of consumers.
“You know what was tough about department stores?” Macy’s Inc. Tony Spring, the CEO, recently spoke with Coins2Day. “We didn’t execute well. Regardless of its designation, a poorly managed store is destined for failure.
Poor seasons keep coming
And indeed many did fail. In 2020 alone, Neiman Marcus, J.C. Penney, Lord & Taylor, and Bon-Ton Stores filed for bankruptcy protection. They were already struggling before they were pushed over the edge by a pandemic that kept shoppers away for months. A couple of years before that, Barneys New York and Sears did the same, eventually going out of business altogether.
As Spring told Coins2Day, Macy’s recent success—including its best quarter for sales growth in three years—is thanks to a playbook focused on less store clutter, a more focused assortment of products and brands, and more staffing in key departments such as women’s shoes and dresses.
Rival Dillard’s, a primarily Southern and Southwestern chain with 290 stores, has also seen modest growth by following those basic retail precepts. Unlike many of its mall-based peers, Dillard’s has rarely deviated from its formula of neat stores and thoughtful product discovery, and is roughly the same size today as it was 15 years ago by revenue and store count—unlike chains that expanded rapidly, then closed scores of stores.
Another department store that appears to be staging a comeback is Nordstrom, which went private this summer to revitalize its business outside of Wall Street’s glare. It has seen sales rise 4.1% in the first half of 2025. Belk, a privately held Southern chain, is seeing growth too, though more modest, according to industry estimates.
Still, it’s too early to pop the champagne. Dillard’s and Macy’s modest comparable sales growth of about 1% last quarter is hardly the mark of a roaring retail renaissance. And Penney and Kohl’s are still seeing sales declines, albeit less severe than just a few quarters ago.
Meanwhile, some companies are still deep in the doldrums: Saks Global recently said its sales fell 13% last quarter. In that case, the decline is largely because vendors are not sending it enough merchandise given recent delays in getting payment from the debt-laden company. Clearly, department stores are not out of the woods.
Deals for thrifty buyers
The holiday season, during which department stores get nearly a third of their annual sales, will be a major test of their nascent comeback. The Mastercard Economics Institute has forecast that sales will rise 3.6% November and December, a slower clip compared to last year’s holiday season. And shoppers are likely to be particularly bargain-hungry, meaning they will be holding out for deals, a trend department store executives are already seeing.
“Many Americans are more stressed than ever about holiday spending, and wallets are stretched,” JCPenney chief customer and marketing officer Marisa Thalberg said in a recent presentation of the retailer’s holiday season strategy. The company’s response? To offer more deals, and earlier in the season.
Kohl’s Chief Marketing Officer Christie Raymond expects shoppers will visit stores more often during the Thanksgiving to Christmas period, but buy less during each visit and gravitate to cheaper products as they feel the economic pinch.
“We are seeing trading down,” Raymond said at a media briefing in October at Kohl’s design office in Manhattan. “Whereas some customers were maybe purchasing a premium brand, we are seeing them trade down to private brands.” This could bode well for the success of Kohl’s recent efforts to refresh its long languishing store brands.
Even the high-end store Nordstrom, with its well-heeled clientele, is emphasizing more low-priced items than usual this year. At its New York flagship, Nordstrom has built a two-story area to showcase giftable items, with about 800 products that cost less than $100.
Future is now
A century ago, department stores began a golden age in which they were at the forefront of America’s burgeoning consumer economy. They were grand behemoths, typically in city centers, where shopping was an event—rather than the constant pastime it is today, often done by scrolling on a device.
These were memorable experiences: a trip to JCPenney to buy a Sunday best suit; the thrill of choosing the perfect debutante ball gown at Neiman Marcus; or the much-anticipated purchase of a new household appliance at Sears.
During the 1950s, Macy's, Sears, and Penney embarked on expansion by opening large, multi-level department stores, a move fueled by the rapid growth of suburban shopping centers nationwide.
