June 9, 2009

News flash: Department stores, up and down

Wal-mart shareholders just got out from their star-studded annual meeting, in which Ben Stiller, Miley Cyrus, and various company execs celebrated the mega-retailer's status as one of few chains with, um, not-so-terrible sales amid the recession. 

Meanwhile, in Germany, the department-store and catalogue group Arcandor has filed for bankruptcy in another American Apparel-like situation: Three days from now, a bank credit of €710 million comes due, and without a serious rescue and restructuring plan, they won't be able to cover the debt. This creates a looming spectre for Germany: What kind of impact will it have on the economy if a major department chain, the Arcandor-owned Karstadt, simply vanishes?

Back in the States, Neiman Marcus isn't disappearing entirely, but some of their opening hours are. After analyzing traffic patterns in their stores, they've decided to open some locations later, and close others earlier. A smart move, even if it hadn't been prompted by the recession: Why spend money to keep your store open if nobody's there?

A more drastic version of that scenario is playing out in New York as Virgin Megastores North America follows its UK brethren into oblivion. Founded by Virgin impresario Sir Richard Branson, the Stateside part of the chain of cavernous music and bookstores was purchased in 2007 by Vornado Realty Trust, which quickly determined that the stores' real estate would bring better profits than did the stores themselves. How the truth hurts…

Saks, meanwhile, is betting on a $30 million renovation to boost sales on its designer floor. Chanel will be front and center, joined by younger designers including Doo.Ri, Erdem, and Martin Grant. But they're not exactly putting all their eggs in the luxury-goods basket: Saks is actually planning to get designers to lower prices, dropping them from the "best" into "better" tier of clothing. Can it work? Will designers survive the narrowing of their already-slim price margins? With Jens Laugesen, Emma Cook, and Veronique Branquinho already folded, the recession will surely claim more casualties as it unfolds, both among small designers and giant retailers.

"The Fall of the Mall" illustration via NY Times
Creative Commons License
MBF Trend Talk by MBF Trend Consulting is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at mbf-trendtalk.blogspot.com.