Department stores stage comeback with help of e-commerce

Department stores are attracting a new generation of customers through e-commerce. Worldwide these stores should return to growth in 2014 and expand by about 22 percent, $450 billion, by 2019, according to retail consulting agency Verdict.

Expansion of the market will be driven by emerging markets such as China, which is predicted to account for 30 percent of total spending five years from now, reported Reuters.

Department stores began falling from favor in the 1970s as new formats, or category killers, that focused on fashion, electronics and housewares, such as Zara and IKEA, began to rise.

But some department stores have been restoring flagships and celebrating their established brands. A focus on high-end fashion, accessories and beauty have attracted new consumers, along with e-commerce and in-store pick-up options.

Bloomingdale's (NYSE:M) best performing store, outside of Manhattan, is the one it opened in Dubai in 2010 in partnership with the Al Tayer group.

However, Michael Gould, former CEO of Bloomingdale's, said that international expansion can dilute brand identity.

"What department stores are is a collection of brands. You can't transfer it to Los Angeles, let alone to a foreign country," Gould told Reuters.

Some international department store chains are investing heavily online, with U.S.-based Nordstrom and Macy's leading the way, according to the top 20 of a digital ranking by the L2 business intelligence services. European department stores are way behind other countries in investing online, with none of them making the top 20.

One exception is British retailer John Lewis, which saw its e-commerce grow more than 25 percent in the first half of 2014 and account for more than 30 percent of total sales. More than half of the orders placed online are now for in-store pick-up.

Investing in digital is helping many department store chains to attract new millennial shoppers. For example, Sears (NASDAQ:SHLD) recently partnered with Hearst Brand Development to launch the Seventeen collection. And Nordstrom (NYSE:JWN) added video display screens showcasing merchandise on social shopping site Wanelo to its stores.

For more:
-See this Reuters article

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