But a couple of decades later, the rise of big-box retailers that boasted lower prices, like Walmart and Target, challenged that supremacy. By the 1990s, department stores had entered a period of sustained decline. The growth of Amazon and online shopping in general did not assist.
Amid all this change, department stores started to seem rather old-fashioned, a sea of sameness offering tired brands in badly lit, boilerplate stores where everything seemed to eventually end up in the discount bin. Faced with pressure, department stores attempted to lower their profit margins by decreasing staff numbers, resulting in an atmosphere that felt disorganized and neglected.
Furthermore, numerous entities pursued consolidation, which, in certain respects, exacerbated the issue. In 2006, Macy's acquisition of May Department Stores, which included regional brands like Marshall Field’s, resulted in an overabundance of stores situated too closely together.
Consumer preferences also had an impact: Shoppers were no longer impressed by receiving perfume samples upon entering the beauty area, favoring a more subtle approach to selling beauty items that has led to the A brand more appealing to young people Ulta Beauty something that's become popular over the past ten years.
Throughout the 2010s, department stores struggled to keep pace with Amazon's rise, focusing on enhancing their supply chain capabilities and merging their physical and online operations, which occasionally compromised the in-store customer experience. “They forgot what they existed for,” said Joel Bines, a former retail consultant with AlixPartners and a current director of North Carolina-based Belk. The focus shifted entirely to efficiency, consolidation, and standardization.
In search of fashion authority
The trend is now shifting back to emphasizing the customer experience within department stores, including their ambiance, the products offered, and how they differentiate themselves from competitors. A significant portion of this involves reversing the growth from prior decades: Macy's is focusing on 125 of its locations, representing one-third of its total stores, and will be shutting down numerous others over the next two years. JCPenney, after closing numerous stores during its 2020 bankruptcy, now operates 650 locations, a significant decrease from the 1,100 it had ten years prior.
However, as the retail industry's saying goes, you can't achieve greatness by simply reducing your size. Department stores must still present a strong reason for shoppers to return.
There's also room for improvement with the brands that department stores carry. High-end retailers have aimed to separate themselves from the deteriorating in-store atmosphere and widespread discounts found at department stores. Fashion brands such as Ralph Lauren have for some time been removing their merchandise from Macy's locations to boost direct-to-consumer sales through their own websites and physical stores.
However, Macy’s CEO Spring, recognized for his successful turnaround of Bloomingdale’s during his ten-year tenure there, is wagering that the company's extensive customer base of 40 million, coupled with its enhanced store environments, Can bring back the brand's “fashion authority” and attract premier brands once more.
Retailers with large floor space are also seeking collaborations with emerging brands. For the 2025 holiday season, JCPenney will feature exclusive items from Designer Rebecca Minkoff.
Re-engaging former patrons
Department stores must achieve a delicate equilibrium to offer a high-end shopping atmosphere, ensuring they have sufficient product diversity for various shoppers without overwhelming their physical spaces with excessive merchandise. Nordstrom and Macy's, for instance, are among the retailers reducing their product selections.
This situation leaves retailers with a reduced margin for mistakes, necessitating enhanced proficiency in data analytics to refine demand predictions, thereby ensuring product availability aligns with consumer desires. Some chains will find that difficult. “They are dealing with this beast of too much data and not enough actionable insights,” says Shelley Kohan, a professor at Fashion Institute of Technology in New York and a former Macy’s executive, noting that this is an area where AI can help.
However, even if these retail chains manage to revitalize themselves, it's unlikely they'll pose a significant challenge to giants like Walmart or T.J. Maxx. Attracting and retaining a younger demographic can be costly and potentially unproductive. According to some analysts, this is precisely why department stores ought to concentrate their efforts on older consumers, as they possess significantly greater disposable income. “While some are chasing the finicky Gen Z and millennials, they should really be focused on recapturing Gen X,” says FIT’s Kohan.
According to Bines, the crucial strategy involves re-engaging past customers who recall the allure and enjoyment of a traditional department store shopping experience. “Your priors become buyers again, and the buyers become loyal,” he says. This creates a cycle that continues on its own. This could attract additional customers.