The traditional definition of a department store centered on multi-category offerings (apparel, beauty, and home), multi-brand assortments with strong private labels, and massive physical footprints anchoring shopping malls. But that definition is evolving.

"I favor a more pared down definition, which is multi-brand, multi-category retailer," said our analyst Rachel Wolff on a recent episode of "Reimagining Retail.” "A lot of people tend to associate them with malls, but I think especially now that's being decoupled."

Department stores can also be defined by what they're not: "The opposite of a department store is the big box or super center,” said our analyst Paul Briggs. “Where the department store is different is in that experiential aspect and really being a foil to the big box phenomenon."

The future of successful department stores likely involves a more focused category approach, concentrating heavily on fashion and home furnishings rather than attempting to be a one-stop shop for dozens of categories.

New metrics for modern department stores

Beyond traditional KPIs like sales per square foot, there are alternative metrics for measuring department store success today, including:

• Social media relevance. "A lot of what gets people into a store is discovering them on social media," Wolff said. For department stores to attract younger consumers who didn't grow up with these retailers in their local malls, maintaining social relevance is critical.
• Individual store performance. With large networks of locations, examining each store as an independent retailer matters more than ever. "Looking at sales per square foot at that particular location, treated as sort of an independent retailer on its own" helps identify underperforming locations, Briggs said.
• Ecommerce share. Categories like apparel and home furnishings see close to 40% of sales happening online. "As a purveyor of these goods, you need to have a really solid handle on how much of those products are being sold online," Briggs noted.

Department store success could also be judged on cross-category penetration or active loyalty members.

What to keep and what to kill

When evaluating traditional department store features, some stood out as worth preserving, while others proved less valuable.

Wolff advocated keeping extensive selections, arguing "that's part of the charm of going to a department store, being able to find all different brands of all different price points and all different categories."

However, Briggs preferred paring down from 100 to roughly 70% of current assortments for a more strategic approach.

Both analysts agreed to keep the large, multi-floor format, but with caveats.

"I don't think this should be the exclusive format that department stores should operate in," Wolff said. "But I think there is a lot of value to the shopper, especially if you're thinking about adding experiential elements."

Opinions diverged on restaurants and services, with Biggs suggesting keeping these only in flagship locations where experience matters most, while Wolff argued they're "reliable drivers of foot traffic" that get people to see what else the store offers.

Building the ideal department store

When asked to allocate resources for a hypothetical department store, the analysts revealed starkly different strategies:

Wolff prioritized brand partnerships and curated assortments, followed by experiential retail and customer service.

• "Having that curated assortment and that selection of brands is really important for department stores to build the sense of style authority," she said.
• High-touch customer service offers "that human touch that a sales associate can offer" as a defense against ecommerce.

Briggs took the opposite approach, pointing to Canadian retailer Simons, which stocks roughly 70% private label.

• "With private label, there's more control, there's higher margin, and there's a good ability to control inventory over time," he said.
• He also values experiential retail, loyalty programs and technology, which are "table stakes" rather than competitive differentiators.

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