Suzanne Kapner reports in the Wall Street Journal:
The space is a quarter of its original size. New goods hit the racks daily and are displayed on a single floor with an e-commerce warehouse upstairs. The store is closed two days a week and is staffed by full-time employees who know their customers by name and sell auto insurance among other services at checkout. Everything is for sale, including the art on the walls, the cutlery in the restaurant and the chairs in communal spaces. “Department stores have a future because they offer one-stop shopping, but how can you have more products than Amazon? “We care about the store being a billboard for our digital business. It’s a way for customers to experience our brand.”
If the department store has a future, it might look like this.
The space is a quarter of its original size. New goods hit the racks daily and are displayed on a single floor with an e-commerce warehouse upstairs. The store is closed two days a week and is staffed by full-time employees who know their customers by name and sell auto insurance among other services at the checkout.
That is the blueprint for a newly reopened Carson’s store in Evergreen Park, Ill., part of the failed Bon-Ton Stores Inc., BONTQ -26.67% a regional department-store chain that filed for bankruptcy and closed all its stores earlier this year.
As traditional department stores struggle, several upstarts are taking a stab at breathing new life into the model.
In Plano, Texas, a company called Neighborhood Goods last month opened what Chief Executive Matt Alexander calls a new type of department store that sells products from furniture to sweaters and hosts events. Everything in the store is for sale, including the art on the walls, the cutlery in the restaurant and the chairs in communal spaces.
Simon Property Group and Macerich have opened spaces in their malls that showcase a rotating lineup of brands. And even an established player such as Macy’s Inc. is tweaking the formula by carving out space for pop-up shops in its stores.
Past attempts at reinvention have fallen flat, including Ron Johnson’s failed overhaul of J.C. Penney Co. and Edward Lampert’s stewardship of Sears Holdings Corp. , which filed for bankruptcy protection in October.
Analysts say doing nothing is a greater risk. Department stores have been losing share to discounters, fast-fashion retailers and off-price chains for decades. Their share of retail sales stood at 1.58% at the end of last year, down from 5.54% in 1998, according to the U.S. Census Bureau.
“Department stores need radical surgery if they are going to survive,” said Craig Johnson, president of consulting firm Customer Growth Partners. “They need something big and impactful to signal that they are about the future, not the past.”
Justin Yoshimura, a technology entrepreneur, is rethinking a way of doing business that hasn’t changed much in more than a century. His company, CSC Generation, purchased Bon-Ton’s intellectual property for $900,000 in September and plans to invest an additional $5 million.
First came relaunched websites under its seven nameplates-—Bon-Ton, Bergner’s, Boston Store, Carson’s, Elder-Beerman, Herberger’s and Younkers.
Then, on Black Friday, a bricks-and-mortar Carson’s opened on the site of a previous Carson’s store at the Evergreen Plaza shopping center in a suburb of Chicago, one of eight leases that Mr. Yoshimura has signed. The next Carson’s is scheduled to open in Orland Park, Ill., in February.
While many mall owners have been nudging out department stores and replacing them with new tenants, such as sporting-goods chains and supermarkets, Lormax Stern Development Co., the owner of Evergreen Plaza, welcomed Carson’s back. The store had been on track to hit $25 million in annual sales before it closed in September, a sign it was still a draw for the community, according to Chris Brochert, a Lormax founding partner.
“Department stores have a future because they offer one-stop shopping,” Mr. Brochert said.
The new Carson’s store is similar enough to its predecessor to win back loyal customers, who can still find their Ugg boots and Tahari dresses. But it is also different in important ways.
The two-story store already had shrunk to 120,000 square feet from 250,000 square feet during a 2016 reconstruction. CSC Generation converted the top floor to a warehouse for e-commerce orders; below is 30,000 square feet of retail space, which eventually will expand to 60,000 square feet, about a quarter of the size of a typical department store.
“Department stores used to sell everything under the sun, so the bigger the store the better,” the 28-year-old Mr. Yoshimura said. “But today, how can you have more products than Amazon?”
Mr. Yoshimura and his team, which includes former Bon-Ton executives, are digging through 100 terabytes of customer data to figure out what people really want to buy at a department store.
Out went items that weren’t selling, such as apparel; the category has been reduced by 50%. The furniture and toy departments have been expanded, and the retailer will soon add large appliances to its lineup. Also coming soon: an art gallery, hair salon and bakery.
Instead of restocking once a season, the store receives fresh items daily and changes over all its merchandise every two weeks. That is a result of Mr. Yoshimura’s push to strike deals with Asian factories that ship directly and brands that produce domestically to shorten delivery times.
Carson’s recently offered to buy specialty women’s apparel retailer Christopher & Banks Corp. , which said last week that its board had rejected the unsolicited proposal.
Retail margins have been eroding, but Mr. Yoshimura plans to counter that trend by selling services such as auto insurance. Customers are asked at the checkout if they are interested in switching to one of several providers that CSC Generation has deals with in return for a 10% discount on all future Carson’s purchases. CSC gets a fee for every referral. Mr. Yoshimura said 8% of customers say they are interested in switching.
He said retailers are too focused on outdated measures such as same-store sales. “We don’t care about those metrics,” he said. “We care about the store being a billboard for our digital business. It’s a way for customers to experience our brand.”
Perhaps the biggest difference is the store’s hours. It is closed on Tuesdays and Wednesdays. Mr. Yoshimura said the five-day week will allow him to hire only full-time employees and give them full benefits.
“When you come in, you’ll see the same people every time,” Mr. Yoshimura said. “They’ll know your name and what you like.”
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