The situation: The department store model is under pressure.

Midmarket department stores have seen significant sales erosion in recent years. Macy’s Q3 2025 sales were about 9% below the same quarter in 2019, while Kohl’s were roughly 26% lower—over a period when overall retail sales rose nearly 42%. Both retailers are pursuing turnaround plans, and Macy’s recently identified 14 stores to close as part of a broader effort to shutter 150 locations.

At the higher end, Saks Global—the parent of Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman, Saks OFF 5TH, Last Call, and Horchow—earlier this month filed for Chapter 11 bankruptcy. Nordstrom, which went private last year, closed a couple of stores in 2025 as it shifts more emphasis toward its growing Nordstrom Rack off-price banner.

Why is this happening? Department stores are being squeezed from multiple directions.

Many of the brands they sell are now direct competitors. A Consumer Edge analysis of lapsed Saks shoppers found sharp increases in spending through brand-direct channels, including NakedCashmere (200%), White & Warren (180%), Cole Haan (30%), and Lafayette 148 (15%).

Shoppers are also reallocating spend to category specialists. The same Consumer Edge report found several jewelry brands experienced a surge in spending among lapsed Saks shoppers, including Zales (up 200%) and James Allen (150%). In apparel, chains such as Gap and Abercrombie & Fitch appear to be capturing share from Macy’s and Kohl’s.

Department stores are losing sales not only to competitors like TJ Maxx and Ross, but also to their own off-price concepts. Macy’s Backstage may be cannibalizing full-price sales. This has been less problematic for Nordstrom, which maintains a clearer separation between Rack and its full-line stores. Rack now has more than twice as many locations as Nordstrom’s full-price banner and continues to expand.

Implications for retailers and brands: Department stores emerged at a time when shopping involved significant friction—discovering brands, comparing prices, and finding curated assortments. But ecommerce and smartphones have eroded many of those advantages. Still, the model isn’t beyond repair. The opening of Printemps in New York shows there are viable paths forward. However, failure to adapt risks not just decline, but longer-term irrelevance.

• Lean harder into service and curation: Personal styling, localized assortments, and high-touch service can give shoppers reasons to visit beyond convenience.
• Rebalance brand mixes: As national brands prioritize direct channels, department stores should double down on private labels and exclusives to improve margins and differentiation.
• Rethink real estate: Flagship stores can lean into experience and storytelling, while secondary locations shift toward smaller formats.

Poor service carries real consequences: 54% of shoppers who have a negative department store experience reduce their spending, including 11% who stop shopping there altogether, according to a recent Qualtrics XM Institute survey. Some retailers are testing responses. Macy’s-owned Bloomingdale’s 59th Street flagship recently partnered with Warner Bros. Discovery on a “Wuthering Heights” immersive activation, and the chain has also expanded smaller-format Bloomie’s stores. The approach appears to be working as Bloomingdale’s comps rose 8.8% YoY in Q3, its strongest performance in 13 quarters.